Time for capitalism to get ethical…
Michael Lewis wrote a great piece in the August issue of the Vanity Fair. Entitled “The Man Who Crashed the World,” it’s about Joseph Cassano, former head of AIG’s Financial Products unit. I always admired Mr. Lewis’ writings for his no-nonsense approach to business, based on his first-hand experience on Wall Street, and his remarkable prescience about the financial industry train wreck to come described in his book Liar’s Poker published in 1989.
What grabbed my attention in the article about Mr. Cassano were his personal traits. He was described as “a guy with a crude feel for financial risk but a real talent for bullying people who doubted him. …Joe would bully people around. He’d humiliate them and then try to make it up to them by giving them huge amounts of money.” When Bernie Madoff was sentenced, “Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff’s behalf that attested to the strength of his character or good deeds he had done.”
Bullying, lack of character and good deeds seem to be the common denominators that fallen financial wizards have demonstrated in spades. What ever happened to the old values that characterized capitalism until the 1980s, when personal greed and profit became the norm rather than an exception?
Peter F. Drucker, one of the greatest business thinker whose “writings are landmark of the managerial profession,” according to Harvard Business Review, was no socialist. This is what he had to say about social responsibilities of every business: “The third task of management is managing the social impacts and the social responsibilities of every enterprise. None of our institutions exists by itself and is an end in itself. Every one is an organ of society. Business is no exception. Free enterprise cannot be justified as being good for business; it can be justified only as being good for society.” (The Essential Drucker, published by Collins Business Essential. Italics are mine.)
Drucker continues: “Asked what a business is, the typical businessman is likely to answer, ‘An organization to make a profit.’ The typical economist is likely to give the same answer. This answer is not only false, it is irrelevant.” Mr. Drucker’s thinking may come as a revelation to many fallen captains in the financial industry who think that ethics is a precocious Greek wine.
A real example of an ethical, socially responsible business is a story in Sunday’s New York Times about Trumpf, a family business employing some 8,000 people and based in Ditzingen, Germany. While the current economic crisis may force the owners to lay off employees by the end of the year, this business is run like nothing we’re used to in North America.
“About 15 years ago, Leibinger père put together his family’s principles in a written 20-page codex outlining rights and, above all, the responsibilities of Trumpf’s stewards. The imperative is to run the business in an ethical manner, to take care of employees and to earn a decent profit, which is largely reinvested in the company.” You can find the Company Principles section here.
Just compare that article to one in last week’s Financial Times, The town that Wal-Mart built. To the Wal-Mart town’s citizens, it’s all about size: the biggest this and the biggest that, topped by this quote from the journalist’s guide: “‘Look at the girls walking their little dogs,’ he says proudly as we cruise past leggy women in shorts. ‘You could be in New York.’” He’s right. You couldn’t be in Ditzingen.
Undercover Boss
Undercover Boss is the first in a series of documentaries about CEOs who want to know what their employees really think about them and their company. In the first segment, a beard and workers’ protective suit allows Stephen Martin, the 43-year-old CEO of the Clugston Group, to live on the front lines for ten days. It was produced by Channel 4 in the UK, a commercially funded public broadcaster.
I found out about the series through a great article by Stefan Stern in Financial Times. Mr. Stern describes a key dilemma faced by many chief executives: “Employee attitude surveys, brown bag lunches, focus groups, informal chats: managers try quite hard to find out what their staff are thinking. But the results are mixed at best. What are your staff thinking? Admit it – you don’t really know.”
You can add town hall meetings where questions are often planted and staging is more reminiscent of a rock-star spectacle than a genuine dialogue. And let’s not forget emails from the CEO. The readership of those decreases as you move down the organization. Yes, the rate of opening the email may be 96 percent but that statistic is as meaningless as the number of hits on your website. Remember when MBWA (Management By Walking Around) was all the rage? Nice, but they often look like a royal family walkabout. A walkabout also happens to be a purported Australian aboriginal ritual of manhood. You may argue that all of these attempts at a dialogue are better than nothing and I would have agreed with you three years ago. Today, they remind me more of a definition of insanity – doing the same stuff over and over, expecting different results.
Mr. Martin, the undercover boss, learned a few interesting things. According to Personneltoday.com, “Martin said he was able to get an ‘unfiltered view’ of how his staff saw the company and the issues they were concerned about, identifying real problems with communication and skills.” And it gets better, or worse, if you’re doing executive communications for Mr. Martin. One of the biggest problems he identified was “his regular e-mail communication and notices to staff about developments within the business were not getting through to many of those working on the construction sites.”
“I thought I was getting my message out there about what we were doing, but it became clear that workers on site were not getting that message because we were not talking to them in a format or language they wanted,” Mr. Martin said.
According to Personneltoday.com, Martin is trying to overcome these problems by setting up teams consisting of labourers, supervisors and managers who meet frequently to discuss developments in the workplace.
