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When boards question their own leadership...

It seems that it is times like these — the global economic crisis, you know — that make us aware of the need for, or the lack of, leadership among our institutions of business and government. Perhaps that quality is present, or not, during "normal" times," but it is only when we actually require such capabilities that we recognize their existence, or the vacuum that remains.

So, it is with only little surprise and some anxiety, that we note the results of a McKinsey Quarterly poll. While it was not entirely scientific — because it was an opt-in, loosely controlled sample — we opine that the results likely are representative and, therefore, worth noting here.

McKinsey published “The crisis: Mobilizing boards for change” in February and in connection with that story the company “invited directors to take an online survey to gather their opinions on how boards were responding to the economic crisis.”

Half of board members responding said their boards have “responded effectively to the global economic turmoil. However, many corporate boards have adjusted their practices, and more want to do so.”

Yet the survey says, “Many boards of directors are not providing the leadership demanded by the global economic crisis.”

• Only half of board members responding described their boards as effective in managing the economic crisis.
• “Just over a third” reported that their boards have not been effective in the current circumstance.
• 14% are unsure how to rate their boards’ effectiveness.

At the personal level…

• “Roughly half of corporate directors” reported that their boards’ chairs have not met the demands of the crisis, and
• “A nearly equal percentage” of board chairmen believe the same about their board members.

Though most boards have implemented some changes to their procedures in response to the crisis, 62 percent say their boards need to change even more.

The McKinsey poll results are available here.

“…A failure to communicate,” Part II

Since our last post on this subject, New Hampshire Congressman Paul Hodes has informed us that AIG now stands for “arrogance, incompetence and greed.” And, if you believe CNBC, the nation is in an outrage about AIG’s $165 million in executive bonuses, and Treasury Secretary Tim Geithner’s tacit approval of them.

With those additions to the picture — and the considerable number of positive emails we’ve received — continuation of this discussion seems justified.

The jumping off point was Waggener Edstrom’s survey indicating financial-service institutions are not communicating — or are not communicating well — with their several constituencies.

To that, we restate that a heavy emphasis on crisis communications tactics is in order. These, of course, include messaging with candor, timeliness, clear explanations and, in this case, differentiation are among financial institutions.

These are not “happy letters,” as one writer feared some institutions could uselessly resort to.

Quite to the contrary, this must be truly strategic communications. Such a program requires clear understanding of stakeholders’ interests, fears and anxieties; thoroughly addressing issues that undermine credibility; and effectively communicating candid corporate positions in media suitable to each constituent audience.

Further, executing such a credibility recovery program requires a continuing drumbeat of regular communications. A one-off or short-term effort will not ease the anxiety, will not begin to rebuild confidence, and will not stabilize the brand. Anything less than a thoughtful, thorough, continuing communications program will only exacerbate the fears and frustrations of the stakeholder on one side and diminish institutional credibility on the other. [AIG is an exception because we believe credibility of that brand is all but extinct — at least for this generation.]

Commercial and retail borrowers, working and retired investors, small businesses, and retail consumers are among the stakeholders who have a common interest in this situation — financial security. They must trust that their money is safe or that the loans won’t be called.

However, each stakeholder group has a unique perspective and a unique language; those constituent differences must be clearly recognized and convincingly addressed. One size certainly does not fit all.

This blog is not the place to present a communications campaign. However, we can say that it is important for financial industry leaders — many of whom seem to be frozen in the headlights when it comes to communications — need to understand that a communications vacuum will be filled by the worst possible visions of individuals — and the media — if they are not satisfied by credible facts.

And for this counter-attack on credibility, the only appropriate leaders are the financial services CEOs and their C-level teams.

What we have here is a failure to communicate

Here’s a real BGO — blinding glimpse of the obvious — and then some really valuable information.

First, the BGO: Advertising Age writes that “Even PR pros are shaking their heads at [AIG] the blundering giant insurer, which is fast becoming not only the poster boy for financial-industry greed, but also a company seen as too arrogant or stupid to keep out of its own way.”

Now, here’s the really important information; it is consumer research conducted by Waggener Edstrom and reported by AA’s Michael Bush.

