Force For Good Communications

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-- Jon Harmon

BP keeps paying through the nose, but will the public stop holding its nose at BP?

Add another $4.5 billion today to the total of still-accruing costs to BP for its massive Gulf of Mexico oil spill in 2010.  That’s the amount BP agreed to pay the U.S. government in its guilty plea to criminal charges connected with the deaths of 11 off-shore rig workers as well as the not-insignificant matter of lying to Congress.

The $4.5B is on top of the rapidly evaporating $20B in trust funds the oil company set aside to clean up the mess and to compensate the communities and individuals for property damages. All told, the company has booked $38.1B to cover the costs of the spill. But costs may very well exceed that figure; the settlement reached today specifically does not cover fines stipulated by the Clean Water Act that could reach as high as $20B (the Act calls for fines of $1,100 to $4,300 per barrel spilled; multiply the upper figure in that range by five million barrels of oil spilled).

There truly aren’t many companies that could absorb such massive penalties and continue to do business. And, of course, BP’s very deep pockets are a contributing factor in the magnitude of damages assessed to the company. At some point you have to wonder, how much is enough? Still you won't find too many in the public feeling sorry for the mammoth oil company. Next to the Wall Street “banksters” who collectively deserve much of the blame for the financial credit markets meltdown that precipitated the Great Recession, BP has few peers as a poster-child for corporate malfeasance, though Bernie Madoff deserves a special Dishonorable Mention in the “individual” category.

So it is that even after BP settles all of its criminal and civil legal obligations, it must continue to make progress on the rehabilitation of its reputation. Are oil and gas customers who have stayed away from BP in the after-math of the oil spill satisfied with the fines and penalties assessed the company and in the clean-up and restitution efforts that are now largely complete?   

And, finally, are they convinced that BP is a different company now, committed to doing the right thing against a triple-bottom line accounting (people, planet, profit)?

A crisis is an opportunity to demonstrate an organization’s values, or to reevaluate its values. Criminal actions that led to the oil spill and the death of the rig workers came out of a company needing to revaluate its values, as did the well-documented missteps of BP Chairman Tony Heyward, “winner” of Force for Good’s 2010 PR Disaster of the Year. Since then, the company has demonstrated a new value system that can genuinely be applauded: a dedication to the cleanup and restoration of the Gulf shores, and a humility in acknowledging its culpability and its responsibility to make things right.

—Jon Harmon

 

Transparency at work: Zuckerberg opens up; Facebook rebounds (a bit)

Back on June 1, I argued here that Facebook's CEO Mark Zuckerberg needed to lead an effort toward greater transparency in conducting the newly public business of the social network behemoth. Two weeks after its epically hyped IPO, Facebook had plunged 28% from its opening price of $38 to reach a new low of $27.50.

I had no pretensions of Zuckerberg noticing my advice, let alone heeding it, even though there were plenty of other voices calling for more business transparency from Facebook. And indeed, the famously maverick young founder of the company continued to keep a fairly low profile. Facebook continued to be vague in detailing its plans to monetize its enormous base of "friends" and failed to provide guidance on future revenue projections. When he did speak, Zuckerberg reminded us that Facebook's mission was never to simply make money but to "give people the power to share and make the world more open and connected."

Having a well-articulated, noble and inspiring mission is critical for encouraging an active and participative employee culture geared to execute corporate strategies. Shareholders can likewise be inspired by the vision. But they also want some guidance to help them figure out if their invested dollars are wisely held in the company, or should be put somewhere else.

(And BTW, employees also want to be reassured that the business has a sustainable trajectory of profitable growth. In short, every stakeholder wants to invest in, work for, do business with...winning companies. "Winning" encompasses all aspects of reputation including social responsibility as well
as, yes, profitable growth.)

Throughout the summer, Facebook stock continued its downward trend, dropping below $18, less than half of its initial price four months earlier. That will get your attention, no matter how maverick you are.

Finally, this week at a tech conference in San Francisco, Zuckerberg let it be know that the company's profit performance was indeed important to management. As John Shinal wrote for MarketWatch:

Now that Zuckerberg has seen the damage that the stock drop has done to the image of his company — not to mention to the morale of employees with restricted stock grants — he’s on board with the whole profit thing.

Today, Facebook closed at $22 -- up a cool 25% from its low 10 days ago. There's still a long ways to go before Day One investors recoup their investment. But it's a good start.

