July 2, 2009

Leadership in Tough Times

I was a participant in the London Business School’s Global Leadership Summit earlier this week. Five hundred executives, many of them LBS graduates, attended the event. There were heated debates about executive compensation, the role of government in the private sector, the balance between needs of shareholders and stakeholders, and the responsibilities of the CEO as communicator/statesman. Here are some of the more provocative contributions from the CEO panelists:

1) Government and Business—Jeff Immelt of GE said, “We need to embrace public private partnerships. Government has moved in next door and is not leaving. “Paul Walsh of Diageo said, “Pressures of rising unemployment are forcing government to consider job protection, which is actually protectionism.” Lord Davies of the UK Government Department of Trade and Investment, added,”The voice of business in the UK is silent on the issues of the day.”

2) CEO as Communicator—Ian Davis of McKinsey said, “There is nothing in it for CEOs to speak up because they will get slammed. Business should have a collective voice or put forward entrepreneurs such as Branson.” Immelt disagreed, “You need the ability to connect with stakeholders, to explain company strategy. To heck with critics in the business media—tell them what you are doing but then move ahead.” Ben Verwaayen of Alcatel-Lucent said, “You must bring your people along to establish credibility and rebuild trust.” Willie Walsh of British Airways added, “Be honest with your people because they are very intelligent and know the business. Pride in the brand can sustain you in trying times.”

3) Shareholder Value as Primary Task—Ian Davis of McKinsey said, “Shareholder value needs a re-think. The duration is the key point; we cannot succeed in business with such short term targets. Finance faculty has been too dominant at business schools. Incentives should recognize needs of employees and society as well.”

4) Executive Compensation—An entrepreneur in the audience challenged Stephen Hester’s pay package. The UK Government regulator, John Kingman, responded, “His rewards are tied to the taxpayer ROI. We seek to run these partly nationalized banks as commercial investors would; we need to rebuild the bank.” Professor Julian Franks of London Business School added, “Compensation should not be sapped. Align management with shareholders to reward success. It is not a matter of fairness.”

5) The Global Divide—It is not about rich and poor, it is East versus West and state capitalism versus free markets. Professor Kishore Mahbubani of National University of Singapore said, “Don’t universalize Western conditions. Asians feel there has never been a better time. The crisis can be traced to Western managerial incompetence.” Sunil Mittal of Bharti added, “The new generation in India are spenders; their parents are savers.” Xavier Rolet of the London Stock Exchange noted, “We are witnessing the relative humbling of the West and of free market capitalism.” Lord Davis of UK Government added, “The West has lost moral authority for promoting its system. Watch out uncontrolled for anti-business, anti-government sentiment.”

6) The Way Out of Crisis—Stephen Hester of RBS said, “There are powerful forces of recidivism, those who benefited from borrowing against rising house values or easy access to credit cards. We cannot go for quick end of recession and create even more instability.” Professor Helene Rey of London Business School, “It is unclear how we get back to growth. We have nations of big savers (China, Japan, Germany) but no longer the big spenders (US). The US is key litmus test on protectionism. “

7) CEO Job in 21st Century—Jeff Immelt advised rapid adaptability, ability to embrace uncertainty, mobilize decentralized team, make business more personal via engagement and transparency. Ben Verwaayen of Alcatel-Lucent noted that CEO’s must be authentic (be yourself) and be predictable. He cited his experience at the troubled company, where his blog, AskBen.com, received 12,000 comments in the first three months—he responded to each himself, thereby building a relationship with employees.

Edelman and LBS also conducted a survey of participants on the day of the event. The data seems to suggest participants are looking forward instead of worrying about a precipitous decline. They are very nervous about the extent of government involvement in business, especially about the long term implications of higher taxes. They were reticent about becoming visionary public figures, preferring to be transparent communicators.

I left the conference convinced that the CEOs see the need for change, for a more robust regulatory structure, for a stakeholder approach supplanting the Milton Friedman vision that the only social responsibility of business it to make profit. But there is a disconnect around compensation (especially in financial services); witness the chair of Deloitte, John Connolly’s quote, “Those who make a big contribution are entitled to a big reward.” The disparity between haves and have nots, the sense of opportunity for the few and pink slip for the many, are corrosive to a vision of business as a productive partner in society. Paul Polman of Unilever spoke of “a higher level of accountability, a need to balance short and long term.” He concluded with a quote from Viktor Frankl’s In Search of Meaning, “Next to the Statue of Liberty on the East Coast, Americans should have built a Statue of Responsibility on the West Coast.” His advice is worth heeding.

