Posts Tagged ‘Corporate communications’

Toyota crisis should teach us

February 4, 2010

Poor Toyota. The crisis Toyota Motor Corp. faces over the safety of its cars is of epic importance – and they are struggling to get ahead of the reputational meltdown.

Investor relations professionals and corporate communicators should be taking notes on this story as it unfolds – and learning from Toyota’s woes – because sooner or later a crisis like this may strike your company.

A “Squawk Box” discussion on CNBC today highlights the reputational crisis Toyota faces – and the direct hit that the change in public perception will have on sales and profits going forward.

Particularly interesting to me are comments by Jeffrey Sonnenfeld, professor at the Yale School of Management, who grades Toyota’s response as “C-minus and falling” and adds, “They’ve lost the leadership moment.”

Asked what he would advise if he were in Toyota’s crisis management “war room,” Sonnenfeld says these actions would be his top priorities:

  • Put CEO Akio Toyoda front-and-center in the public responses to the crisis. “He should get out there like Jim Burke of Johnson & Johnson, Bob Eckert at Mattel more recently and David Neeleman at JetBlue. These guys controlled the story – with facts,” the prof says. “He’s new on the job. Well, this is trial by fire. He’s got to learn to articulate and reassure the public with facts.” I might add this is a time to communicate the right values – and facts.
  • Respond in the blogosphere and social media. It’s a tsunami of talk, and Toyota needs to be answering, giving its viewpoint, correcting errors, responding to rumors, expressing a caring approach. The “Recall Information” link on the Toyota homepage is hardly adequate. Toyota ought to speak out in words and on video – and it should be very proactive online. Of course, you have to learn to engage in social media before the crushing wave rolls over you.
  • Embrace the critics rather than hiding. Hard as it may be, Toyota management should be side-by-side with the regulators and opinion leaders (in Washington or elsewhere) to demonstrate its concern and active response, keep the facts in line, and be a part of the dialogue. “Rather than disparage them, let’s embrace them as part of the flow of communications,” Sonnenfeld says.
  • Share with competitors what’s going on as the crisis unfolds. Counter-intuitive, but Sonnenfeld points out other automakers aren’t above safety problems or recalls, and some may even share suppliers with Toyota. Good time to reach out and enlist competitors’ sympathy and perhaps help – because in the long run the automakers all face similar issues.

This isn’t just a product or branding issue – the crisis is a major financial and capital markets setback for Toyota. The stock has tanked 20 bucks or 22% (looking at the ADS) since the mid-January peak before the recall. When the core value of your only product becomes a target of late-night comedians, it’s trouble.

Of course, Washington is dealing out public floggings daily – and these will continue and increase. Given the prevailing populism, which thrives on attacking big business, companies need to get much sharper at reputation management. When someone like the Obama Administration’s secretary of transportation tells Americans who own Toyotas to stop driving them – he later “clarified” that he meant something else – it’s ugly. (Does the US government in 2010 have a conflict of interest as the majority shareholder of GM, Toyota’s biggest competitor?)

Out in the blogosphere, people are equally carried away. One post by a public relations guy who writes anonymously under his Twitter handle @PRdude asks: “Should Toyota change its name?” And suggesting a name change may be the nicest thing a blogger is saying about Toyota.

Unlike the Yale prof or the anonymous “dude,” I don’t have solutions to offer Toyota today. But my advice to all of us at other companies is to watch this one – and learn.

Any thoughts? Please share your comments below.

© 2010 Johnson Strategic Communications Inc.

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Stakeholders vs. stockholders?

July 14, 2009

A Stanford University business professor, Jeffrey Pfeffer, takes on “shareholder capitalism” in an article in the July-August issue of Harvard Business Review.

Pfeffer argues in “Shareholders First? No So Fast …” that the pendulum is swinging from stockholders toward stakeholders. Noting the recent political changes and populist backlash after the carnage in financial and credit markets, he says CEOs and the rest of us need to get away from shareholder-driven decision making.

I’m not sure I buy the stakeholder-stockholder dichotomy. But we certainly do need to study the mood of our society as we work out corporate strategies – and craft messages for investor relations and corporate communications.

Pfeffer says companies used to be run (in the 1950s and 1960s) for employees, customers, suppliers and communities, as well as shareholders. In the 1970s and 1980s, he says, faith in the wisdom of financial markets became pre-eminent.

He describes the current shift back to stakeholders:

Now opinions on deregulation, finance, time horizons, and the wisdom of corporate leaders are all shifting, and the logic for putting the creation of shareholder wealth ahead of the creation of stakeholder value is rightfully under fire. Given the political realignment occurring in many countries, and the residue of the worst economic meltdown and destruction of wealth since the Great Depression, the chances are pretty good that stakeholder interests will remain at the top of the list a bit longer this time.

