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April 25, 2007
A Damn Shame
I was sitting on the tarmac at LaGuardia Airport waiting to take off for Chicago when an RSS feed from the Wall Street Journal interrupted my reverie. “Siemens CEO Kleinfeld Plans to Stand Down.” The article says that Klaus Kleinfeld plans to leave when his contract expires in September after “tense board discussions about whether to extend his tenure.”
Siemens has been buffeted by two corruption scandals, involving fake consulting contracts to bribe potential customers and payments to an employer-friendly labor representative. Only last week, Siemens chairman Heinrich von Pierer, who had been CEO from 1992-2005, the years in which the alleged bribery took place, resigned from the supervisory board.
As a matter of full disclosure, I consider Kleinfeld a friend. We met through our work. Klaus was a newly minted chief executive of the US business of Siemens and Edelman was the PR firm for his company in America. Klaus embraced his role with great vigor and genuine enthusiasm. I remember his key role in building back confidence in New York City after the horror of 9/11, when he hosted European investors and CEOs in the Big Apple on behalf of the Partnership for New York City. He trained for and competed in the New York City Marathon. He joined the Centers for Disease Control Foundation in Atlanta and counseled with CDC Director Julie Gerberding on a restructuring of the agency. He played an important bridging function between the US and Germany in the wake of Chancellor Schroeder’s very public opposition to the US military action in Iraq.
My favorite memory is of Klaus with his family standing at the window on the top floor of the NY Historical Society, overlooking the starting point of the annual Macy’s Thanksgiving Day Parade in New York City. Flanked by his wife and two daughters, he was thrilled to see the huge balloon floats, the high school marching bands and Broadway performers. He loved the experience, the unabashed display of American culture, not because it was American but because it was truly local flavor. He was happy to give his children a chance to be part of a different society, to broaden themselves.
When he returned to Munich to take a senior position as head of a large operating unit, with an implied path to the top job, there were some critics who said that he had become too American, too focused on the bottom line. About a year later, he was promoted to CEO and made it clear that he would be a change agent, determined to rationalize the company structure, to get out of businesses where Siemens could not be a leader, to invest in economies showing the best growth potential. He has kept his word, by exiting industries such as mobile telecom, focusing on health and transport, exciting investors by raising the stock price by 50%. He began to communicate differently, writing a blog each week on his travels and the progress of the business, exhibiting a more open management style than the traditional top down, hierarchical approach. His tenure was not always perfect; he sold the mobile handset business to Ben-Q, the Taiwanese electronics firm, which within a year took it into bankruptcy, putting hundreds of German employees out of work.
He is leaving with his head held high, unwilling to tolerate any longer the ambiguous position in which the Siemens board has placed him by not providing immediately the planned contract extension. He has been cleared of any wrong-doing by an independent law firm, Debevoise Plimpton. He has turned around the company, making it a focused enterprise. What he has not done is to play the game by local rules, to emphasize the primacy of country of origin and making job protection the priority over growth in revenue or return on investment. Leadership at a time of change often means taking difficult decisions and confronting the established orthodoxy. As the Joni Mitchell song goes, “You don’t know what you’ve got ‘til it’s gone.”
Posted by Edelman at 4:20 PM
Comments
Richard, you captured the essence of the man perfectly. He is a great leader. We haven't seen the last of him. Jack Bergen
Posted by: Jack Bergen at April 26, 2007 8:50 AM
The only reason Kleinfeld had to go is because of power issues within the board of directors. He failed to build alliances there because he concentrated on his work and the communication with the Siemens community. Even in Germany and amongst the Siemens employees, he is, despite the failure of managing the cell phone business successfully, very well respected and certainly there are many people who would agree that it is a shame he is leaving.
Had he been tough enough to sit out the critical moment while his leadership was questioned by the board, he would still be Siemens' CEO. My guess is that he just did not want to be with that company anymore, because he could not identify any longer and felt his energy being eaten by intern politics. Sure enough, soon will he be back in another reponsible position and in the end Siemens will ask themselves: Why did we let him go?
Posted by: Thomas Praus at April 26, 2007 1:20 PM
I completely agree to Richard that Dr.Kleinfeld is a great leader and I feel it is definitely Siemens's loss and Alcoa's gain. I am very proud of Alcoa's Board members for bringing him in. He is one of the smartest men I have ever seen.