Posted by Edelman at 1:33 PM | Comments (0) | TrackBack (0) |

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June 22, 2009

In Defense of Premium Media

Robert Thomson, editor of the Wall Street Journal, addressed a group of McGraw Hill Company executives on Thursday evening. He mounted a spirited defense of premium mainstream media, citing its vital role in educating the populace and in pursuing investigations that keep business and government honest. He worried openly about the business model for his industry, concerned that revenue is being skimmed by aggregators who are plucking choice paragraphs from authority media, then collecting the bulk of the advertising revenue. He disagrees vehemently with those who argue that content wants to be free on the Web; he believes his own paper proves the validity of payment for premium content. Here are a few of the important quotes from his speech:

1) There is an exponential rise of opinion journalism as the factory of facts is being closed down. Professional journalists may have attention deficit disorder but they do provide a reasonable account of important events.

2) As revenue is skimmed by aggregators, served up by search results, there is a drought of diversity in journalism. Readers are the losers in a world dominated by content verticals. But society itself is content horizontal—people are interested in wide array of subjects and we all benefit from information described from different perspectives.

3) Content creators must take their place at center stage; the audience must buy tickets to see the performance. People will more likely pay for packets of articles than individual pieces.

4) The advertising model for premium media relies upon demographic information such as income and education. Aggregators are simply selling cost per thousand, without regard for quality of audience.

5) People are creating their own “Daily Me” newspaper, taking a bit from each of the mainstream media, a by-product of an aggregator sensibility. The reader is satisfied with the small bits of text excerpted from articles, generally does not go on to the individual mainstream media site. The paragraphs taken by the aggregator are no longer just the leads of stories; now there are quotes plucked from the middle of articles, thereby making aggregation richer.

6) Mainstream media must improve its own search capability. Search will be refined so people can pay by article via an easy payment facility. There will also need to be segmentation in the filter, by geography or line of business.

Steve Adler, editor of BusinessWeek, offered his own cogent views on the way forward for mainstream media. He argued that editors accustomed to organizing vast amounts of content are better able to make sense of the surfeit of material on the web. He acknowledged the value of consumer generated content, especially around events such as the revolt in Iran, noting that media is increasingly likely to integrate regular people’s views and reporting to enhance the overall experience. Here are highlights of his rejoinder:

1) We are quite confident about business journalism as a valid basis for a successful enterprise. People are willing to pay for business news. But are they willing to pay for quality journalism on world events, to fund bureaus in Iraq or Pakistan? Do people want news as much as we think they do?

2) We need to make model of digital delivery closer to a magazine format to keep readers on our sites. We have to add value by making it easy to use our material even better.

The mainstream media has put itself into this strategic box by allowing in most cases the aggregators to use content without paying. Now readers will have to be retrained to pay for content they value. I believe this will happen—notice the successful migration of sports and entertainment content to paid platforms. There is evidence of the value of quality media in the Edelman Trust Barometer, which finds that business magazines are the most trusted source of information on companies, at 55%, followed by financial analyst reports at 50%. There is then a significant drop off to radio, TV and newspapers in the 30-35% range. Let us hope that the new approach to pricing of content preserves a healthy business media sector because its objective commentary is key to the recovery of trust in private enterprise around the world.

Posted by Edelman at 11:37 AM | Comments (3) | TrackBack (0) |

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June 15, 2009

Double Nickels

I turned 55 years old today, a bizarre concept but certainly the best option given the alternatives. Here are a few observations from a middle-aged (though desperately fighting it) vantage point:

First, you are going to get knocked down in life. The question is whether and how quickly you will get up again to rejoin the race. If the past year’s health challenge has proven anything, it is the benefit of fast remedial action and dogged determination to get back to form.

Second, maintain your inner child. I still read the sports page first thing in the morning. I love playing basketball and tennis. I am not self-conscious about dancing at parties. I laugh at silly movies (Wedding Crashers and Young Frankenstein standard fare) and go on rides at amusement parks (bring the Dramamine).

