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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.

Clinton's staff gaff sends message to corporate CEOs

Secretary of State Hillary Rodham Clinton showed great aplomb in her globally embarrassing gaff with Russian counterpart Foreign Minister Sergei V. Lavrov in Ankara, Turkey, Friday (3-6-09). Even so, the embarrassing incident speaks worlds about the importance of competent support staff for C-Suite executives in government and private enterprise. (Sergei also appears as Sergey. The Financial Times of London uses Sergei; The New York Times uses Sergey.)

Before the world’s media, Secretary Clinton told Minister Lavrov that her staff “worked hard” to get precisely the right Russian word for the American English term “reset,” or to begin anew. (The wrong word that was used is "Peregruzka.")

The word was important because it was a play on the office supply store Staples' “Easy Button,” and was intended by Clinton to be the continuation of Vice President Biden’s previous commitment to reset previously contentious American relations with Russia, and to move forward with a more cordial tone.

However, when asked about the correctness of the Russian term, Lavrov told Clinton that “you got it wrong.”  The Russian word Clinton staffers selected for the Secretary’s version of the Easy Button actually meant “overloaded” or “overcharged.”

The two laughed off the gaff and Clinton later suggested that “overloaded” might be a correct description for the work level their two governments will find in front of them.

This embarrassment should’t have too much made of it. Mistakes happen, even to the most well intentioned individuals. However, the source of the incident does speak to American short comings in understanding non-American environments. Where were the native-speakers of Russian to double fact-check exact meanings — to say nothing of the nuanced meanings — of the word?

The incident reminds us, once again, of a mentor who believed firmly in the adage that, “if I can’t trust you with the small things, how can I trust you with the big ones?”

Credibility is built on what one does, and doesn’t do; on attention to detail; on the ability to move swiftly, deftly and accurately. This incident will pass and be largely forgotten, as it should be. But the lingering questions remain: how much attention to detail do American leaders devote behind the scenes and how much expertise is available in Washington to understand the cultures, customs and languages of our allies — and enemies?

To optimize business effectiveness, the same goes for CEOs — and their relationships with critical stakeholders.

Communicating the right pricing message

Faced with dramatically falling consumer demand and subsequent downward pricing pressures, some companies — such as inventory-heavy apparels — feel the necessity to lower or even slash retail prices.

But what sort of message does this send to customers? Are you telling them your products really aren’t worth the prices you’ve been charging? Are you communicating mixed messages that will haunt you when the recovery finally begins?

“Discounting and promotions condition the buyer to expect lower prices” and create a customer mindset that makes it “hard to raise prices later when times are better,” according to Paul Nunes, executive director of research at Accenture's Institute for High Performance

Writing in the Harvard Business Review [2-23-09], Nunes calls this the “discount trap,” and says that it exacerbates the difficulties faced when you want to raise prices. Nunes calculates that a 30% price cut today requires a 43% price increase tomorrow to regain price parity.

Therefore, the Accenture director suggests several alternatives that communicate value more effectively.

• Analyze whether your product has comparable competitors that are strong enough to overcome the brand loyalty you’ve established. Price may not be the deciding factor in your customers’ buying decision processes.
  
• Frito-Lay is trying promotions that are “different at the beginning of the month than at the end of the month," CFO Richard Goodman told The Wall Street Journal. "People have more money to spend at the beginning [of the month] and a little less at the end," he said. It is called 'Paycheck cycle' pricing.
  
• “Discount” by increasing the amount of product you sell for the same price. Nunes notes that "20% more product may cost a lot less than offering them a 20 percent discount” and appeals to consumers’ sense of value.
  
• Haggling is back,” Nunes says. “And it's everywhere. Customers are now prepared to ask for discounts even in grocery stores. Let sales people know how much leeway they have in negotiating prices and “train them to ensure they consistently realize the best negotiated price.”
  
• Create deferred payment plans for higher priced items, formerly known as the “lay-away plan.”
  

So, what’s old is new again, and the mantra “Never pay retail” rings loud and clear.

Read Paul Nunes entire article at the Harvard Business Review.

Geithner: The smartest man in the room?

The smartest person in the room can only claim that title if the others think s/he is. That's because personal and corporate reputations are built on third party opinion. Or, as one mentor was fond of pointing out, “PR is what you do, not what you say you do.”

And it surely was with such awareness that President Obama named Timothy Geithner the nation’s Treasury secretary, and the point man to fix America’s piece of the global financial crisis.

Why else would Obama on Feb. 9 say, "My instruction to [Geithner] has been let's get this right. Let's create a template in which we're restoring market confidence.... We've got to restore confidence, so that private capital goes back in."

Those expectations have been so deeply unfulfilled that even the very liberal Time Magazine this week repeatedly defines Geithner’s performance as less than inspiring. Among its observations on the head of Treasury are the following.

• Geithner’s presentation of a “half baked plan to save the banks” was “less than inspiring.”
  
• That delivery “left Washington and Wall Street whispering that Geithner wasn't ready for prime time.”
  
• Time’s own assessment of that performance is that, “He survived.”
  
• Then Time echoes Florida Rep. Ginny Brown-Waite's assertion that “every time Geithner speaks in public ‘the stock market plummets.’”
  
• “He doesn't seem to fill his suit.”
  
• “He talks too quickly.”
  
• “He swallows the ends of his sentences.”
  
