The|Intangibles

Reasons to Feel Uneasy or Exhilarated

Philip Sheppard, a past president of the International Public Relations Association, brought to my attention this exhilarating and numbing video called Did You KNow? posted on the Pilot Theatre (from Wakefield West Yorkshire) website . . . Lots to make you think about business, communications, knowledge management and North American education (strengths and failures).

Restoring Reputation

The stock of CSX Corp., a Jacksonville Florida-based railway company has been discounted as a result of lingering criticism of "poor management", according to UBS analyst Rick Paterson as reported today in the Financial Post. (I can't find a link: The Financial Post's website doesn't make it easy.) It should be trading at a premium to its competitors according to Paterson.

He goes on to say "Four or five years ago that ("poor management") was probably true, but we think these days are long gone and (mis)perception is lagging reality."

If that's the case (and I have no idea if the company has been actively trying to restore its reputation), then why is it that investment bankers and equity analysts stubbornly resist the idea that a good reputation, consciously developed, nurtured and communicated, can have a measurable impact on valuation? And why is it that some companies have such a hard time understanding that reputations don't recover solely through solid financial performance?

There are strategies for reputation recovery. But they require commitment, humility and honesty . . . and the support of financial advisers, lenders and legal counsel.

Philanthropy - No Stand-In for Better Behaviour

The Economist, not normally a booster of corporate social responsibility (CSR) or sustainability as it  tends to be known in Europe, this week has a piece on CSR that hits the mark. The author concludes that corporate philanthropy (contributions to charitable causes) is being cleaved but the attention being paid to behaviour -- ethics and governance in particular -- is holding steady, as it should.

"There is one other important reason for thinking that companies will maintain their commitments to sustainability through the downturn and beyond: the need to restore confidence in business. The financial crisis was triggered by a bout of corporate social irresponsibility on a massive scale that has tarnished the reputations of even the bluest of blue-chip companies. Now corporate leaders have a chance to show that they are not just motivated by short-termism after all."

As Intel (a client) says in the management analysis and strategy portion of its 2008 corporate responsibility report (Note . . . I agree with ridding CSR of its restrictive 'S'),  "By incorporating corporate responsibility directly into our strategy and objectives, we manage our business more effectively and understand our impact on the world more clearly."

Corporate or 'strategic' philanthropy is a programmatic means by which a company contributes to its community. Philanthropy evidences a corporate recognition that profits are derived from the community and that a return to the community in the form of wages paid for labor and consistent dividend payments to shareholders as well as steady share price growth is -- at least in terms of today's social expectations -- insufficient.

Communities expect companies to give back, and companies have obliged either through random acts of kindness or more structured investments in causes which match company values or business goals.

But let's be honest. Philanthropy is unlikely to define or affect company behaviour when it comes to choosing business strategy, rewarding employees, managing supply chain relationships, committing to respectful and sensitive business principles and overseeing board and C-suite conduct. 

A generous philanthropy program, and commitment to a cause, can comfortably sit side-by-side with dishonest accounting, excessive senior executive compensation, autocratic and harsh management, deferential governance, poor labour and sourcing practices, and denial of environmental impact. Philanthropy provides a reputational sheen, but it doesn't de facto require ethical conduct or a socially astute business strategy. Philanthropy buys goodwill but it doesn't drive responsible behaviour nor build social trust.

If The Economist is right, and I think it is, and the decline in spending on smoke-screen philanthropy is NOT being matched by a retreat from investment (time, focus, intensity) in better behaviour, then maybe out of the current crisis we will see a steady push-back within companies against insular corporate boards, inappropriate rock star-like CEO salaries, and short-sighted and opaque business strategies.

Comments on Empire Club Social Media Event

Although it was a week or so ago, the event I moderated on Social Media and Corporate Trust in Toronto has resulted in a number of posts and articles.

For those who want to find out what others took away from the session take a look at these:

1. From Paul Beier who blogs at One Degree ("The inside scoop on digital marketing and social media in Canada").
2. Panelist Tom Watson did a follow-up post on the Canadian Business magazine blog.
3. Brian Jackson, reported on the discussion for ITbusiness.ca

I am grateful for the reports since it helps me remember what others said. As a moderator, I am too busy worrying about what the next question is to pay the attention I should to what the response was to my previous question. A failing I know, but one I'll work at overcoming. :)

Speaking Notes on Trust and Social Media

I moderated a panel today at The Empire Club of Canada on Social Media and Corporate Trust which included Peter Aceto, CEO of ING Direct Canada,  Suzanne Fallender, manager of CSR for Intel USA and Tom Watson, senior writer with Canadian Business magazine. Thanks to some lively points of view, and sharp questions from the audience, the panel was deemed a success.

Here are the remarks I made to kick off the panel . . . sorry for the length:)

It is self-evident that trust in companies has declined significantly over the past few years, although if you want to argue the point I can direct you to any number of studies, including H&K’s own corporate reputation surveys which make the case.