Third, keep learning and growing. I read books constantly (best new ones on revolutions of 1848 and Edmund Morgan’s American Heroes). I was thrilled by my recent trip to Abu Dhabi; appealed to my sense of adventure, the emirate’s sheer drive to succeed and the long term plan to incorporate culture into lifestyle.

Fourth, put your family first. When I woke up this morning, I had a sign on my door from my middle kid, who told me I was the best dad in the world. I try not to do business dinners and to keep home entertaining to a minimum. You don’t get the time back…believe me I know given that child #1 is already out the door, on to the workplace. Spend time with your parents—I call mine every day.

Fifth, network in order to build your circle of acquaintance but remember that your friends are your real asset. Help them get through divorces, job disappointment, problems with progeny. If you have a misunderstanding, go back and repair it. Give more than you receive.

Sixth, remember that reputation is all that you have. Money and possessions are temporal. I would urge real consideration of the Obama message on shared sacrifice and community purpose. Keep your ego in check and remember no individual can make as much impact as a team working together.

So there you are, my simple guide to a good life as I keep charging straight ahead.

Posted by Edelman at 2:45 PM | Comments (17) | TrackBack (0) |

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June 10, 2009

PR in a World of Expression

I am delivering the opening speech at the New Media Academic Summit that begins this morning at Georgetown University. This is the third annual confab organized by Edelman and PRWeek to discuss how social media is changing public relations and mass communications. More than 100 professors from the US, Canada, Europe and Latin America are joining for the two day session. If you’re interesting in watching any session live go here. I am using the opportunity to discuss Public Engagement—the combination of policy and communications which enables corporations/organizations to engage credibly in a stakeholder world.

Our traditional business of media relations is affected by the shrinking news hole, as reporters are laid off in response to an unprecedented decline in advertising (digital pennies earned as print dollars are lost). Media is incorporating reader feedback, short-form video, discussion and news aggregation. There is a dispersion of authority, as people shift away from sole reliance on mainstream media or traditional influencers such as government or CEOs, towards those with people with experience, passion and voice earned by knowledge or frequency of their posts. Consumers are moving away from instant gratification toward instant justification--from what they want to what they need. Government is the new “big foot” with an increasing stake in business, insisting on new levels of transparency, reduction in compensation and social benefit beyond shareholder value.

We have no choice but to evolve or die. What is our role in the future?

Public relations people must advise on policy, beyond how to communicate. We should offer a view on all important decisions to be taken by the corporation, from product pricing to supply chain to warranty length. We offer unique insight because we are actively engaged with the newly empowered constituencies, from civil society to employees to impassioned consumers. What you do determines your success in what you say.

The tenets of Public Engagement apply specifically also to the communications aspect of our business. We need to do the following:

1) Integrate Search into the PR: Our work must be crafted for optimized search but also for reputational search and social search (since Google increasingly ranks social content from Flickr, blogs, Twitter etc.). We can prioritize media and blogger outreach on the basis of which reporter/person/outlets helps most in search. We can create “embassies” for clients within social networks like Facebook and Twitter so that there is an outlet for suggestions and complaints. Here is our white paper on search and PR.

2) Mobilize the Influencers: We have always engaged credible experts to provide independent insights for mainstream media. Today, we can uncover influencers of all stripes--the people who are passionately interested in a given area--and provide them with early access so they can publicly discuss product or corporate initiative. An influencer is not someone (like Ashton Kutcher on Twitter) with millions of followers, rather it is a person who is truly ‘engaged,’ based on how many times an individual’s posts are linked to and re-tweeted.

3) Inform the Conversation: We can no longer rely upon readers to go to mainstream media or to client’s own web site. We need to go where the people are, whether in social media or in comments on blog posts (be transparent about your client’s interest!). We must also provide people with relevant utilities, whether through the web, iPhone or Pre (Disclosure: Palm is a client) apps.

4) Every Company a Media Company: Companies can offer real depth of content from their core area of knowledge, such as J&J Baby Center, the Web's #1 global interactive parenting network. We can help clients engage their consumers to co-create their brands, and to curate conversations happening around the web on a given topic.

5) Be Present and Consistent Everywhere: The average person uses eight sources of media each day. That same person needs to hear or see something three to five times from different sources in order to achieve belief. So we need to involve audiences consistently across all mediums, adapting the discussion and style to the specific medium. So let’s collaborate on Facebook, entertain on YouTube and offer customer tips on Twitter. For instance, the Butterball (a client) Turkey Talk-line now offers mobile texting tips, hosted web chats, a partnership with Bravo’s Top Chef show and a Cellufun mobile game.