"Our research showed that it was consistently clear that consumers are looking to hear from financial-services institutions and they are not," AA quotes Torod Neptune, WE’s global public affairs SVP.

It may be arguable whether AIG can communicate their way through this image disaster or they’re stuck for a generation with a reputation for arrogance and avarice.

However, looking beyond AIG and in the broader financial-banking industry, well, that’s a different story.

Waggener polled 1,000 consumers and found that “many said they are not even hearing from their own banks.” Here are the numbers.

• 44% said they heard something from their financial-service institutions, but felt more negative about the industry afterward.
• 38% said they heard nothing at all.
• 11% said that had heard from their financial institution and felt better as a result.

We think the financial services situation worldwide needs to be treated with a crisis communications attitude and approach, using proven crisis communications tactics.

However, it appears form WE's numbers, the financial-banking sector is either frozen in their tracks traumatized by the whole situation and uncertain what or how to communicate — or they are communicating poorly.

Clearly, there’s room for improvement in both B2C and B2B communications here.

[Several weeks ago, we posted our 30,000-foot view of crisis communications principles in this blog's side column; you may want to take a look at them about half way down on the right.]

You can read the full AA story here.

Good Idea! PowerPoint presentation tips

Here's a good idea!

Love 'em or loathe 'em, PowerPoint presentations are a fact of life. So, if you accept that premise, the better those PPTs are, the better it will be for everyone.

Here's a helpful site/blog, Visually Speaking - effective presentation skills, that we've found has a lot of helpful ideas for PPT creators and presenters.

Tom Mucciolo is the head of Presentation Skills and MediaNet, which are located in New York. He's been a presentation skills consultant for major corporations since 1985. Mucciolo's focus is on the scripting, visual design and delivery -- especially associated with electronic event presentations.

Cut out the 'Gloom and Doom' talk

"In tough times, words matter. Leaders must choose them carefully," says John Baldoni in "Cut Out the Doom and Gloom Talk."

Baldoni's trying to get leaders to stop using terms such as "financial Armageddon," and he summarizes his his advice for the doomsayers with six basic rules of the road. You can read all of them at Susan Weiner's Investment Writing blog.

Have a read; it is worth your time.

Obama & Geithner — A question of the angles of perception

The Administration's popularity with the electorate is well established; however, Obama's success among the experts viewing his performance as the elected leader of the largest economy in the world is quite a different story.

“U.S. President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the economy,” according to the results of the latest Wall Street Journal forecasting survey.

The Wall Street Journal’s survey of economists gives the Obama and Geithner team failing grades.

“The economists' assessment stands in stark contrast with Mr. Obama's popularity with the public,” the Journal writes.

While Obama enjoys 60+% popular approval ratings in several national polls, the WSJ survey of 49 economists shows a majority is dissatisfied with his administration’s economic policies.

“On average, [the economists] gave the president a grade of 59 out of 100, and although there was a broad range of marks, 42% of respondents rated Mr. Obama below 60. Mr. Geithner received an average grade of 51. Federal Reserve Chairman Ben Bernanke scored better, with an average 71.

The economists also disagreed with the administration about when a recovery would begin — later than the Obama team says publicly.

Those surveyed generally believed that the downturn might end in October, pushed out from their August end suggested last month. And they see the U.S. GDP continuing downward through the second quarter, with slow growth returning in the third quarter of this year.

As to the $787 billion economic-stimulus package, 43% of the economists polled said the U.S. will need another stimulus package of $500+/- billion. “Others were skeptical of the need for stimulus at all.”

The economists' “main criticism of the Obama team centered on delays in enacting key parts of plans to rescue banks.”

"They overpromised and under delivered," the Journal quotes Stephen Stanley of RBS Greenwich Capital. "Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone's head." See edit30 post.

Mr. Geithner’s Feb. 10, speech announced the administration's plans but offered few details — a shortcoming that has been criticized daily in the financial media, and cited as a black cloud of uncertainty that has created anxiety on traders and downward pressure on stock indexes.

While Geither has since appeared before Congress and offered some specifics, he admits that the plan still is weeks away.

Preparing for an economic recovery

A near total lack of visibility is about the only thing business people know for certain thus far in this recession. But Harvard professor John Quelch has a few thoughts about what business marketers need to do while we wait for an economic turn around. Here is a shaved down version of his “seven top recommendations for marketers looking to plan ahead.”

