Archive for the ‘Leadership’ Category

The Uncertainty Principle

August 6, 2012

Heisenberg famously calculated the limits to our ability to measure the position and momentum of sub-atomic particles at the same time.  Perhaps that is why it is hard to pinpoint the exact level of collusion between business leaders asserting that uncertainty is holding them back from investment and hiring.  Obeisance to the great god, uncertainty, became a cliché of business rhetoric two years ago after the worst of the depression had passed.  Today’s New York Times’ piece by Nelson Schwartz takes the lamentations to a new level.  “We’d love to hire more people, but we’re saying no,” Schwartz quotes Legrand’s CEO as saying.  Timothy Powers, Hubbell, Inc.’s chief executive told Schwartz that he is not filling 100 positions that are open.  The political impasse driving these concerns is the failure of opponents in Congress to find consensus on Bush-era tax cut extensions, but the sub-text in a presidential election year has a frisson to it that should give business leaders pause.  At some point, complaints about uncertainty due to partisan rancor run the risk of looking like the American business community is sitting on its hands because a brisker recovery might aid an Obama victory in November.  There is no evidence of this, but if this narrative takes hold it could generate an anti-business momentum that will be damaging for everyone.  This is a Pandora’s Box that it is in no one’s best interests to kick open accidentally.

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Hack Hacks Shutter Rag

July 8, 2011

The New York Times barely concealed glee at the misfortunes of News Corp. shouldn’t distract us from this rare example of crisis over-reaction. The negative response to the decision to shut down The News of the World, which may well have had iron-clad operational logic, demonstrates that in every crisis there is an irreducible narrative arc that must not be violated. In the context of the ongoing uncertainties about whose cell phone was hacked by whom, shutting the newspaper was akin to knocking off the key government witness prior to the trial. The News Corp.’s explanation for the decision was also a textbook non-explanation explanation. The New York Times called James Murdoch’s statements “a striking example of self-critical apology” but if all the key players, James Murdoch and Rebekah Brooks, among others, remain in place, this is an odd sort of self-criticism. Rather like the exquisite torture of business executives appearing before a Congressional committee in order to provide headlines for politicians, it is sometimes most effective simply to stand out in the withering fire until public interest begins to fade. By attempting to bring down the curtain prematurely, to mix metaphors, News Corp. has robbed the public and the politicos of their moment of hypocritical self-righteousness and it will assuredly not smooth things out for the BSkyB deal. The only effective brand recovery has to include publicly acknowledged learnings. Riding out of town in the dead of night makes this hard to do. There will be more twists and turns before the public has had its fill of this story.

First Stupid, now Evil

April 28, 2011

We were happy to see the board of Berkshire Hathaway reverse itself in the matter of David Sokol’s disclosure about his acquisition of shares in Lubrizol because it neatly illustrates one of our core crisis management precepts.  This is that in the fog of swirling facts, conjectures and opinions surrounding a crisis, it is often helpful for a company to ask itself — is our explanation going to be that we were stupid (mistakes were made) or evil (someone can be blamed)?  This can then lead to an unemotional discussion of whether procedures need to be changed (no more mistakes) or whether someone can be fired (noisely or quietly) or a business unit closed or sold.  What is compelling about the B-H decision is that its original explanation was a botched attempt at explanation #1 — everything was legally OK, but we probably would behave differently in the future.  This flew completely in the face of our baseline of expectations about Warren Buffett as a man of impeccable rectitude with an aversion to obfuscation.  The audit committee report outlines in excruciating detail a timeline and pattern of events that enables the firm to convincingly switch to explanation #2.  We offer no opinion on whether this version of events is correct, but this looks like a good save, and probably a bit of luck.  Most companies in crisis trying to make this switch simply make matters worse by destroying their credibility.  Note to Renault: it is usually easier to go from stupid to evil than evil to stupid.

Tempest in a Taco

February 1, 2011

With its highly public response to a lawsuit about the beef content of its fillings, Taco Bell has provided another opportunity for us to observe reputation management in action in today’s social media environment.  With its “Thank You for Suing Us” advertising campaign, Taco Bell has taken the offensive in both MSM and digital media to make the point that its beef fillings are more than 80 percent beef.  Both in tone of voice and proactive stance, Taco Bell is trying to find the sweet spot that represents confidence, transparency and intimacy in the digital age.

Taco Bell may or may not succeed in rallying its loyalists by this campaign but they are more likely to succeed than Nestle that initially reacted to the Green Peace Kit Kat campaign by scolding the NGO for copyright infringement.  Public outrage caused them to back down quickly, but we believe more and more companies will find the right tone of voice defending themselves in the social media era.  This is healthy experimentation that will provide insights for reputation management across the industry spectrum.