Posted by: Nisha Varghese at December 12, 2007 11:28 AM
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| TrackBackApril 18, 2007
Two (and a Half) Different Prescriptions
I heard two very distinct views on how to run a company last week. George David, CEO of United Technologies, and Bill George, former CEO of Medtronic, are lauded as outstanding leaders with amazing records of performance in stock price appreciation and customer satisfaction. Their quite different prescriptions for managers reminded me of the validity of the Harvard Business School case method, where there is no right answer to a problem, simply a logical strategy supported by facts and implemented with elegance.
Mr. David eloquently described his guiding principle at UT as, “How to do it better.” He indicated that he runs the company from the center, with passion and strong input to his units. He has pushed his Otis Elevator unit to reengineer the dynamics of elevator propulsion so that there is generation of energy on the way down, thereby enabling a drop in total energy use of 75%. He has embraced the Japanese principles of productivity, moving from sequential to simultaneous work processes, creating a uniform flow instead of high and low periods of output, thereby increasing physical volume productivity by 5-7% a year. He has focused on reducing missed work days from employee accidents by ten times in ten years, from 3% of total days to .3%. Meanwhile, the UT Foundation has given 21,000 employees the opportunity to pursue higher education, while giving working hour credit for those volunteering for local charities. “I want our young MBAs to stop thinking about financial ratios and to consider the physical reality of production. You cannot just repackage; you need to create underlying goodness in the business,” Mr. David said.
Mr. George, whose new book North Star, is now available in bookstores, talks about CEOs as authentic leaders, statesmen who must “serve all of our stakeholders.” He argues that employees today want input to the company strategy; “we have outgrown the apprentice system. They also want to find meaning in their work.” He suggests that the best leaders will engage with their people, will create a shared purpose and alignment on values. “You should not govern by rules; you should trust but verify that everyone is staying on board.” He cited a recent Harvard Business School study of 125 CEOs, which identified work-life balance, self awareness and honest feedback from subordinates and practicing your values in moments of greatest pressure as key success factors in leadership. His world view is that bottom-up works best.
My own experience as CEO is somewhere in between. I began a decade ago as a business school trained George David disciple, determined to push product development in communications(we were first to use the Web in crisis management for Odwalla in food contamination case in 1997) and to instill an aggressive spirit in our team including mandatory cold calls on prospective clients. I still cringe when I think of my use of a clip at an Edelman Leadership meeting from the movie, “Glory” in which Matthew Broderick, a newly minted general of a Union Army corps, is teaching his green recruits how to shoot a musket, shouting, “Do it. Faster. Again.” I remember the puzzled looks in the audience, as if I had totally lost them (and I had!) I made frequent changes in our corporate strategy, from diversification around a PR core (PR centric concept) to investments in a CSR company (a bit early—now right time!).
What I have learned is that credibility is earned by listening, by innovating, by making the right (and consistent) calls on strategy and by leading from the front. You must share the same pleasure and pain as your colleagues. The best ideas need to be mulled, vetted with your senior executive team and tested before full implementation. You need to emphasize quality and client service, while instituting training and development that builds employee skills and enhances career opportunities because it all comes down to people. It has been an interesting decade as CEO. I am certainly older and wiser; the company is better off for it. I would appreciate your views on this topic.
Posted by Edelman at 11:21 AM
Comments
Any one who has any amount of grey hair has seen vast changes in how leadership and strategy have been defined and redefined over the years. We have moved from a centralized, top-down approach to a more decentralized, horizontal approach. The debate--hopefuly--is no longer about whether leadership comes from the top. The top no longer has greater knowledge than the rest of the organization. Network engineers often used to say that the Internet was moving information from the core to the edges of the network. While this was "network speak", it was valid as well for corporations.
In the age of digital media, intelligence has moved from the top down and out to the edges of the corporation. Employees, customers and others have access to vast amount of information about the company. So, the debate becomes whether or not to lead from the center or the bottom (although it is difficult these days to determine where the bottom is or if there even is a bottom).
The fact that you have evolved and recognize the things you did wrong is a sign of leadership. There are too many so-called leaders who either never recognize that they were wrong, or can only admit wrong by blaming other for leading them astray.
The interesting thing about both CEOs is that have both recognized that financial measures are insufficient evidence of organizational success. It is far better to focus on employees and customers. Success with these two stakeholders will lead to financial success. Focus on financial success will not necessarily enhance employee or customer relationships.