It has also become manifest that what can be called social tools – YouTube, Flickr, Facebook, Twitter and blogging among others – have been catalysts for impugning corporate behavior (just ask Domino’s pizza, McNeil Consumer Healthcare, Taser Intl., Continental Airlines or Dalhousie University). What is less obvious is how these tools can be used by organizations and companies to build or rebuild trust.

There are a number of hypotheses about social media and trust which I hope we can test in our short panel discussion. By doing so I think we will get a better understanding of what those of us who manage reputation both inside and outside organizations have to think and do differently to be effective.

I would like to get things going by posing a few axiomatic beliefs of my own about social media. My point of view comes from four or five years of blogging, engaging in social networks such as Facebook and Twitter, providing counsel to clients on transforming crisis, reputation and issue management strategies through the analysis and application of new social tools, teaching new directions in communications at two Canadian universities and discussion online and in person with people much smarter than me.

Let me start by arguing that companies and organizations today are facing what can only be called a sea change in the universe of idea generation, news gathering and information sharing whose only precedent may be the impact that the creation of the printing press had on industrial society after the 15th century.

I can think of at least three things that social media change that can be both obstacles to and facilitators of creating trust, and make many of our past reputation management approaches obsolete:

First . . . the concepts of personal expression and friends first

In his recent book, Here Comes Everybody, NYU professor Clay Shirky says that “We are living through the largest increase in human expressive capability in history.” The midwife of this expression is the ability of anyone to post or publish anything, anytime and anywhere and to have an audience for this expression. Now the audience may be small and may only be an audience of friends, but you can never be sure that it will stay small or that it may not persuade a much larger network of people or dispose them to act.

It is important to recognize that this is not about the technology that makes interaction possible but about the anatomy of the interaction. It is an interaction that is consistent with our oral tradition of politics and storytelling. Like 17th century coffee houses, social media are now the place to assemble, to exchange ideas and if desired to organize action/dissent.

One of the most difficult things for senior executives and communications professionals to get our minds around about this change is that our strategies now require people more than communications products, because the expectation now is for personal relationship and responsiveness and not just facts and information.

Second . . . group formation

Clay Shirky also goes on to say that “By making it easier for groups to self-assemble and for individuals to contribute to group effort without requiring formal management (and its attendant overhead), (social media) tools have radically altered the old limits on the size, sophistication, and scope of unsupervised effort.” In other words, we now have what my colleague – Brendan Hodgson – calls empowered detractors and supporters – individuals and small groups who can challenge a point of view, force transparency, expose malfeasance and also become allies and friends.

What empowers them is the ease with which they can assemble in small but potent networks using social media. And because of the low barriers to participation and action, power increasingly resides in the hands of the committed and the concerned.  The Motrin Mom’s campaign is one recent example in which an angry individual used social tools like YouTube, Flickr and Twitter to defeat an advertising campaign.

Third . . . A vastly different “news” dynamic

Because news can come from anywhere, and increasingly frequently comes to the public consciousness not through the traditional news infrastructure but through social networks, listening, vigilance and conversation are more important than they have ever been in the past.

At the same time, although circulation for newspapers is declining and publications disappearing, our appetite for news (albeit news that we want to choose rather than have imposed) keeps growing. That means companies that want to affect the way they are seen will have to be prepared to provide a steady flow of news and information – supported by crystal -clear conversation and dialogue – rather than waiting only for what in the past they have judged as “worthy” of being released.

So what do these three observations mean for strategies meant to sustain, defend or build trust in corporations and organizations? I have at least four ideas:

Communication strategies that depended on influencing reporters in mainstream news infrastructure now must include ways to incite interest and engagement from a range of individuals, groups and networks. 

Communication strategies that depended on the publication of information must now be scrapped in favour of strategies that find and/or build communities of interest and small networks of advocates, champions or apostles.

Strategies meant to influence government or specific social behaviors or even encourage buying must now recognize that the new backbone of influence is the small – but highly connected – networks of ordinary people. Media “impressions” – the historic but oh so inadequate measure of the success of communications programs by counting how many people likely had access to a certain media piece – just doesn’t tell us much anymore.

And finally . . . Generic brand building strategies should now be supplemented – okay maybe even replaced – by programs that start from people, that engage networks, and that reveal personality because as a Deloitte consultant once wrote “It’s harder to distrust a person than it is to distrust a corporation.”

Blogs on Leadership

CEOs must have a tough time deciding what to read among all the blogs, online news sites, management school journals and mainstream media which offer points of view on how CEOs can lead better. Alright, they likely don't read any of them.

Should they change their minds, here is a recent addition to the plethora of leadership punditry that may be worth watching: The Syd Blog is by Sydney Finkelstein, the Steven Roth Professor of Management at the Tuck School of Business at Dartmouth College. The blog is subtitled "Insight into the force and follies of leaders."  His latest post looks at how Bank of America CEO Ken Lewis, who was stripped of his chairman title last week, may still lose his CEO position even though Bank Of America is run by what Finkelstein calls a "rubber-stamp board."

Sounds like Finkelstein would not be displeased.