• “He gives the impression of a grad student taking an oral exam, not leading the country out of perdition.”
  

Time concludes that Geithner was named Treasury in part because he “was considered a smoother salesman” than Larry Summers.

However, the publication notes that when the Administration rolls out its more detailed bank bailout plans in the next few weeks, Geithner will have another chance to salvage his reputation as a salesman…. But the truth is, if the plans fail on their own, it won't be Geithner's tone of voice or his demeanor that brought him down, no matter what the Washington crowd may say.”

Nonetheless, Geithners reputation as the smartest guy in the room will forever be bloodied and tarnished by abundant skepticism and accusation, which once again proves that reality is what people perceive to be real and reputation is defined by public perception.

Read the full Time story here.

Effective messaging: One poke in the eye, one not

It is virtually a truism that a great deal of what solidifies corporate images among stakeholders are their perceptions of what is true or factual or real. However, what is not always acknowledged among communicators is that what constituents believe to be true, factual or real may differ from actual empirical facts.

Therefore, to get your money’s worth when executing communications campaigns, it is very important to view corporate message from the perspective of the end-user, the stakeholder.

An examination of two general aviation companies provides a dramatic contrast in approaches, the visceral versus the thoughtful.

The companies are Cessna [see earlier post] and Hawker Beechcraft.

Their common objective is to prove the efficacy of corporate aviation, overcome public and Congressional outrage over high-flying fat cat executives, and to staunch declining aircraft sales.

Cessna’s pokes Congress in the eye in its appeal to CEO machismo when it says, "true visionaries will continue to fly." The headline virtually hammers the board table when it shouts, “Timidity didn’t get you this far.” These messages sit above a gleaming Cessna jet aggressively poised to thunder into a threateningly black sky.

By contrast, Hawker Beechcraft ads don’t feature an executive jet, but the workhorse nine-passenger turboprop Beechcraft King Air 350. The message is clear: this is a business tool, not an executive luxury.

Instead of a damn the criticism, man, fly anyway approach, Beechcraft provides an easily understood example of how business efficiency is achieved by Starbucks’ use of its aircraft as prudent, cost-effective business tools.

The ad says, “Starbucks is a uniquely American success story with thousands of locations in more than 40 countries. Like most successful corporations, Starbucks relies on business aircraft to manage and grow its business worldwide. We are here to help them fly even more efficiently than before by showing them how to right-size their flight department.”

"You can debate the size and amenities,” Hawker Beechcraft CEO James E. Schuster said. “But that doesn't negate the basic economic premise of the value of business aircraft to many, many companies."

(USA Today reports that The National Business Aviation Association says that 86% of those on board corporate planes are non-executive employees, such as sales people, technical experts or repairmen doing jobs more quickly in difficult locations that don’t lend themselves to regularly scheduled commercial flights.)

CEO Schuster added that the choice of executive aviation should be "function of the cost of their time," not their egos. "What makes a business competitive [is] getting the most out of the people it employs" and prudent use of corporate aviation is one way to achieve this legitimate business goal.

Links to Hawker Beechcraft, Cessna and the USA Today story.

Stakeholder communications still essential

Corporate communications with stakeholders have taken less of a hit during this recession than during previous economic downturns, reported the Annenberg Strategic Communications and Public Relations Center.

"The only plausible reason for this change is recognition that in our hyper-informational, increasingly transparent environment, organizations of all types need to communicate effectively or see their relationships with their key audiences wither away. This seems to be true even when — or perhaps especially when — times are tough” said SCPRC director Jerry Swerling in a news release.

“Engaging with your stakeholders in cost effective ways is no longer an optional practice; it’s essential," he added.

For the 200 companies surveyed, 7.4% reported 2009 budgets lower than in 2008. “Thus far in 2009, surveyed organizations have further reduced their spending by an average of 3.9% relative to their planned budgets for this fiscal year,” the release stated.

Budget cuts have hit agencies rather than internal staffs. “While the recession has certainly hurt, and there will undoubtedly be more pain in the future,” Swerling said that, “our survey respondents, who come from a wide swath of the economy, have experienced significant but not debilitating budget cuts and have been able to prevent, at least through today, widespread layoffs.

Read the Annenberg release and report here.

Just the facts, ma'am.... well, almost

CEO responsibilities rise above fact-checking speechwriters’ illustrative statements. And to attend to their higher duties without being menaced by minor issues, executives deserve knowing that their wordmongers get it right — otherwise the boss’s credibility gets dinged.

And no less a symbiotic relationship exists between President Obama and his own word crafters.
Nonetheless, as we all know by now, Obama is fond of entertaining tales and phrases. He evidently believes they contribute to his ‘ordinary man’ quality while elevating the mundane or simply tedious to the palatable.

Therefore, in addressing the joint session of Congress about both the American auto industry disaster and the ever-resilient American spirit, Obama once again entertained us with such an informative statement: "I believe the nation that invented the automobile cannot walk away from it."

While a handy turn of phrase, it is not correct.

The Library of Congress credits Germany with inventing the automobile, according to USA Today’s James Healy. And a Diamler AG spokesman says, “It's a fact that Daimler invented the car.”

All of this reminds us of another executive over-reacher, former Vice President Al Gore, who told CNN in 1999 that, “I took the initiative in creating the Internet.”

When Today's Healy asked the White House about the error, a presidential spokeswoman, Jen Psaki, challenged: "There may be some question about who invented the car, but make no mistake, we still make the best cars right here in America." [We don't think J.D. Power agrees with that, but we may be wrong.] 