The Mind Under Fire

November 12, 2010

The past few weeks have seen numerous news reports about the beatings and murders of Russian journalists.  A few of them have made reference to the hiring of “Mercaders” by the targets of investigative reporting, an oblique reference to Ramon Mercader, the man dispatched to Mexico City by Stalin to kill Leon Trotsky with an ice pick.  On this anniversary of Trotsky’s expulsion from the Communist Party in 1927, it is interesting to re-read some of his work.  In many ways as repellently infatuated with the use of force as Lenin and Stalin, Trotsky was also deeply interested in how to create behavior change. In his autobiography, “My Life,” Trotsky wrote “Ideas that enter the mind under fire remain there securely and for ever.”

Communicators can learn from this concept in two ways, literally and figuratively.  Literally, the statement reminds us that ideas people learn at intense moments of their lives shape them for ever.  But, figuratively, it also describes the process by which we should try to communicate important ideas.  We not only need to shape the ideas to make them relevant to their intended audience, but also create a fire in their minds to make them stick.  The emotional and psychological environment you create around an idea can be almost as critical as the idea itself.

Finagle’s Law and the Gulf Oil Crisis

November 3, 2010

Yesterday’s admirable piece by Michael Skapinker in the Financial Times about BP’s crisis in the Gulf got us to thinking about what really good reputation risk management looks like.  Skapinker rightly recommends that boards of directors pay careful heed to what Bob Dudley, the new CEO of BP had to say about the Gulf disaster at a Confederation of British Industry conference this week.  Perhaps, but they will need to re-read carefully the passage in which he talks about “a series of interlinked failures” as the cause of the spill.  If they do so, they might begin to apply “Finagle’s Law,” the gold standard of disaster prevention.

Finagle’s Law, an elaboration of Murphy’s or Sod’s Law states that “if anything can go wrong, it will go wrong, at the worst possible moment.”  It is hard to reconcile a complete understanding of this principle with the way most companies practice crisis prevention today, with their reliance on fail safes not themselves failing.  In fact, Murphy himself or rather Air Force Colonel Stapp who coined the phrase in the 1940s, understood that Murphy and Finagle were not simply articulating a fatalistic point of view but recommending a critical series of thought experiments — imagining the worst case scenario for every sequence in a chain of events and the failure of its back-up, in order to engineer effective safeguards.

With apologies to Mr. Dudley, “low probability event” and “unimaginably devastating” are not quite the same thing.  We’ll talk tomorrow about how companies can stress test their entire value chain in order to uncover hidden risks.

Wanted: Social Capitalists

November 1, 2010

Social Network consultant Valdis Krebs plays along with Brian Lehrer on NPR today to create a “Six Degrees of Separation” game for Andrew Cuomo and Carl Paladino, each striving to win New York’s gubernatorial race.  It features the usual political figures, both foreground and background, lobbyists and campaign consultants.  This kind of social network analysis has been used in  numerous ways, such as mapping the relationships between senators, lobbyists and corporations with respect to health reform.

Digging a little into the social capital theories of Ron Burt at the University of Chicago we find useful measures of power relationships in social networks such as “betweenness” and “closeness.”  We also learn that most networks, left to their own devices, develop a high degree of homogeneity — more connections between more of the same kind of people.  Undiversified networks such as these offer none of the supposed benefits of social networks, such as innovation and cross-fertilization of ideas that come from unanticipated inputs.  In order to create these benefits, social networks need to be actively managed and nourished.

It strikes us that fostering these networks is one of  the critical contributions of the corporate communications function in the 21st century.  In an environment of intense flux and the disappearance of boundaries between industry sectors and functions, having a strategy to build your company’s social capital is no longer a luxury.  Wherever new threats emerge, we need fresh and diverse connections to understand and manage them.  New opportunities can only be seized when the diversity of our corporate networks alerts us to them.

The good news is that social media make the work of measuring your social capital and finding new potential connections easier than ever before.  The bad news is that building social capital is time and resource intensive.  Since some things don’t change, though, we will need new titles to describe our social network experts.  We think Senior Vice President for Social Capitalism has a nice ring to it.

Opacity Redux

July 29, 2010

Two separate but parallel discussions recently have caused us to revisit the issue of transparency and its bad-tempered twin, opacity.  Back in the early 2000s, we helped pioneer something called the Opacity Index which measured the extent to which a country’s sovereign borrowing costs and levels of foreign direct investment were impacted by levels of corruption, regulatory capriciousness, administrative speed, judicial transparency and a number of other factors.  In this index, opacity was bad and transparency good.  Similarly, in the fraught field of crisis communications,  the gold standard of crisis response has been ever higher levels of transparency.  Stakeholders, in this theory, are kinder to companies that are quickly and comprehensively disclosive.  And then we looked at Apple and BP.

In response to early complaints about signal strength and dropped calls with its latest IPhone, Apple was at first unresponsive, then petulant, before finally offering customers a “bumper” to put around their phone.  BP, by contrast, almost instantly flew its CEO to the Gulf, and while there have been many spoken gaffes, it has apparently been completely transparent and disclosive throughout the long unfolding of  the well capping process.  In spite of its sour behavior, Apple has sold boatloads of the new phone.  In spite of its attempts to be transparent in real-time, BP’s reputation continues to sink to new lows.