Even while stockholders were king, some of the most successful companies like Southwest Airlines put employees first, customers second and shareholders third, Pfeffer notes. The people who most influence a company’s success – employees and customers – don’t really get fired up by shareholder value, he suggests. Employees want to be valued (and paid), and customers want quality, price and service.

To me, there’s an element of “straw man” in the stakeholder vs. stockholder debate. Most companies I’ve worked with see shareholder value as a long-term outcome of working to motivate employees and excel in meeting the needs of customers. To the extent that any CEOs actually do fit the image of greed-crazed robber barons, I don’t see their behavior as having anything to do with the interests of shareholders.

Pfeffer even suggests that shareholder capitalism contributes to causing recessions. In that, I think he goes beyond economic evidence and joins the political hordes. Not much good can come from taking up torches to burn CEOs at the stake for our current woes. I doubt that shareholders’ interests led to this or any recession.

But stakeholders are the people our companies serve – shareholders, employees, customers, suppliers and communities – whatever order you list them in.

Our message has to do with what leads to business success. So, yes: stakeholders … and stockholders. What’s your view?

Reputation ‘now more than ever’

June 24, 2009

The financial and economic crisis has seriously eroded the trust people feel for business generally and specific corporations – and companies need a concerted, sophisticated effort to repair the damage – three McKinsey & Co. consultants write in “Rebuilding Corporate Reputations” in the firm’s June 2009 newsletter.

Today is an especially tough environment for corporate reputations, the consultants say. The onslaught of online participatory media, scrutiny from nongovernmental organizations, and waning trust for advertising make it harder to be believed. And all this comes at the same time that policy makers are eager to make an example of corporate executives and impose new laws and regulations on their industries.

Old-line PR tactics will no longer work in this environment, the authors say:

Now more than ever, it will be action—not spin—that builds strong reputations. Organizations need to enhance their listening skills so that they are sufficiently aware of emerging issues; to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters who can influence key constituencies.

A company fighting for its reputation must marshal a coordinated cross-functional response including investor relations, communications, marketing, legal and regulatory, and corporate social responsibility, the consultants write (OK, OK, they mention IR last). And reputation management must begin at the top:

… it’s the CEO who must lead a company’s overall reputation strategy, ideally with the support of a board committee focused on it. This may seem like a lot of firepower, but in today’s climate, with reputational issues threatening both shareholders and a company’s ability to achieve broader goals, that degree of high-level attention and integration is essential.

Investor relations professionals should be big-picture people, and the intersection of reputation, industry standing in the public policy arena and shareholder value is ample reason for IR to join in the effort to understand and build reputations.

The website: your front door

June 8, 2009

As investor relations professionals, we need an audience-centered approach to communicating with investors. And the audience, more than ever, is online. So we need to think strategically about our company websites and their IR sections.

Do they deliver what investors need and want? Do they accomplish what we want?

Think of a corporate website as a place that people experience. When an investor comes to your home page, it’s like a prospect stepping onto the front porch of a house you’re trying to sell. The investor looks in the front door, takes it all in, and prepares to go in and walk around. Other sections of the site are the rooms.

An investor has three kinds of experiences when he or she visits your website:

  • Finds information – which, of course, is why he’s there.
  • Forms impressions – your company brand comes across in many ways.
  • Interacts in some way – which may be your one chance to engage.

We should evaluate our websites in terms of these experiences for our audience – what they’re looking for and what drives value in their minds.

Over the years, I’ve worked on corporate websites to benchmark best practices for what IR content should be there, and I’ve done a good deal of writing for the web.

In a panel discussion today at the National Investor Relations Institute (NIRI) 2009 Annual Conference, I’m sharing some ideas on websites in a workshop called “Trends in Media and Technology.”

The strategic IR focus for a website looks at whether we are delivering the right information for investors in easy-to-find, usable forms, creating the right impressions of a company committed to creating value for shareholders; and inviting investors to interact with the company in convenient and helpful ways.

The IR purposes of the website must integrate with other goals – marketing, recruiting and retention, public affairs – because all of these audiences overlap. A corporate website must integrate with offline sources of information – the print reports, SEC filings, product promotion, media releases and so on that all of these audiences also see.

Tactically, we can do a great deal to maximize the value of our websites to investors. My own “audit” checklist for IR websites has about 40 potential features or content items.

But checking off information items isn’t the main point. The experience of the investor when he or she comes to this place – your front door – is the main point.

Some resources to guide IR people in maximizing our websites:

Quote, unquote – Open dialogue

May 14, 2009

Sounds like a cliché, but if we can walk the talk, this exec has it right:

In uncertain economic times, stakeholders need a CEO committed to transparency, communication and an unwavering focus on client service. H&R Block stakeholders deserve nothing less than an open dialogue about our company’s financial health and business trends.