The White House aide suggested that Obama was encouraging Americans "to remember our rich history of ingenuity."

Which brings us to another fundamental of executive communications: Admit mistakes, and demand that your lieutenants do, too.

Attempting to rewrite history doesn’t work, and is completely contrary to the notion of learning from one's mistakes and moving on.

Of course, we could take the approach of William Godwin, who pleaded in his 1797 “Of History and Romance: ”Dismiss me from the falsehood and impossibility of history, and deliver me over to the reality of romance.”

PS: One final thought on facts and accuracy: Dragnet's Sgt. Joe Friday is often credited with the phrase, “Just the facts, ma’am.” Close. Actually that exact sentence appeared in a 1953 Stan Freberg spoof of the cop drama. The accurate Dragnet phrase was, “All we know are the fact, ma’am.”

Business communication must address crisis realities

You will need to recalibrate and refocus your business communications based on “a new logic” defined in a Wharton Business School study just released, which suggests the end of conspicuous consumption and the notion of luxury as an entitlement.

The severity and uncertainty of today's economic crisis will be more pronounced and last longer than the outcomes of other post-Depression downturns. While spending will resume, Wharton says, it will be “without the vigor” characteristic of the roaring 2000s.

Wharton marketing professor Wesley Hutchinson says the Great Depression “changed consumer behavior and attitudes for a generation," and set a “precedent for a very large shift" to come from today’s economic crisis. These new behaviors include the following.

• Consumers will learn to become more frugal.
  
• Conservative spending practices “are likely” to become a post-recovery standard.
  
• Bad credit management habits will be replaced by an “overextending” wariness.
  

Consumers who “learned to trade up when times were flush are now learning to trade down. They realize they were wasting money on higher-priced goods and services.” They are finding a new sense of well-being in becoming more discerning shoppers. "There will be more of a premium placed on seeking value," says Wharton marketing professor Stephen Hoch.

This will not be an ephemeral shift. Consumers won’t “go back to spending like they did, at least not anytime soon," Erin Armendinger, managing director of Wharton's Baker Retailing Initiative.

The consumer mood is clearly downbeat, says Paco Underhill, author of “Why We Buy: The Science of Shopping.” " The level of depression is pervasive. This is a very dark period," which is defined by income security rather than income, and broadly falls into three consumer groups.

• Lost their jobs and are downwardly mobile, crosses social lines from the Wall Street banker to the GM worker. "This is traumatic.”
  
• Not at immediate job-loss risk, but friends have lost jobs. They are cutting back; take pride in comparison shopping.
  
• Relatively untouched: have paid-off mortgages, portfolios may be down sharply, have adequate cushion. Cutting back because conspicuous consumption seems like bad manners.

The changing consumer psychology also cuts across age groups.

For the sub-30-year-old Generation Y, who “believe spending is limitless…. This is the first financial trauma of their lives…. They have no idea of budgeting."

For the 30-to-45 Generation X, the decline in housing values is the challenge.
Baby boomers also are caught by the challenged of collapsing housing values. "They forgot to save, and thought their houses were doing the saving for them." Their expectations for retirement will be downscaled.

The way to cope psychologically with these changes is for each group to understand that “no acquisition in life that is transformative…. Nothing changes you into somebody you weren't before that purchase happened," Underhill suggested.

The 'Communications Impact' charted

A modest "Obama bounce" was seen in the Dow during the days immediately after the President's inauguration. However, once in place, the President's plans and non-plans began to emerge, and the notably unsentimental and apolitical Wall Street communicated clear dissatisfaction. Pundits and pols alike expressed their belief that Treasury Secretary Tim Geithner's non-plan recovery presentation was precisely the wrong communications package; it was a plan to have a plan to be announced later, but not a plan as expected. 

To see graphic representation of Obama's dramatic impact on the stock market, click the chart below and get a larger image.

Then, to add to the confusion, Sen. Dodd said live on Bloomberg TV: “I don’t welcome that (bank nationalization) at all, but I could see how it’s possible it may happen…. I’m concerned that we may end up having to do that, at least for a short time.” 

Almost immediately after Dodd's comments, Bank of America and Citigroup shares tumbled, and Treasury felt compelled to issue a brief statement saying the President’s plans did not include bank nationalization. That statement, however, was not all-inclusive or definitive. Confusion prevailed and stocks fell further. 

The White House attempted to counter the impact as Obama spokesman Robert Gibb told the media, "Let me reassure as best I can on banks. This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring they are regulated sufficiently by this government. That's been our belief for quite some time and we continue to have that." Stocks came off of their lows following these comments.

Unfortunately for American individual and institutional investors, the business of communications and effective performance of the communications function both were failures.

Sen. Dodd's communications DISASTER hurts Americans

The U.S. may have to temporarily nationalize certain banks, Senate Banking Committee Chairman Christopher Dodd said Friday in an interview on Bloomberg Television. The headlines sent shares of Citigroup and Bank of America down more than 20 percent on fear they could be involved in any such nationalization plan, reported ForexTV.com.

The market overall tumbled further in its current free fall following Sen. Dodd’s comments.

Dodd said on Bloomberg TV: "I don't welcome that at all, but I could see how it's possible it may happen…. I'm concerned that we may end up having to do that, at least for a short time."