So, yes, transparency is critical for all stakeholders, including (especially) employees. And that includes detailing efforts being made to ensure sustainable, profitable growth.

- Jon Harmon

 

At too-big-to-fail banks, transparency should mean letting us know when risk models scream TILT!

In an interesting turn of events...

When J. P. Morgan Chase CEO Jamie Dimon meets with analysts Friday, he can expect tougher questioning than when he testified before Congress twice last month.

Senators from both sides of the aisle tip-toed around Dimon in June, incredibly deferential in their questioning. The "fawning" from the members of the Senate banking commitee greatly disappointed critics apalled that "too-big-to-fail" banks have jumped back into risky investments so soon after being bailed out by U.S. taxpayers. Dimon had been called on the Congressional carpet after JPM announced that it had lost at least $2 billion in bets on derivative investments tied to a single trader with a made-for-tabloids nickname, the "London Whale."

Some analysts expect those trading losses to be much higher than $2 billion. First order of business for Dimon Friday is to provide an accurate--and hopefully final--accounting of the losses. Then he needs to detail how JPM will improve its risk managment. Analysts certainly will have some tough questions about how JPM judged the riskiness of the trades and controls the bank has since put in place.

A key issue for analysts, investors and, ultimately, the SEC: How JPM and other big banks have kept their investors in the dark about how they calculate trading risks. Investment banks evaluate risk with proprietary "value-at-risk" (VaR) formulas that are kept closely guarded. JPM, for example, did not disclose to investors or regulators even when their VaR calculations showed that risk assumptions had changed. According to a recent Bloomberg report:

Wall Street firms routinely give only broad outlines of how their mathematicians calculate VaR, according to data compiled by Bloomberg, and almost nothing about changes in statistical assumptions or the prices they choose to feed into their models.

Dimon should come to the analyst meeting Friday prepared to detail improvements in transparency, while protecting what is rightfully proprietary. Even though Congress has to this date been easy on him, Dimon cannot expect to be able to continue to keep JPM's investors in the dark.

- Jon Harmon

 

 

Goldman won't regain public trust with Wall of Secrecy

What do companies need to do and say to win back pubic trust?

Jordan Kimmel of Trust Across America posed that question to me this week on his radio program on Voice America. Here's the link to listen to the interview.

Jordan asked me about winning back trust after a crisis and about my experience in the Ford-Firestone mess that is the basis for my book, FEEDING FRENZY. And we talked about the turmoil inside Goldman Sachs after former executive Greg Smith took quite a public parting shot in the form of an op-ed in the New York Times. (Smith's piece has since led to a global torrent of negative press and opinion against Goldman and its brand of "pirate capitalism.")

Goldman CEO Lloyd Blankfein

I pointed out that the heart of Smith's accusations against Goldman's corporate culture is the violation of customer trust, of putting profit ahead of customer interest. But even worse, I noted, is a bigger cloud hanging over Goldman, the violation of public trust. It's now clear that Goldman played a key role in the financial crisis that precipitated the global Great Recession, especially in regard to the clever packaging of derivatives built around shaky subprime mortgage disguised as AAA-rated investments.

The American public is incredibly forgiving when the leaders of an organization express remorse and a sincere commitment to change behavior for the better. But contriteness is not the message coming out of Goldman.

Furthermore, in today's world, transparency is an essential element of corporate social responsibility. Goldman's corporate culture is built on impenetrable secrecy. And there's little reason to expect the curtain to be lifted any time soon.

It's only March, but put Goldman Sachs down as an early contender for Force for Good's 2012 PR Disaster of the Year.

- Jon Harmon

High-integrity communication can be a Force for Good; FFG joins Trust Across America

Happy and proud to announce that the Force for Good blog has been invited to join a growing chorus of voices advocating for trust-worthy corporate behavior and, subsequently, increased public trust in worthy corporations. Here's the link.

Trust Across America is a fantastic collaboration dedicated to such principles as corporate integrity, transparency and sustainability. So Force for Good is a natural addition, as it was founded in 2006 on THIS: Transparency, Honesty, Integrity and Social Responsibility.

Think of Trust Across America as a sort of inverse adjunct to the Occupy Wall Street movement (without the drum-beating and vagrancy). If all companies lived up to these ideals, and their trust-worthy behavior was effectively communicated to the public at large, a whole lot of Occupy activists could go home happy (and, presumably, more productive).

