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February 16, 2007
Business – Its Time to Lead
One of the most interesting dichotomies in this year’s Edelman Trust Barometer is the rise in trust in business as an institution but the decline in trust in CEOs as spokespeople (down from 28% to 22% in the US, lower in key European markets). As I have traveled around to Silicon Valley, London, Frankfurt, Chicago, Los Angeles and New York City to discuss this year’s findings, I am always asked about this seeming contradiction.
Here are a few thoughts on why trust in business is rising. Business is helping to create prosperity and new jobs, especially in the developing world--trust in business especially high in the BRIC countries of Brazil, Russia, India, and China). Stock markets are buoyant, enriching investors, 401K and pension plan holders. The pace of product innovation has quickened, improving quality of life and also provides opportunity for employees to be more productive. Business is taking on important issues, such as environment and HIV/AIDS. Many companies are responding better in crisis-- Siemens immediately appointed an outside legal counsel to conduct an investigation of bribery charges, promising to “let the chips fall where they may.”
At the same time, CEOs have largely adopted a “duck and cover” approach since the onset of the crisis of confidence in 2002 stemming from accounting scandals (Tyco, Global Crossing, Enron, and Parmalat). More recently, the questions about executive compensation (Nardelli at Home Depot) and backdating of stock options (McGuire at United Health) have undermined public trust. Matthew Bishop, US editor of the Economist, remarked today at our Trust Barometer client briefing event in Chicago, “Business leaders have been rightly pilloried. They have let the side down. They have damaged their own ability to operate effectively.”
We are now at a point where CEOs and other members of top management have to lead in a more public manner. They must go beyond their comfort zone of financial analysts and institutional investors, of numbers and quarterly performance. There are critical issues to be addressed in the coming months, such as the preservation of free trade agreements in the face of rising political pressure to preserve jobs in the US and EU. Business leaders need to explain why open markets are critical for the future prosperity of the global economy and how trade benefits each individual consumer, and benefits employees. The same sort of argument must be joined about our energy future and the appropriate mix of oil and gas, nuclear, plus alternative energy options. The progress of science, whether stem cells or genetically modified seeds, will be halted without evidence of the tangible future benefits. As Alan Murray of the Wall Street Journal said so well, public companies are now political institutions and need to solicit support from stakeholders including NGOs, employees, communities as well as shareholders.
According to a McKinsey study released in December, CEOs are actually aware of the need to change. The study stated that half of American CEOs know they should shape the debate on key issues but only 14% said they are doing it now. The key reasons for not entering the arena: lack of knowledge of the issues; absence of a strong network of peers on the issue; fear of negative publicity. Neville Isdell, CEO of Coca Cola, said it well at the World Economic Forum in Davos. “CEOs have had their heads below the parapet since 2002. We have not engaged enough in the debate. It is time for business to step up. We need strong CEO leadership to embolden politicians on trade, environment and other issues.”
There is a very important role for PR professionals in facilitating this transition for CEOs, so they will take the leadership role on key issues. We have to explain that such CEO advocacy does not imply a rock star positioning that was so prevalent in the 90s. Nor does it mean that a CEO is distracted from his or her primary task of achieving financial results. By moving from defense to offense, by taking on bold initiatives such as Jeff Immelt’s Eco-Imagination for GE, CEOs will be able to inspire employees, reach out to new customers and have a robust interaction with new influencers such as NGOs. Our job in PR is to think of ourselves as more than listeners and communicators; we are actually relationship managers with important constituencies who are demanding a mutually beneficial outcome on important issues. As always, I appreciate your views on how we can help Business lead.
Posted by Edelman at February 16, 2007 10:02 AM
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Comments
Interesting stuff, indeed.
I agree that CEOs need to "engage," "step up," and otherwise lead more than they have. And doing so will eventually cause CEO trust ratings to catch up to business ratings.
But I worry about your suggested "very important role" for PR.