Dodd did say that the Obama Administration is doing what it can to avoid such action.

With market uproar still sounding, CNBC’s Steve Liesman contacted Treasury, which contradicted Sen. Dodd and assured the business reporter that “As Secretary Geithner has said, we will preserve a financial system that is owned and managed by the private sector”

Does Obama have any control over this Democrat-majority Congress and its outspoken Sen. Dodd. Obviously not, and the miscommunication presented global financial markets are costing investors of all strips enormously.

Financial crisis exposes communications breakdowns

“The force and speed of the global downturn have sent most companies reeling, and many senior managers have not yet figured out how to respond,” according Booz & Company research among 800 global managers conducted in December, 2008.

While that may not be surprising, a “significant lack of confidence in senior leadership’s strategies” is disturbing, and suggests the need for greater C-suite outreach among key stakeholders, namely employees, customers and investors. The numbers:

• 34% of respondents are “skeptical of plans being put forth by senior executives.”
  
• 51% of managers not reporting to the C-level manager expressed similar doubts.
  

The Booze&Co. report concludes that these numbers may result form:

• “Executives inability to communicate the elements of their plans,” or
  
• “The plans simply don’t resonate with many of the people who must make them happen.”
  

The study suggests the existence of a significant gap between logical actions and actual actions of senior executives, which is creating a world view that “isn’t always realistic.” Booz researches suggest three steps to remedy this problem.

• First, executives should get “an accurate read” on their business environment and their company’s relationship to it.
  
• Second, they then must pick an appropriate response to the situation, thus “there are many different ways to strengthen the balance sheet….”
  
• Finally, essential to regaining wary stakeholders’ confidence is effective communications and decisive action.
  

[The full study is available at the Booz&Co. Web site.]

The KISS that never fades

“When everyone else suffers from over-complexity, there is a market for products and services that simplify life” Rosabeth Moss Kanter writes in the current editon of the Harvard Business Review.

The noted Harvard Business School professor cites several examples of businesses that became too complex and suffered as a result. The one that all of us can all relate to is P&G’s Crest toothpaste options; which one to choose? Basic, whiter, tarter control, gum disease? Ahah! P&G simplified by creating Crest Pro, which combines all the benefits into one product.

However, Prof. Kanter asserts that “simplification is not the norm, and that's a problem.” Unnecessary complexity, she believes, has contributed to the global economic meltdown, the failure of GM’s 47 brands, Bernie Madoff’s faud, and out-of-control American healthcare costs.

[In contrast to GM, Prof. Kanter points to Ford Motor Co., which “started its 'One Ford' campaign to integrate its international units and simplify its global structure. Ford was profitable despite industry woes in the first part of 2008 and did not require government assistance.”]

Prof. Kanter’s insights on business complexity translate perfectly to business communications and stakeholder outreach. The communications example we find always compelling is that of great American literature: Hemingway is more interesting, understandable and compelling for most readers than is Faulkner.

[Read Rosabeth Moss Kanter’s full HBR article on business complexity.]

Communications vacuum impairs judgment

Operating in a vacuum — where the only input you get is from animals of your own stripe — will surely produce skewed perceptions of the dangers that lurk in your jungle. Wall Street executives and the nation’s largest bankers have been swinging from their own trees for so long that they have failed to perceive all of the threats around them — those in the larger American habitat.

This apparent lack of clear corporate perception promises potentially dire consequences for these executives, their companies, and the rest of America.

Effective corporate communications are based, in part, on a dialogue among executives and stakeholders to gain insight and support.

As we have said in previous posts [see Cessna], executives who manage without the knowledge such dialogues provide do so at their own peril — and now everyone else's, too.

Such an outcome has emerged “buried deep inside the $787 billion economic stimulus bill,” the Times reports [1-15-09]

“Much tougher” than proposed by Treasury Secretary Tim Geithner, the very restrictive compensation aspects of the bill are the handiwork of Connecticut Democrat Sen. Chris Dodd, who seems to enjoy his ability to smack around business leaders on behalf of his constituents.

“The decisions of certain Wall Street executives to enrich themselves at the expense of taxpayers have seriously undermined public confidence,” Dodd said. “These tough new rules will help ensure that taxpayer dollars no longer effectively subsidize lavish Wall Street bonuses.”

“These tough new rules” also may have some negative unintended consequences, according to both Administration and outside experts.

First among these is a brain drain in the financial industry. The top talent, the best traders and managers may flee to hedge funds and foreign banks not constrained by Congressional action.

“These rules will not work. Any smart executive will… get another job,” compensation consultant James F. Reda told the Times.

Second is the likelihood banks and other financial entities covered by the bill can simply increase executives salaries.

“About the only way to address these limits is to pay large salaries,” according to Michael S. Melbinger, an executive compensation lawyer at Winston & Strawn in Chicago. “There’s no pay for performance in this,” which is what bonus are all about and help ensure quality output.

And finally, “at some point, you begin to wonder: has the government given up on these companies anyway?” asked Alan Johnson, a compensation consultant and advisor to Wall Street banks. “Why would the government or White House want to go along with that unless they have come to the conclusion they will have to nationalize these firms anyway?”

Hearing these argument against Sen. Dodd’s addition to the rescue bill makes one wonder if the CT Democrat is hastily helping along the President’s effort to redistribute wealth in America — ushering in The Socialist Era in America.