Posted by: Elliot Schreiber at April 20, 2007 1:21 PM
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| TrackBackApril 12, 2007
Shrill Tone Is Out of Hand
I was in Atlanta yesterday at a breakfast event at Emory University. I ran into Chris Cramer, who has recently stepped down as managing editor of CNN International. His first comment to me was, “The shrill tone on cable TV news is out of control. The disgusting Don Imus comment about the Rutgers University women’s basketball team is just the extreme edge of this.”
He went on to tell me that the dilemma for media companies is that “this stuff drives up ratings.” He used Lou Dobbs, the CNN nightly news anchor as an example of “reinvention of the news as opinion and commentary.” He asked me rhetorically, “Should Dobbs be a broadcaster interviewing experts or an expert himself on issues such as immigration?”
Cramer’s view is that working in the media “is an honor. We impart information to viewers based on a certain moral compass, with editorial integrity. It may be old fashioned but this is the basis of building a sustainable long term media business.” He told me that he doubts the viability of a business model in which a network simply reaffirms what you, the viewer, believe as the basis of a trusting relationship. He concluded by saying that a course correction is near at hand; the era of “noise over context has run its course.”
I then chatted with Mike McCarthy, Cramer’s successor at CNN-International. Mike believes that viewer interaction is the key to building trust, whether offering the chance for viewers to see anchors passionately involved on site (Anderson Cooper in New Orleans after Hurricane Katrina) to allow customization of the web site (which news you want first) to offering a place for consumer generated content such as photos from the World Cup in 2006 under the “Fan Zone.” He believes in offering accountability for how “we develop news programming.”
McCarthy acknowledged the pressure to “make the product relevant to the audience,” but said that “CNN-I has put its stake in the ground. Our defining values are journalistic credibility and cutting through the hyperbole. We are the impartial news service, which differentiates us from the avalanche of news sources.”
I asked McCarthy about the proper role of a PR firm. He said, “ A PR firm is a vital part of the newsgathering process. You provide background information and make connections to the company. Our job is to scrutinize and interpret the facts provided by a PR person.” We agreed that PR people have a higher obligation than in previous times because material posted directly to a company web site is assumed to be factual and based on research.
I will paraphrase a quote from Alex Jones, dean of the Shorenstein Center at Harvard, who said that PR should be about credible advocacy, while journalism continues to be an independent voice offering accountability reporting of important events. We should emphasize the distinction, not attempt to blur the lines, between our professions, because it is only with a vital and active media sector that PR can thrive in the future.
Posted by Edelman at 11:28 AM
Comments
I noticed with interest your description of Cris Cramer's comments relating to Don Imus. In Germany, on confronted with a Don Imus of a different caliber. You may find the following of interest:
http://weblog.buzzcentric.com/
Regards,
Severin L. Wilson
Posted by: Severin Wilson at April 14, 2007 10:36 PM
SW thanks for this. It seems that this politician is attempting to curry favor with the extreme right wing voters by making this statement on the judge’s death. This is a disgrace, as you properly point out. America has reached the edge of its tolerance for this type of demagogue. I am proud that Imus has been dismissed by CBS. All the best
Posted by: Richard Edelman at April 16, 2007 12:02 PM
As long as ratings are tied to advertisers are tied to the bottom line, cable news will always reach for the most sensationalized, quick-buzz coverage they can find. I'm often amazed at the scandals they aren't reporting until the blogs do the legwork. The economics of newscasting today means everybody is too busy (or too lazy) to do the homework. The press release is the easy reach for those addicted to access.
Posted by: Andy Wibbels at April 16, 2007 12:11 PM
AW look at the success of the Economist Magazine, now at 1.1 million in circulation, 700,000 in the USA alone. It is the opposite of trend toward “newstainment.” Thanks for reading my blog
Posted by: Richard Edelman at April 18, 2007 5:41 PM
Richard,
FYI, I have posted on my own site re this blog, which I found thoughtful and provocative.
http://www.trustedadvisor.com/blog/137/
I would welcome your comments.
Charles H. Green
Posted by: Charles H. Green at April 18, 2007 8:51 PM
Richard, thanks for dropping by my blog to comment, I appreciate it.