“Focus on high-potential customers.” In the B2B space, those are the ones “where pent-up demand is going to be unleashed once the economy turns.” On the consumer side, Quelch says, “focus on cash-rich or long-term-oriented consumers.”

“Don't assume a return to normal.” The longer and deeper the recession, the more the landscape and consumer behavior will change. What to do? Listen closely to your customers — obviously good advice in any economic cycle.

“Assess your target customers' trust in your brand.” Economic upheavals always tarnish some industries and brands; some may never regain their luster. This creates a need to “add service support and hold [the customer’s] hand more firmly.”

“Stay focused on costs.” Many manufacturers will be plagued by overcapacity and excess supply chain inventories; thus continued downward price pressure. Consequently, keep the pressure controlling costs and improving productivity.

“Know your lead indicators.” Every good marketer knows the specific indicators, macro or micro, that predict product demand. Use common sense: If the Wal-Mart parking lot looks less crowded, some consumers are probably migrating back to Target and vice versa.

“Develop scenarios.” Since recovery visibility will continue to be very foggy, Quelch suggests Peter Drucker’s advise: "A strategy is a sense of direction around which to improvise."

“Don't wait for permission.” Don’t wait for The Wall Street Journal to “declare the recovery underway.” Develop a recovery plan now, and “pull the trigger when your lead indicators say go.”

You can find Quelch’s whole article in the Harvard Business Review online here.

Communications in the changing media environment

A new research report by The Rosen Group that sampled American readers’ about their use of traditional print media versus digital formats confirms what publishers nationwide well know, that “there is a strong shift to online news consumption.”

But, there is a twist here, and it is an important one; this outcome is with respect to consumers’ desire for breaking news.

• 30% of respondents say web sites are the top sources for news updates.
• 66% say Web sites are among their daily news sources.

By contrast, among the same sampling,

• 80% subscribe to magazines; and
• 65 percent find weekly news magazines relevant.

Even though the numbers are somewhat ambiguous, they confirm what we have long believed is obvious: Not everyone is good at everything.

Therefore, we think the implications for corporate communications suggest a careful examination of what media you are using to communicate with your diverse stakeholder audiences, as well as what corporate subjects are focused where. As Orwell noted, "All of the animals are equal, but some are more equal than others."

Here’s our take on the meaning of this research for business communicators:

• Unquestionably digital media is growing in importance and influence. This is especially the case for breaking news. From a corporate perspective this means, product announcements, financial releases, tactical aspects of your strategic focus need to pay close attention to your digital contacts.
• At the same time, don’t be excessively fearful of “citizen journalists,” such as bloggers, because “60% of respondents believe the information on blogs is not credible.”
• While developing a healthy relationships with digital editors, don’t minimize the attention you pay to daily newspaper journalists, and especially to editors of the “long lead books” [magazines that publish once or twice a month] as well as the weekly publications.

Not surprisingly, in an increasingly costly and competitive media world, discrete areas of expertise will win out.

• In this environment where keeping abreast of fast breaking, rapidly changing information is essential, the natural leaders are going to be digital information providers. These will be stand-alone Web publications as well as the digital adjuncts of print media.
• When a broader focus requiring more in-depth and thoughtful trend reporting is appropriate, [and time sensitivity is less of an issue] the traditional print format will rise to the surface. Again, this is likely to be a digital extension of an analog brand.
• A third, and sometimes overlooked, facet of the corporate media mix are the specialized local print media, sometimes referred to as the “neighborhood newspaper.” We opine that they will survive, and therefore should be included as credible avenues to your stakeholders, too. [Everyone has to live in a "neighborhood."] As the late U.S. House Speaker Thomas P. "Tip" O’Neal was fond of saying, “All politics is local,” and we believe corporations are very political animals, whether they like it or not.

To a large degree this media environment is not much different than the one in which corporate communicators have always work. It will continue to require timely, consistent and accurate information dissemination — three communications values that will be more critical than ever.

Your can read the full Rosen Group here.