In any case, bankers operating in a corporate information vacuum have brought the nation to this uncomfortable situation.

[Read The New York Times' story on this Congressional action.]

Cessna's corporate blind spot: "Who, me worry?"

Cessna simply does not get it.

That the public and the media pilloried CEO’s of Detroit’s Big Three automakers for flying hugely expensive corporate jets to DC so that they could personally beg Congress for billions of taxpayer dollars was less about the private aviation and more about executive judgment.

When the nation, and indeed the world, is experiencing the worst financial crisis since the Great Depression 70 years ago, and the auto companies are losing tens of millions of dollars daily, fiscal excess in any form is the last thing they should exhibit to stakeholders.

Yet Cessna’s “Rise” ad and PR campaign debuted in The Wall Street Journal and other business and trade publications this week. And the “Rise” challenge to executives plays not to their fiscal prudence and thoughtful and prescient management, but to unvarnished ego and raw machismo.

One segment of the Cessna ad reads: "One thing is certain: True visionaries will continue to fly. Because in tempestuous times, leaders recognize it's not about ego. Or artifice. It's simply about availing yourself of the full range of tools to do your job.”

By denouncing ego, Cessna is in fact catering to it, just through the back door.

"Timidity didn't get you this far,” the Cessna ad states. “Why put it in your business plan now? In today's corporate world, pity the executive who blinks."

Explaining why he approved the campaign’s lead ad, Cessna CEO and president Jack Pelton told Ad Age, "It's time for the other side of the story to be told" referring to the denunciation the Big Three got for their beggars’ fly-in.

And corporate communication VP Robert Stangarone so eloquently supported his boss saying, "We have a big dog in this fight. We feel like we must take a stand."

No one at Cessna, or their ad agency, seems to understand. Wise use of private aviation by corporations is widely accepted as good business and financial policy, when done properly:

• When executives regularly visit multiple clients in geographically dispersed areas over short periods of time; 
  
• When a corporate shuttle is a more cost efficient way to move employees regularly among multiple facilities than high cost, last minute commercial tickets;
  
• When CEO safety is a concern.
  

Lots of valid reasons justifying private aviation can be made, but Cessna did not make them. Therefore, we must conclude that Cessna did not make a valid case because it does not understand the practical business and public relations issues at hand.

It was much easier for Cessna to reach for the corporate jugular, and challenge CEOs with the implied question of what sort of weak-kneed, indecisive sissy executive are your to give up your magic carpet of privilege!

This insensitivity to stakeholder reaction — a not unjustified reaction — is the kind of behavior that diminishes public confidence in “big business” and leads to public outcry for increased regulation. Too bad Cessna is only adding fuel to the fire.

[Read the full Cessna campaign story in the Ad Age online edition.]

Corporate taglines can say a lot with a little

Tag lines can say a lot about a corporation, and shouldn’t be taken lightly – despite their diminutive presence. At times, they can even echo the vision and soul of a company.

Take for instance the venerable technology offspring of Bill Hewlett and David Packard. HP long used the simple tagline “invent,” with a lower case “i” and it established the entire tone and mission of the company.

In recent years, however, “invent” is seldom used, perhaps indicating a confidence, like Apple, that HP simply says it all. Perhaps it says something about the company’s new direction.

Apple, from the beginning, has had no tag line. “Apple,” indeed, does seems to say it all. The brand is iconic, recognized worldwide, synonymous with innovative usefulness. That’s a tribute to decades of [almost always] clear focus delivering to customers innovative, easy-to-use technology that is helpful.

GE used “bringing good things to life” for ages. It was comfortable, comforting and very 1950s. We liked it. Then GE became a ginormous conglomerate, and today the tag is “imagination at work.” That covers all the bases, saying everything and nothing simultaneously.

Toyota’s tag is a double entendre intended for both consumers and investors; it is “moving forward” in lower case [with a tiny red arrow pointing right in case you'd confuse the direction in which their primary markets read: left to right, not right to left]. Low key, steady and reliable, dependable and not frivolous. What more do you want in a car or a company.

Walmart, after a long and painful agency transition, has moved from “Always low prices” to “Save money. Live better.” They’ve also – thankfully! – moved away from “Wal-Mart” to “Walmart.”

It appears that Walmart has changed pricing policies, too. From Maine to Florida, we’ve noticed very fluid same-store, same-product price fluctuations. For instance, such high volume, wildly-floating-priced consumables as soda drinks can vary up and down as much as 30 percent overnight.

So, tag lines say a lot. “Save money - Live better” has very little to do with “Always low prices.” But, gee, they have to pay those hefty ad agency fees somehow, right?

Go, Team O'Bama! Go!

Business as usual for President Obama is getting off to a rough start, with his Cabinet nominees not paying their taxes - and apparently not telling their prospective boss. [Ooooh! That's real embarrassing.]

And the folks on Wall Street perceiving his economic recovering package as something rather like a Mary Poppins promise.

And Illinois Gov. Rod Blagojevich trying to sell the ex-Senator's Congressional seat to the highest bidder.

And the Muslims, at least in Egypt, writing him off as just so much talk [See post below].

Well, it's not been so promising a beginning for the Senator from Chicago. So, we thought he might be helped along if he had a bit of luck o' the Irish. Here's to ya' Barack!

A plan to have a plan is not an acceptable plan

Markets and businesses don’t like uncertainty. That's a blinding glimpse of the obvious that any corporate executive or investor relations officer knows all too well.