Hope to have more to say about Trust Across America in the coming weeks and months.

- Jon Harmon

When should you ignore the lawyers and apologize?

When is an apology helpful? When might an apology prove damaging?

A PR pro who is aiming to repair damage to trust and reputation will likely give you different answers to these questions than a lawyer aiming to limit liability. In many, if not most cases, reputation trumps liability. It’s better to sincerely apologize and attempt to move forward in restoring trust in your organization than to stubbornly remain silent. Losing in the court of public opinion can prove more damaging than losing in a court of law. And refusing to apologize may even prove harmful in the courtroom, perhaps leading an unsympathetic judge or jury to pile on punitive damages to what they see as an unrepentant offender.

Keeping this in mind, I offer the following two-question test to help you decide when an apology is in order, courtesy of Eric Zorn in today’s Chicago Tribune. (Zorn brings up the subject because of criticism Republican presidential candidates have directed at President Obama following his apology to the people of Afghanistan for the inadvertent burning of some copies of the Koran. Regardless of your own political views, Zorn’s simple test is helpful to the corporate communicator deciding whether to push back against the lawyers and recommend a public apology be extended.)

1. Did you (or those who represent you or answer to you) do or say something that caused discomfort, or worse, to others?
2. Would you undo this act if you could?

A “yes” to both of these questions indicates an apology is almost surely in order. Note that the harmful act need not have been deliberate; and if it was indeed unintentional, you clearly should mention that fact in your apology.

Note also that your social responsibility, if not your legal accountability, often extends beyond your own company and its employees—your dealers and even your suppliers may be considered part of your extended organization in the eyes of the public. A socially responsible company holds its dealers and suppliers to the same ethical standards it follows itself.

Finally, Zorn reminds his readers not to offer one of those mealy-mouthed non-apologies that includes caveats like “… if anyone was offended” or is written in a non-accountable passive voice: “mistakes were made.”

And finally I offer these Force for Good posts from the past on the still-pertinent issue of the apology:
When is an emotional apology just too much?

When is an apology a better response than trying to argue the merits of your behavior?

How long do you have to be sorry?

-Jon Harmon

Is brand what we want it to be, or what others say it is?

I posted my thoughts on the meaning of "reputation" and "brand" on the Corporate Communications and Reputation group at LinkedIn, which sparked an interesting flow of ideas and perspective:

Nick Taylor • Reputation is made up of three dimensions, and is, essentially, the “intellectual capital” of an organisation (i.e., not the book value). The first dimension is identity – what we present ourselves as. This is typically what a brand is about (logos, values, positioning). The second dimension is image, which is almost the reverse, the opposite. It is what stakeholders see and feel from their perspective. The third dimension is personality. This is the reality of the brand seen through actions, not words, and is a real contributor to brand perception and overall reputation. So brand is an element of intellectual capital.

Jerry Thompson • Brand is the promise of value defined and offered to an organization's stakeholders. Reputation is awareness and understanding – by those stakeholders – of how well that promise is being kept, based on actions taken by the organization each and every day.

Martin Liptrot • I agree with Jerry. The brand is the promise; reputation is how well you are perceived to be living up to it. The other key difference is about ownership – while brand is tightly governed and controlled from the centre out, in the corporate voice, consistent iconography, etc. – reputation is subjective and truly in the eye of the beholder. It is possible to have a great reputation with consumers and analysts but a rotten one with community and employees, for example. That is the bit that senior executives sometimes struggle with; it isn’t a linear relationship.

Jon Harmon • Interesting comments, gentlemen.

But I'm not sure I would still assert that brand is what we say it is. More and more, brand is what those "out there" say it is; reputation, of course, always has been determined by "the others."

Today, a myriad of conversations, in social media as well as in "real life," determine the texture and shape of brand. (I'm thinking more of product brand or corporate brand than one's personal "brand," but the principle is the same.) When the branding put out by a company does not square with the branding determined by the social conversation, the dissonance can render the company's efforts ineffectual and wasted or, worse, counter-productive. And when the failed branding becomes the butt of jokes or scorned as intentionally deceptive, the company's reputation takes a hit as well.

Reputation comes before brand. But what does that mean?

Okay, so we all agree that "reputation is a winning company's greatest asset," right? That makes it pretty darn important.

But what exactly do we mean by reputation? And how does it differ from brand?