A great job of selling a lousy product is the way to ruin. When you use phrases like "moving from defense to offense," I hear the risk of sizzle without the steak. This has been the response, broadly speaking, of the pharmaceutical industry--a natural one, given the importance of marketing, but an unfortunate one--to its critics. Using the language of conflict--defense and offense--is not typically the best way to establish better relationships with new constituencies.
Try googling BP Green ad campaign. When I did it just now, the first 9 items were critical of BP, ranging from articles citing consumer skepticism to the nummber one listing, an outright satire of BP. What are the risks to a company like BP of being perceived as cynical?
When you define PR as analogous to relationship managers, I'm not sure I buy it. A "relationship manager" in the professional service industries of accounting or consulting is generally charged with articulating the voice of the client, solving problems, helping the company serve the client--and as a result, developing business.
Here's how one employment ad for a "client relationship manager" puts it:
"XYZ is currently searching for a Client Relationship Manager.
"As the Client Relationship Manager you will be working directly with some of North America’s top [blah blahs.] You will become our client’s trusted business partner by proactively managing their account and taking responsibility to make sure their needs are met. Ultimately, you will be responsible for the overall client experience and act as the face of the company to ensure the voice of both the client, and the voice of the company is heard.
Is that really what you mean?
The language of "client relationship manager" doesn't typically rhyme with "from defense to offense"--an inherently competitive, rather than collaborative phrasing--or with "bold initiatives." The best relationship managers don't institute bold initiatives; they go out and listen, deeply and intently, then quietly mobilize forces back in the company.
Finally, when you say it "doesn't mean that CEO is distracted from his or her primary task of achieving financial results," doesn't that beg the question? If corporations are indeed coming to be political entities, as you correctly suggest, then their new and evolving role needs to be addressed head on. By guaranteeing the old single-stakeholder role at the outset, you don't help the debate.
Let me try to be constructive. Leaders aren't leading. Yes, you can help them lead by framing the issues to the various constituencies. Implicit in that approach is that they are helpless, that they need help leading.
A far greater service to all if the profession tackled head on the consequences of failure of CEOs to lead. Start with the presumption that they are fully competent to lead, but have been derelict in not doing so.
In this sense, it is a virtue to look within. CEOs must recognize that quarterly earnings, one-way pronouncements, and spin campaigns are guarantors of medium to long term failure with various constituencies. On many issues--energy, environment, free trade, employment, demographics--corporations need to develop a framework for looking longer term than they have, at least in the US.
The PR profession can do a service by articulating political dynamics; by learning from longer-term companies and cultures (e.g. Toyota); by translating the strident language of various political groups into straight business talk that CEOs can understand; by helping CEOs understand that they are living in a new age of transparency; that the impact of cynicism and mistrust is huge and that the solution is not spin control, ads and PR campaigns, but solidly well thought out programs that address issues.
Tell the CEOs that their first instinct should be to address the issues with concrete business proposals--then to sell them. Not the other way 'round. If that's an unnatural act for the PR profession, well, it's time to act unnaturally.
[the posting shows up in preview mode without paragraph breaks, though I intended them in the draft--if you edit, might you add these in?]
Posted by: Charles H. Green at February 20, 2007 10:51 PM
This is a really interesting comment—thorough, constructive. I agree that the best PR is based on substance. I would argue that Wal-Mart’s environmental initiative is just that sort of effort, based on serious change in supplier behavior and commitment to customers. PR should bring these types of big ideas to the table. And you are right to insist on a stakeholder, not a shareholder, model. Thanks for reading my blog
Posted by: Richard Edelman at February 22, 2007 11:29 AM
Richard,
Thanks for the prompt and thoughtful response; and for the high-content blog you produce.
I’ll make it a point to become more familiar with Wal-Mart’s situation. I confess I haven’t followed it closely, and from what you say it sounds like a good model for the industry.
As you might imagine, since my business is built on helping create trust, I’m very interested in your trust survey. Keep up the good work, it’s quite valuable.
Best wishes,
Posted by: Charles Green at February 22, 2007 1:35 PM