So why was it that Treasury Secretary Tim Geithner laid out a financial rescue plan that had about as much specificity as a sky full of cirrus clouds?

The NYT’s first news report on the secretary’s news conference “plan” announcement stated that “Mr. Geithner left major questions unanswered about the workings of many components of the new plan, and officials acknowledged that they had yet to decide many of the thorniest issues.”

MarketWatch quoted Ryan Larson, head equity trader at Voyageur Asset Management, as saying, “We’re not impressed, and I don’t think the market’s impressed either…. It’s clear the administration is still trying to work on something concrete. I think the market sensed that, too.”

The stock market started its nose dive almost as soon as Geithner began speaking. At its close the Dow was off 381.99 points, 4.6 percent, at 7,888.88.

As we have said in earlier posts, the Administration simply cannot jawbone success; it must have real, credible, immediately actionable plans. A plan to have a plan is not an actionable plan.

"I screwed up." Well, that'd be right...

In business communications, credibility is the foundation for all other actions. If your clients and other stakeholders cannot rely on the integrity of your statements, how can you expect them to believe in and buy your products and services. 

A sage CEO once told us that among the various maxims he lives by is the notion that, "If I can't trust you with the small things, how can I trust with the big ones." All of which makes the observations of the AP’s Calvin Woodward even more interesting. 

Woodward this morning offers a reality check on the President’s continuing effluence of superlatives. We find Woodward's observations compelling if not reassuring.

OBAMA — "Not a single pet project…not a single earmark" appears in the President’s $800 billion economic recovery package.

THE FACTS — The program passed by Congress contains the following items that smell an awful lot like special interest projects, which is the definition of an earmark, pork, or a pet project.
• $2 billion for a clean-coal power plant with specifications matching one in Mattoon, Ill.
• $10 million for urban canals
• $2 billion for manufacturing advanced batteries for hybrid cars
• $255 million for a polar icebreaker and other Coast Guard items
• Of course, there is Obama’s statement earlier in the day to his friends in Elkhart. IN, that his plan would benefit the northern Indiana town with work on "roads like US 31 here…[and] that new overpass downtown."

OBAMA — During his press conference, the President said the recovery plan would create “four million jobs,” his highest definitive statement yet. In Elkhart, Obama said that the plan “will save or create 3 million to 4 million jobs over the next two years."

THE FACTS — “Job creation projections are uncertain even in stable times, and some of the economists relied on by Obama in making his forecast acknowledge a great deal of uncertainty in their numbers," Woodward reported.

“The president's own economists, in a report prepared last month, stated, ‘It should be understood that that all of the estimates presented in this memo are subject to significant margins of error.’

“Beyond that, it's unlikely the nation will ever know how many jobs are saved as a result of the stimulus. While it's clear when jobs are abolished, there's no economic gauge that tracks job preservation.”

OBAMA — "They'll be jobs building the wind turbines and solar panels and fuel-efficient cars that will lower our dependence on foreign oil and modernizing our costly health care system that will save us billions of dollars and countless lives."

THE FACTS — The economic stimulus bill would allocate about $20 billion to help hospitals and doctors transition from paper charts to electronic health records for their patients.

“Research has shown that in some instances, electronic record keeping can eliminate inappropriate services and improve care, but it's not a sure thing by any means. ‘By itself, the adoption of more health IT is generally not sufficient to produce significant cost savings,’ the Congressional Budget Office reported last year.”

OBAMA — "I've appointed hundreds of people, all of whom are outstanding Americans who are doing a great job. There are a couple who had problems before they came into my administration, in terms of their taxes. ... I made a mistake. ... I don't want to send the signal that there are two sets of rules."

THE FACTS —Two of his appointees, Tom Daschle, tapped for HHS secretary, and Nancy Killefer, planned to hold the post of Chief Performance Officer, both removed themselves from consideration because of tax payment failures.

Treasury Secretary Timothy Geithner made it through Senate confirmation hearings – before Daschle and killefer – despite his admitted failure to pay $34,000 in taxes, which he quickly handed over to the IRS.

During those difficulties, Obama admitted that he "screwed up" in making it seem to Americans that there are two sets of tax compliance rules – one for the very top VIPs, like Geithner, and another for not-quite-so-high VIPs and everyone else.

OBAMA — "We also inherited the most profound economic emergency since the Great Depression."

THE FACTS: — Hopefully the current situation won’t turn out to be the “catastrophe” that Obama predicted it might happen. Even so, based on the government's own unemployment figures, this is not yet the worst situation since the depression.

• In January, unemployment climbed to 7.6, up by 0.6 percent from the month earlier.
  
• The figure in June 1992 was 7.8 percent.
  
• In November and December 1982, the jobless rate was 10.8 percent.
  
• During the Great Depression, estimates are that joblessness reached 25 to 30 percent.
  

Oh, Mr. Prez! So soon, so much, yet so little

In Media Training 101, executives are told that the most effective means of communicating with the press -- and thus the public -- is to present short, simple, direct statements regardless of how complex the question may be. The more you talk, the more you elaborate, the more detail you provide, the greater your likelihood of getting something wrong. And, surely, the longer the answer, the less the likelihood your audience will grasp the one important point you are seeking to get across.

We know that President Obama has taken Media Training 101, but he must not have listened. Perhaps it was to long. 

The result was exhibited tonight. The president took seven minutes to answer to each of his first three questions. 