We are not suggesting a return to the evasive stonewalling at Three Mile Island in the 1970s, but is there, in fact, a lesson about corporate transparency to be learned from the Apple/BP contrast?  We’re not quite sure what it is, but it is telling that some of the most unfortunate moments for BP involved comments from Hayward and Svanberg about their feelings and the least appealing aspect to the IPhone story was the emotional disdain expressed by Steve Jobs for the media.  In the era of social networking, corporations are striving to find a voice that suits the intimacy and informality of the new medium.  This is proving more difficult than some had hoped.  Having a strong brand helps, but when the chips are down, people want corporations to get things right, not express their feelings.  The “get it” factor may be over-rated.

Governing in Prose

July 13, 2010

On WNYC’s Brian Lehrer Show today, Newsweek’s Jonathan Alter and The Nation’s Katrina Van den Heuvel commented on the disappointment being expressed by Progressives that President Obama has not fulfilled his promise as the passionate evangelist for transformative change.  One of them cited Mario Cuomo’s adage that “we campaign in poetry but we have to govern in prose.”  Inevitably, the name of the “Great Communicator,” President Reagan, came up and we got to wondering about business leaders: how important is the silver-tongued CEO and how effective are powerful speeches delivered to internal and external audiences in today’s consciousness?

But first, back to Ronald Reagan. In the 1950s and early 1960s, Reagan spent more than 4,000 hours in front of a microphone on behalf of GE talking to workers, chambers of commerce, executive clubs and political groups extolling the importance of the free enterprise system.  It was pretty good practice, but he also had the advantage of belonging to the generation of Americans who could take credit for two victories — surviving the Great Depression and defeating fascism.  This made for simple and arresting images.  Here’s an excerpt from a campaign speech when he was running against Gerald Ford in 1976: 

“No one who lived through the Great Depression can ever look upon an unemployed person with anything but compassion. To me, there is no greater tragedy than a breadwinner willing to work, with a job skill but unable to find a market for that job skill. Back in those dark Depression days I saw my father on a Christmas Eve open what he thought was a Christmas greeting from his boss. Instead, it was the blue slip telling him he no longer had a job. The memory of him sitting there holding that slip of paper and then saying in a half whisper, “That’s quite a Christmas present”; it will stay with me as long as I live.”   Cue Tiny Tim.

If managing people is the biggest challenge in business, as Stefan Stern comments in his column in today’s Financial Times, is there in fact a role for great business leader/communicators motivating and inspiring employees through in- person and videotaped speeches?  We think there is, but in today’s global economy it can’t be “Morning in America.”  The effective CEO needs to speak to the aspirations of employees all over the world for satisfying work, economic betterment and improvement opportunities.  The call to employees must be to ask for their help not only to innovate and solve difficult challenges, but to become co-stewards of the world’s resources.  To be ingenious in response to our dwindling natural assets.  These are messages that could resonate with Reaganesque vibrancy anywhere in the world.  Perhaps, after all, we can manage in poetry.  President Obama could, too.

The King is dead! Long live the King!

July 2, 2010

The orderly succession planning  recently announced at JPMorganChase stands in stark contrast to the unanticipated executive departures and botched successions that crop up routinely at many American corporations.  This contrast accentuates the dual nature of the succession/replacement issue.  A well-run company needs a contingency plan to ensure that there is a back-up in case of  the illness or departure of a key executive. It also needs a credible narrative to support a transition even when unexpected.  The need for this narrative becomes especially acute when a company suffers from a string of what are almost always unrelated senior exits, but in the marketplace are construed as that noxious form of negative momentum — the mass desertion.  Once established, this storyline can be very hard to eradicate.  Naturally, it strikes hardest in those organizations where much value resides in individual players — technology, health care, professional and creative services.

There are limits to the available mitigation strategies.  The research genius or marketer with true flair can have an enormous impact on a company’s fortunes.  However, there are some prophylactic measures available to head off the threat of negative momentum.  The first of these is to have agreement in advance about what you would say if a key executive left to join a competitor or retired unexpectedly and have a narrative that explains why the departure, while regrettable, does not throw the company off track.   This usually involves pointing to the strengths of the overall team and the credentials of executives moving into new positions.  This is hard to pull off convincingly in the heat of the moment which is why it needs to be agreed upon before it happens.

 The companion piece is for the CEO and his or her senior communications counselor to keep a quiet watch on the publicity generated about individual performers in successful business units.   Some executives like the limelight more than others, and publicity for the individual is usually also good for the firm in the short-term.  What communicators need to ensure, however, is that  there is a good balance of visibility amongst key executives both internally and externally.  Enlist lots of them in company thought leadership.  Reach down into the middle ranks for executive profiles whenever possible so that dark horse replacements, when needed, aren’t quite so dark.

No solution is fool-proof but a few steps like these can help deter the negative narrative.  Perhaps if Saul’s publicists had hyped their favorite Pharisee just a little less, the conversion of St. Paul would have been nothing more than an HR problem.