The solution, by mixing different layers of organization, is bound to improve the exchange of ideas. But it’s tough. Mr. Martin and other CEOs are trying to overcome barriers to communications erected by a command-and-control management and communications structure we’ve had for 150 years, originally patterned on the old Prussian army. The attempt may get rid of some of the filters that exist between each layer, but will not provide that “unfiltered view” acquired by going undercover. Mr. Martin may also want to consider adding another tool – social media. This would be a more interactive and personal way to communicate with his organization compared to traditional broadcast tools like email.
Channel 4 will broadcast Undercover Boss in two weeks. CBS is planning to broadcast “the new reality series” later this year.
Social media: coming to a boardroom near you…
You may (or not) agree with me, but social media could be reaching the tipping point in becoming the major influencer in the way decisions are made in corporate boardrooms. What I mean by tipping point is similar to reaching critical mass in technology adoption: the point at which adoption becomes self-reinforcing. I tipped to this point, so to speak, after I read The Importance of Compensation post on The Baseline Scenario. The post and its responses are brilliant in dissecting what went wrong with the way boards handled compensation, resulting in excessive risk-taking by company executives. And when it comes to compensation, the spotlight is on boards, because that’s where compensation is set.
Many surveys confirm that businesses, especially in non-tech sectors, have been slow to engage in social media. It’s hard to give up the old broadcast media paradigm, which was tailor-made for the command-and-control style of management. As Anthony Goodman writes in Financial Times, “Every chief executive and board member will say that ‘tone at the top’ is critical to a business, particularly in turbulent times.” The stentorian approach does not lend itself well to the new media. The voice at the bottom, multiplied by social media, counts in times of crisis too.
I have a theory why social media had such a hard time in the executive office and it has something to do with names. “Social media” is unlikely to fire up executive testosterone the way that “deadly force media” would make them pay attention. Just think of how many corporations have “war rooms,” where the deadliest weapon is a whiteboard with markers. Twitter, one of the most powerful tools in the social media arsenal, comes with a bird on its home page. Viral networks sound a lot more serious than social networks, especially considering the recent attention on the swine flu virus. I’m absolutely excited about Google’s Wave possibilities. Again, “Wave” is not something that the war-room crowd can envision without taking a tranquilizer or two.
Despite the initial resistance, social media have already changed the way businesses communicate. Some may even argue that new media will impact corporate structures, because social media are changing relationships with customers, shareholders and communities where businesses operate. Just think for a moment of shareholders as a special interest group. Now imagine the special interest group forming an online community capable of interacting with senior executives and board members in a way it never did before. Instead of waiting for an annual meeting, they will engage the head of compensation committee in a conversation that doesn’t allow the chairperson to shut it down as easily as he or she could during a once-a-year meeting. So this begs a question: does your board have a social media strategy? Because if it doesn’t, the one elected after the next annual meeting will…
An Essential List for Corporate PR
If anybody has any illusions that this recession is going to be just like the last two, here is something to change your mind. The U.S. gross domestic product decreased at a seasonally adjusted 6.2% annual rate in the fourth quarter of last year, way more than anybody expected, according to an article in the Wall Street Journal online. The U.S. Department of Labor reports that 598,000 jobs were lost in January alone. It should not come as a surprise that every big PR agency already stated that 2009 would be tough. Corporate PR won’t be spared from the wrath of the downturn either. Here’s a list of five critical factors to keep in mind in these demanding times.
#1 – Content
Content in PR, like cash to every business in recession, is king. Your company will still need press releases, your executives still give speeches and presentations, your website still needs new content. And, let’s not forget, social media without content is about as useful as a hole in the head. Content is absolutely essential to your business. Make sure you have people on your staff who can write and edit. You can hire outside help if absolutely necessary, just keep in mind that consultants are less than welcome when your business is suffering. The Financial Times reported last month that Siemens issued a ban on external consultants, hoping to save $386 million.
#2 – Deliver & Report
Deliver results and make sure that your senior executives know what you delivered. We all know that statistics play well, just keep in mind that not everything that can be counted counts, and not everything that counts can be counted. Your CXOs’ speeches are remembered longer than most statistics and speeches are amazingly cost-effective for reaching your customers and other key stakeholders. Produce monthly reports, but keep them short. Anything longer than a page gets far less attention than a well-written summary.
#3 – Extend Your Reach
We are, above all, communicators and our functional expertise and skills are essential for media relations as much as they are for internal and customer communications. Help your sales and marketing people with RFPs and RFIs. Make them stand out over your competition with clear writing and appealing visuals. Work with your HR department to improve communications with employees. Help your investor relations with better presentations. Offer your board members help with their presentations as well.
#4 – Maximize Your Channels
Maximize social media. As my colleague Mark Evans says, there are a growing number of social media that companies can use to extend their messages in new and different ways. This ranges from blogs and Twitter to video and Facebook. The key is determining the social media tools that meet your strategic needs, and then committing the resources and time to leverage them effectively.
#5 – Downsize Right
Create the worst-case scenario model to find out what is absolutely essential to deliver basic PR to your business if you have to lay people off. Keep in mind that, under Sorbanes-Oxley, companies are required to meet certain communications standards. Consider short and long-term contracts for people you want back when this recession is over. Because like all other downturns this one will end eventually.