Liberal apologist Chris Matthews thinks this long-windedness helps the public understand Obama's thinking process. We believe it actually confuses issues.

Obama will have to change his manner of communicating if he expects to be fully understood for the facts, and not just the emotion. His Baptist preacher style -- filled full of elaboration and allusion -- is not an appropriate manner for the nation's Chief Executive.

With such unwillingness to grapple with these press conference basics, we wonder if he can he control Congress and the pressures around him? Or will House Speaker Nancy Pelosi politely let the Prez ramble on, then go off and do what she wants, which now seems to be the case.

By contrast, David Gergen on CNN stated that "eight or 10 days from now" Obama's long winded approach may be successful, the markets may love it, and we'll all be asking "How'd he do such a masterful job," or something like that. 

We don't think so. But we hope we are wrong. Even so, we don't believe Obama convinced Wall Street, though Main Street may have bought it. The folks on Wall Street are notably unsentimental about their money, and they react to the expectation of performance, and sometimes even performance itself.

The real measure of persuasion will come in Wall Street's reaction to Tim Geithner's first/public presentation of the next recovery plan PLAN. That comes tomorrow, Tuesday. Market movement will be a credibility barometer for the plan's perceived efficacy.

Presidential substance over statement

In government, as in business, credibility is everything. Therefore, an ancillary note about Obama’s speech-ifying and the power or rhetoric, or lack of same, is justified.

Over the past several months, news reporting has suggested that Muslims worldwide perceived a possible new day when with the election of a non-traditional American president. It appears that not all expectations for the measure of "change" are coming to fruition, at least so far. One observer and commentator on the effectiveness of Obama's substance over stance says a lot.

Egyptian author Alaa Al Aswany, writing from Cairo in the NYT, believes that - despite great expectations to the contrary - Obama’s “brilliantly written inaugural speech did not leave a big impression on Egyptians. We had already begun to tune him out.”

Why? Because mere jawboning does not cut it in the world of global realities.

Aswany wrote that “No matter how many envoys, speeches or interviews Mr. Obama offers to us, he will not win the hearts and minds of Egyptians until he takes up the injustice in the Middle East.” NYT, 2-8-09: “Why the Muslim World Can’t Hear Obama.”

Is Obama wearing thin so soon?

Times columnist Frank Rich wrote ["Slumdogs Unite"] on Sunday, Feb. 8, that “Obama was blindsided by the savagery and speed of (Tom) Daschle’s demise,” which included Times and WSJ editorials calling for him to step away from his HHS Secretary nomination.

Rich suggested that Obama may be melding into the Washington insider's environment of privilege and power [and lack of perspective], a group that still “doesn’t get it.” Rich explained that “there are simply too many major players in the Obama team who are either alumni of the financial bubble’s insiders’ club or of the somnambulant governmental establishment that presided over the [current financial] catastrophe.”

We think that Obama risks wearing thin with Americans on yet another characteristic, his paternalistic tendency to use broad pejorative superlatives. Make no mistake that we agree that current circumstances deserve the gravest of gravitas, but Presidential verbiage needs to be prudent and promising, not stoking the fires. [Stoking the fires should come in the background with Congress.] For instance...

Obama officials told Citigroup officials to “Fix it,” referring to purchase of a $50 million corporate jet. They did so.

Obama himself condemned John Thain’s doling out of billions in Merrill Lynch bonuses as “shameful” and "outrageous." But, the bonuses remain in recipients’ accounts.

While we feel these characterizations are on the mark, we’re beginning to sense that the President is acting a bit like Pappa Bear, passing judgment on the behavior of his offspring.

As momentarily refreshing as some of Obama’s comments may be, we’re not so sure that Americans want to be treated like the 10-year-old school girls the President has at home in Chicago. 

[White House photo: Pete Souza]

PR is what you do, not what you say...

The adage in the communications biz goes that “PR is what you do, not what you say you do,” and so it is with former Senate leader Tom Daschle, who today withdrew his name from nomination as Obama’s Secretary of Health and Human Services.

In withdrawing his name, Daschle confirmed that he failed to pay $128,203 in back taxes on consulting income and use of a car service.

[Daschle is the second Obama nominee to have forgotten to pay his taxes. Treasury Secretary Timothy Geithner admitted last week that he overlooked paying $42,702 and back taxes and interest. Obama's intended "performance office," Nancy Killefer also withdrew her candidacy today due to problems with her household tax filing. Killefer is an executive with McKinsey & Co. and oversees their management consulting for government clients]

Daschle’s predicament is very instructive on the PR front. With missteps of judgment, sincere apology is always the first move in attempting to recover. But such utterances must be supported by good behavior, not just good words.

When Daschle apologized for his lapse of taxable memory, he said, “All of my life I assiduously tried to pay my taxes in full and on time…. I deeply apologize…. I would hope that my mistake would be viewed in the context of 30 years of public service.”

The only problem is that his “assiduously trying to pay” his taxes does not seem to true up with his own earlier admissions of omission of previous tax payment delinquencies.

Daschle filed amended tax returns for 2005-2007 to pay $140,167 in back taxes and interest. This is coming close of a pattern of behavior.

A sincere apology for a single misstep often works. However, it is very difficult to believe that a public servant of Daschle’s ability can actually overlook the taxable nature of consulting fees – which amount to three times the median US household income of $50,000. This is where the admitted facts trump mea culpas, and PR proves to really be what you do, not what you say you do.