– Russ Smyth, CEO, H&R Block,
Communication is Key,” NYSE Magazine, 2nd Quarter 2009

The job of the CEO (and IRO)

May 5, 2009

Procter & Gamble CEO A.G. Lafley offers insights on the job of a CEO in the May 2009 issue of Harvard Business Review. Since we as communicators work on the CEO’s supporting staff, the piece also sheds light on the job of an IR professional.

Lafley draws heavily on Peter Drucker’s view of the chief executive:

The CEO is the link between the Inside that is ‘the organization,’ and the Outside of society, economy, technology, markets, and customers. Inside there are only costs. Results are on the outside.

To be effective as that link between the outside and inside of a company, Lafley says, the CEO must embrace four fundamental tasks:

  • Defining “the outside,” interpreting which external stakeholders matter the most and what actions by the company are meaningful to them.
  • Deciding “what business you are in,” focusing and providing direction – as well as spelling out what business you’re not pursuing.
  • Balancing the demand for a “sufficient yield in the present” with the need to invest in the long-term future vitality of the company.
  • “Shaping values and standards” that connect with what people outside value – and shaping behavior to deliver on those promises.

I like this focus. It says that a CEO is not just a head cheerleader – or even the chief whip cracker. He or she must take on the tough job of defining and communicating the business and how it relates to the world around us.

If you’ve been in investor relations for long, or corporate communications, you see yourself at times standing in that same intersection between the internal world of your enterprise and the people on the outside who matter most to its success. Topics revolve around the four tasks cited by Lafley.

IR professionals should stand with our CEOs as active helpers – both in communicating with key stakeholders and feeding back to the CEO what those audiences say about the values, direction and plans of the company.

You can read Lafley’s piece, or watch his condensed version on video, at the HBR website.

Update your website

February 2, 2009

Getting caught with stale information on your website is an embarrassing – and usually preventable – moment. Investor relations can lead the way in protecting the company reputation by keeping that website up to date – or ensuring that someone is tasked with monitoring the corporate site.

The latest slap at a company website comes from Thomas Brown, a hedge fund guy writing on the BankStocks.com blog. Brown has been on the warpath against Bank of America and its CEO, and he takes another slap today in a post called “Ken Lewis’s Web Bio: Update Urgently Needed.” 

The B of A executive bio Brown cites gives Lewis implied credit for big increases in revenue, profit, assets and shareholder value …

During his tenure, Bank of America has improved customer satisfaction significantly across every major line of business; annual revenue has increased from $33 billion to $66 billion; annual profit has increased from $7.5 billion to $15 billion; assets have increased from $642 billion to $1.7 trillion; market capitalization has grown from $74 billion to $183 billion; and total annual shareholder returns (including stock price growth plus dividends) have averaged 13.3%, doubling peers, the KBW Banks Index, the S&P 500 and the Dow Jones Industrial Average over the same period.

… except that it doesn’t cite a time period for those stellar results.

Anyone who hasn’t been lost at sea knows that shareholder value in the banking biz – and for B of A – hasn’t been growing of late.

Brown refutes the rosy results point by point. That $138 billion market cap for BAC? It’s dropped to $38 billion, says Brown (closer to $30 billion after today). And the 13.3% annual total shareholder return? Brown calculates average total return as negative 18% per year during Lewis’s tenure as CEO.

I’m not into kicking a bank when it’s down, or siding with the hedgies. Generally, blending financial metrics into corporate descriptive material seems like a good idea – perspective and all that. But letting it go stale? Let’s just say it gives ammunition to the critics.

Best practice would assign responsibility for monitoring web content to someone who’s part of the company’s messaging process, whether it’s a person in IR, corporate communications or an outside firm. (The task should not go to a tech person or web designer, whose skills are not in financial communication.) 

This has to be an ongoing maintenance commitment. And you must decide a comfort level for how often to check and update the site: quarterly would make sense, at least, maybe monthly or a continual loop process.

Resolutions for 2009

January 5, 2009

In the spirit of new beginnings, I’ll share a few of my resolutions for 2009. Don’t worry, nothing on weight or exercise to engender any guilt feelings. These all touch on the business of investor relations:

  • I hope to speak more clearly and write more clearly. Creating a message that is well-understood by each person in our audience – clarity – is the measure of success in investor relations and corporate communication.
  • I plan to expand my own network of relationships. Personally, I favor business relationships that grow into mutually supportive friendships.
  • I want to give away more, and also bring in more.
  • I hope to surprise people with the quality of our work on every project. This little firm, Johnson Strategic, is a calling – not just a job.
  • I strive to continue learning new ways to communicate. Interactive tools are transforming the way people seek and find information, but in the corporate world we are not yet very good at connecting via Web 2.0.
  • I want to write this IR Café blog for the benefit of investor relations professionals – and stimulate conversation to build up all of our skills.

What are your resolutions for 2009? Care to share?