I replied as follows:
Thanks Richard for the comments. I agree that transparency plays a huge role in developing trust. It reveals motives, enhances credibilty, and initiates the emotional risk-sharing that's required of each party in a trust relationship.
Not that many CEOs write their own blogs; Richard is one--read him at http://www.edelman.com/speak_up/blog/
Posted by: Charles H. Green at April 19, 2007 11:24 AM
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| TrackBackApril 5, 2007
The New Mantra: Lead, Tell, Show
I was having a drink last night with Matthew Bishop, US editor of The Economist, whose book on corporate philanthropy is due out next spring. We were discussing the rise in confidence in business and concomitant decline in trust in government seen in the Edelman Trust Barometer. Bishop noted, “Business is the most accountable institution, far more accountable than government. Its every move is monitored, by financial analysts, regulators, NGOs and customers.” We agreed that business is now a “political institution” answerable to stakeholders, held responsible for finding solutions for major issues, from environment to proper working conditions in factories.
These new expectations of companies are aligned with the economic might of the private sector and its ability to act in an entrepreneurial manner. The revenue of the top 50 companies are commensurate with the GNP of the 50 top economies. So for companies to maintain the ability to say, "trust us", they must respond to stakeholder demands to, "show us."
The actions of smart companies can be summarized in three words: LEAD; TELL; SHOW.
In this context, it is ironic to see increasing criticism of business for making certain decisions because “it is good PR.” Of course, corporations seek better reputation, in the same way they want higher stock prices, more sales and the top employees. It is the job of PR people to listen to non-traditional stakeholders (NGOs, community leaders) and to bring ideas forward that can improve the reality while buttressing the image of a corporation. Effective communication can provide a blend of credibility and transparency as potent as financial data corroborated by accounting firms. PR should also offer the same level of strategic guidance on non-traditional stakeholders as management consulting firms for traditional audiences. Once upon a time, our job specification in PR was limited to TELL; now we are at the table, suggesting ways to LEAD. We then are charged with SHOW(ing) progress. This is a virtuous circle for business in the 21st century, premised on innovation, conversation and accountability, not on the perverse stereotypes of spin, control, deflect and defend.
P.S. Given the season, I wanted to relate an Edelman family story. There comes a moment during the Passover seder that the youngest in the family is asked to open the door for Elijah, the prophet. A place is laid at the table for Elijah, symbolizing the warm welcome for strangers at the dinner. In 1925, my father Dan, age 5, was asked to do the honors. He walked to the door, opened it and was confronted by a 6 foot five inch man about to knock. As legend has it, my father exclaimed, “It’s Elijah,” and promptly passed out cold on the floor. It was the doorman for the building, affectionately known as “Sweet Man,” for his profuse applications of cologne, seeking to drop a package off for my grandmother. In any case, each of my children has been given appropriate warning lest a latter day “Sweet Man” comes knocking. Happy holidays to all.
Posted by Edelman at 11:35 AM
Comments
I have no bone to pick with Matthew Bishop, but his observation about corporate accountability cries out for a bit of context. Yes, corporations are getting more accountable. More accountable than some governments. But I get leery when corporate representatives begin to mistake their CSR programs for quasi-governmental programs. Corporations are accountable to a wide range of stakeholders for their ability to make money. Period. Their bottom line is not the public good. Ordinary people cannot elect representatives to business, not can they choose leaders or follow independent media that scrutinize policies. Their jobs or pension savings may go up in a puff of smoke to satisfy quarterly results-hungry or greedy executives. Corporate empires already transcend national boundaries and are often unaccountable to legislation designed to protect local environments or economies. I have nothing against large corporations (disclosure: clients!) but when I hear them whine or brag about their accountability (no reference to Bishop here), I think, let's not take ourselves for government, guys! No one has given us that right.
Posted by: Elizabeth Hirst at April 6, 2007 6:38 PM
You wrote, Bishop noted, “Business is the most accountable institution, far more accountable than government."
Is he stating that business simply has higher standards of accountability or that we as a practical matter truly hold business more accountable? And if it's the latter (or arguably both), one would expect that the relevance to self-interest or the unbroken line between financial performance and our personal pocket books is among the chief reasons. Seems to me that if we could create such an unbroken line to citizen self-interest in the political world, then we could and would hold our politicians more accountable. Of course we would have to have politicians as willing to accept the blame as they are willing to take the credit.
Posted by: Leo Bottary at April 9, 2007 2:24 PM