Biotech Genzyme stumbles on disclosure, credibility

Corporate credibility is based on a lot of factors, one is the timely, candid delivery of information — especially information that can influence share price. Indeed, the SEC has rules about such things.

So, it is with some amazement — and disappointment — to learn that the Boston-area biotech firm Genzyme held material product information from the media and, thus, investors.

Forbes.com reports that the Food and Drug Administration notified Genzyme in two letters on a Friday afternoon that it was “delaying a key product,” Lmuizyme, an approval Genzyme had expected. The company did not reveal the news until the next Monday — three days, including one trading day, later and then only after NASDAQ had closed.

Such material strategic information leaves plenty of room for insider trading before the knowledge becomes widely distributed, as required.

Even so, Genzyme share fell 4% on Friday and 7% on Monday, outpacing declines in the broader market and biotechs in particular.

When Genzyme did disclose the news, the company said the FDA’s action would cut 2009 profits by about 12 cents per share, and the share price fell another 5% in after-market trading.

Forbes wrote that an SEC enforcement attorney believes that Genzyme may have complied with disclosure laws, but that doesn't mean it made the right choice. After all, investors and analysts do read newspapers over weekend, and even on Mondays.

While legitimate business reasons may have motivated the delay, the incident makes one think back to the ImClone Systems scandal, in which former CEO Sam Waksal was alleged to have tipped off Martha Stewart and his family before telling the market about an FDA delay. Waksal went to jail for insider trading; and Martha did too, but that was for lying to investigators.

The financial pressures on all companies today are enormous, but so are credibility pressures.

In such a situation, share price is going to take a hit, but management’s integrity and credibility shouldn’t have to.

"The quicker you get out that kind of material announcement, the less scrutiny is invited. Anybody who sold [Genzyme shares] from the time of receipt until the company made its disclosure should be expecting a call from the SEC." Jacob Frenkel, a partner at Shulman, Rogers and a former SEC enforcement attorney told Forbes.

Here’s the full Forbes article.

Bernanke's perfect speech, a model in style and of clarity

Every corporate speechwriter knows that the proven format for achieving audience understanding is to create a context of understanding; tell the audience what you are going to tell them; tell them; and then tell them what you told them.

That simple four-step rule may get panned for its simplicity, but unjustly so. We believe that it is as close to perfection as you will get on the speech-making circuit — and that's because it works. And today, Fed Chairman Ben Bernanke once again proved the merits of the simple little format.

Bernanke's presentation to the Council on Foreign Relations represents speech construction in virtual perfection. He presents a very complex topic of vast global interest and, therefore, clarity of message is essential.

His format is a textbook example of how to construct — and in his case deliver — an understandable speech using all of the right elements in the right order and in the right percentages.

Bernanke’s 4,222-word speech precisely uses the four elements essential to gaining audience understanding. Here’s how it breaks down.

• Create a context of understanding for what you will say — 629 words, 15%.
• Tell the audience what you are going to tell them; use a headline list — 221 words, 5%.
• Explain the list, which provides the meat of your presentation — 3,136 words, 75%.
• Tell them what you told them by restating your headline list — 236 words, 5%.

Bernanke’s introduction, or context-setting segment, may have been a bit long at 629 for the average business speech, but not for his difficult topic of Global financial reform.

The text of Bernanke's speech, with our identification of its structural components, is available at this link.

Talk about a lack of credibility! Ya’ hear Mr. Geithner?

Two stock analysts from ConvergEX Group, Nick Colas and Oren Klachkin, have come up with a list of 10 headlines that could signal — finally! —a stock market bottom. Ah, something to build on!

Their first suggested headline is a “significant one- or two-day drop in the market.” To the two, “significant” means 10% or more. Holy Dow Jones! Can the market go to minus numbers?

But the second one is probably the most promising for investors, thus the markets, and the most damning for President Obama and Treasury Secretary Tim Geithner and, it is “Timothy Geithner is replaced by Paul Volcker.”

Credibility is everything in business, and the analysts say that, “Fairly or not, the market does not have a lot of confidence in Treasury Secretary Geithner, while former Federal Reserve Chairman Volcker's ‘proven abilities in a crisis could play better with investors.’”

Volcker currently heads the Economic Recovery Advisory Board under President Obama.

Read the full list at MarketWatch.