These are crucial questions – the two words are central to the professions of communications and marketing, yet there seems to be widespread disagreement on what reputation and brand really mean.

I generally love Wikipedia but this isn’t helpful:

Reputation, as distinct from image, is the process and the effect of transmission of a target image. To be more precise, we call reputation transmission a communication of an evaluation without the specification of the evaluator, if not for a group attribution, and only in the default sense.

Got that?

This is how I would begin:

Reputation is the audience filter that comes before consideration – of purchase, investment, recommendation, or employment. A positive reputation opens the door to consideration; a negative reputation can slam it shut.

Brand is all about identity and connotation, but it has no power to drive action without reputational “permission.”

Advertising pioneer David Ogilvy (who would’ve turned 100 a few months ago), made this simple and brilliant distinction:

“Brand is the promise that an organization makes. Reputation is whether it lives up to that promise”. (Thanks to Mike Hatcliffe’s blog for that.)

Other useful definitions:

“Reputation is (corporate) culture seen from the outside.” – Alan Towers, TowersGroup Inc

Reputation is “how much a community trusts you.” – Stackoverflow

If there is any doubt of reputation’s primacy before brand, consider this pithy command to the marketer by Richard Branson, founder of Virgin Airways and someone who knows a bit about branding:

“Build brands not around products but around reputation.”

And finally, on the notion of “building your own personal brand” as distinct from your reputation:

You build reputation by silently doing, proving and acting on everything you said you were going to do while building your brand. If your brand is … that you know what the hell you’re talking about, your reputation is the proof that you do. – Lisa Barone, Outspoken Media

How to put strategic communications into practice to set your business on a winning trajectory

Seventh in my series on strategic communications.

My central point has been that truly strategic communications can be more than just proactive ... and more than just closely wired to the corporate strategy. Truly strategic communications can be an ongoing input into the corporate strategy and indispensable to its execution. Corporate strategy aiming to be transformational needs the communication strategy to be a dynamic driver, helping to propel the business to a higher plane.

That's good in theory. But just how does that work in practice?

Here are two critical connection points between communication strategy and corporate strategy -- where communications can drive results so fundamentally that the Corporate Strategy function would be remiss in not actively courting Communications "to the table" as it establishes objectives and strategic plans:

Internal transformation--Becoming an innovation leader. Unless your company is already fully functioning as a living, breathing mecca of innovation, fully engaged in a learning cycle delivering continual transformation for sustainable competitive advantage, it probably needs a steady dose of active culture change. Senior management, informed by forward-thinking Human Resources (no, that doesn't have to be an oxymoron) and Communications leaders, pushes the organization out of its comfort zone for truly creative innovation. HR must revamp evaluation and compensation processes to reward smart risk-taking, breakthrough thinking and creativity while fostering cooperation and teamwork (we aren't looking for me-first all-stars, but individuals whose passion, energy and creativity helps makes everyone better). And Communications actively promotes candid, sharp, timely and specific communication throughout the organization. Everyone knows senior management's vision and strategic priorities, and knows that their ideas are actively sought and valued. Together, HR and Communications aim not just for effective internal communication, but active and productive internal engagement.

Reputation management--Beyond protecting the brand. Top-performing companies know the value of a strong brand (and not just consumer companies; a vibrant brand drives sales success in a B-to-B environment as well). But reputation management is on an even higher plane of importance than brand management. Companies not considered trustworthy drop off customers' consideration lists, preempting an opportunity for the brand to gain traction as a sales motivator. Active reputation management makes brand enhancement possible. Marketing and Communications should work actively to help drive reputation and brand valuation upward. But that's more than just a matter of communicating well to the marketplace (media relations, social media participation, marketing and advertising). The company's actions must match its words just as its products must measure up to its marketing claims. Communications leaders provide an active voice in strategic and operational meetings as the company's reputational conscience. (The Chief Communications Officer may be more appropriately renamed the Chief Reputation Officer, as I have suggested here since 2006.) Yes, the company's reputation is every leader's responsibility, but the senior Communications leader is its unceasing advocate. (Just as financial accountability and stewardship is every leader's responsibility but the CFO keeps it his/her singular focus).

These two strategic priorities--developing and maintaining a high-performance culture, and protecting and enhancing corporate reputation among all key stakeholders--are critical to your company's long-term success, are they not? Can you really achieve excellence without them? So ... is strategic communications an active and valued input in your corporate strategy?

- Jon Harmon