6) Democratic and Decentralized: Let’s give voice to the people. The Ben and Jerry’s (a client) Facebook page has nearly 1 million fans who can create their own flavors, take interactive polls, give virtual gifts, connect via Twitter, view and discuss videos.

The PR business must move from pitching to informing, from control to credibility, from influencing elites to engaging the new influencers. Trust is established through continuous conversation and appropriate behavior. PR can become the communications partner of choice in the coming decade. We have little choice but to move to seize the mantle.

Here is my presentation (note white navigational arrows on pale gray to the left and right of each slide):

And here is my introductory video at the Summit:

Posted by Edelman at 8:13 AM | Comments (17) | TrackBack (0) |

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June 5, 2009

The MBA Oath

Adi Ignatius, Editor, Harvard Business Review opens the June edition with:

“The public’s trust in business leaders has never been weaker. According to the Edelman Trust Barometer, released in January, trust in U.S. business dropped from 58% to 38% in one year. European businesses are in nearly as much trouble with the public. Businesses in emerging markets are faring better—but not by a lot. If companies can’t address this problem, an economic turnaround may be delayed indefinitely.”

Trust in CEOs as spokespeople dropped to an all time low of 17% in the US, lower even than in the year following the Enron debacle. As many of the protagonists in the drama were classmates of mine at Harvard Business School (Rick Wagoner of GM, Stanley O’Neal of Merrill Lynch, John Thain of Merrill Lynch, Jeff Skilling of Enron), I found Harvard President Drew Faust’s comments during the 100th Anniversary of the institution last fall to be important and well-timed. She spoke about stone-cutters working on a great cathedral and concluded that of the three types of laborers, the most effective was neither the one trying to build his section most beautifully nor the one who was just doing his job and collecting a check. It was the team player devoted to success of the enterprise.

In the wake of that celebration, two professors at the school, Rakesh Khurana and Nitin Nohria, wrote an article in the Harvard Business Review, titled, “It’s Time to make Management a True Profession.” In the piece, they argued for a Hippocratic oath for business people, a higher standard than making money for yourself. As Professor Nohria told me on Wednesday, “The average person’s view of a business executive is one who is entirely self-interested, a Gordon Gekko character from the movie Wall Street, not even aiming for maximizing shareholder value but to enhance personal net worth.”

As an outgrowth of that article, the newly elected presidents of the HBS class of 2010 visited the professors and said they were willing to embrace a higher standard. A student from the class of 2009, Max Anderson, took it upon himself to draft the MBA Oath. Among the important precepts are commitment to ethical behavior, recognition of need to balance economic, social and environmental prosperity, plus a need to manage one’s career beyond self-interest by considering the needs of both the company and society. Four hundred twenty five of the 900 graduates of the class of 2009 have signed the oath, plus 100 others at business schools across the world. This is an important first step toward business regaining the public trust.

Professor Khurana told me that MBA education must also change profoundly. “We are living in a new context. If you cannot scan the environment, build alliances, shape the discourse, find the hard and soft constraints in a stakeholder society, you will not be an effective manager.” He believes that graduates of HBS cannot do this type of analysis. “They are unsettled about this knowledge gap; they believe they will have to learn it on the job. We need a coherent intellectual framework.”

Both of the professors agreed that the present MBA course teaches students to integrate across functions, from accounting to finance to marketing and production. “But the world is now much more complex,” Khurana stated. “We must teach systems thinking, with feedback loops on decisions. We are now just too linear.” Professor Nohria advocates training of MBAs in cognitive, process and emotional capacities. “We must get to enlightened self interest, beyond narrow self-interest. To do so, business leaders must think about problems using multiple intelligences.”

The challenge for business is not whether companies are entitled to make money but how they make money. Simple reliance on economic justification is not sufficient; there now needs to be social justification, or as Professor Khurana describes it, “Legitimacy earned by acting in concert with the norms of society, moving from business as an extractive to a value-creating mode.” Just as communication has evolved, from a top down set of messages delivered by the CEO to a continuous conversation among peers, the challenge to management schools is to teach functional skills and environmental analysis. It is only with complex thinking that best decisions will be taken.

Posted by Edelman at 10:42 AM | Comments (3) | TrackBack (0) |

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