Bankers learning to communicate

The first rule of communications is to gain understanding. If your audience does not understand what you are saying, no amount of effort will convince them that your way is the right way or your product is the right product. Thus emerged the simple dictum of “Keep it simple, stupid,” the KISS theory. Based on this, the banking sector has a real communications problem.

Most people don’t really understand how the banking system works or what the people who are its cogs and gears actually do. Americans, and others, only know that it is broken, and the jerks who broke it are getting paid a fortune from taxpayer funds. 

Thus, the appearance of the latest let-me-tell-you-what-I-think t-shirt: “I Hate Investment Banking.” Not surprisingly The Times reports that with its “catastrophic loss of cultural cache,” the financial industry’s new role is that of “national pariah.” And justifiably so.

After all, the folks who were paid those huge sums of money, were supposed to be the guards at the gate; they were supposed to be keeping away the wolves in sheep’s clothing. Instead, they were among the wolves and were, indeed, themselves wolves. Consequently, no one was at the gate and the wolves ravaged the system.

The enabler for Rule One is candor. And candor is essential in gaining understanding in any situation, crisis or otherwise. You have to deal with the true situation, not the situation the way you’d like it to be. 

However, at this point, it appears to us that the failed financial industry has yet to admit they were, and remain, the failed gate-keepers. They lack candor. Until this level of realization develops, no amount of effort at communications can achieve the goal of Rule One, understanding, among the bankers’ constituencies.

Obama launches neo-Socialism?

If one purpose of business communications is to inform stakeholders and competitors alike of your strategic intentions, President Obama gets straight As for the course. Today, he further distanced himself from the Bush administration and emphatically coupled himself with the socialism of organized labor.

So strong were Obama’s socialist labor commitments that the Hoffa scion, James P., proclaimed “It’s a new day for workers.”

The Hoffa offspring of legendary trucker boss Jimmy Hoffa and himself the current Teamsters’ president, said at a White House ceremony: “We finally have a White House that is dedicated to working with us to rebuild our middle class. Hope for the American Dream is being restored.”

[While clear business communications get a bit hazy at this point, it is safe to read “American dream” as organized labor, or redistribution of wealth, or equalization of income.]

Furthering this warning to corporate America, Obama signed three executive orders that he said would “reverse many of the policies towards organized labor” enacted during President George W. Bush’s two terms.

Obama's executive orders will require federal contractors to offer jobs to current workers when contracts change and will make it more difficult for federal contractors to discourage union activities, according to The New York Times. They will also closely examine how to restore “the balance in the workplace,” which includes provision of or funding for child care, increased workplace safety and additional retirement security. Each classic management responsibilities and decisions.

Sounding like a pre-WW II socialist, Obama described his American worker constituency as those “men and the women who form the backbone of our economy, the most productive workers in the world.”

To further emphasize the point, Obama said, “I do not view the labor movement as part of the problem. To me, it’s part of the solution.” We think this is pretty consistent thinking for a community organizer.

Wall Street behavior “shameful,” Obama says

Wall Street’s distribution of nearly $19 billion in end-of-year bonuses to executives and financial managers was “the height of irresponsibility. It is shameful. It's outrageous,” a visibly irked President Obama told reporters as he prepared to enter a Senate Banking Committee meeting chaired by CT Sen. Chris Dodd. 

Obama said that bonus payments may be justified at certain times, but now "is not the time.... You are never going to get any support for the continued tough decisions we 

have to make if this kind of behavior continues."

Wall Street needs to “show some restraint and show some discipline,” Obama fumed.

Dodd later said that he is “demanding that the Treasury Department figure out some way to get the money back,” referring to TARP funds distributed to the financial institutions, some of which was used for the bonuses.

Let’s not mince words, Maureen!

We love Maureen Dowd! And even more so today.

The editorially passionate NYT columnist never disguises her feelings. Today’s journalistic offering entitled “Wall Street’s Socialist Jet-Setters” was no exception.

She copped the term “Citiboobs” from the New York Post, and then added a few choice descriptions of her own for the virtual criminals of Wall Street. She called them “obtuse bankers and auto executives,” to include the flyboys from GM, Chrysler and Ford. And further questioned “How could Citigroup be so dumb.”

Obviously to Maureen, a “warped mentality” characterizes the “greedy creeps on Wall Street,” who exhibit “specious, contemptible reasoning.” They’re absolutely “ruthless, careless ghouls.”
These “feckless financiers,” she added, rank right up there with “sociopathic sadist Bernie Madoff.”

Well, Maureen, next time do you want to tell us how you really feel!

Maureen's column is available at this link.

“Who can you trust?” Darn few!

Global financial markets remain largely frozen because of distrust among bankers. Now comes the Edelman Trust Barometer released today [Jan 28, 09] at the Davos World Economic Forum.

The Financial Times today says that global business and economic leaders – the very ones gathering in Switzerland - “have never been less trusted to provide the answer to financial and social troubles they are supposed to be addressing.”

CEO’s and the information they provide to stakeholders lead the parade among the untrusted. Only 17% in the US are trusted; 29% in Europe.

Bankers come in next: 36% trust bankers in the US; 41% in Europe.

Business overall is similarly mauled. Among Euro businesses, only 36% are credible; 38% in the US.

The FT suggests that all of this lack of credibility stems from behavior by business, media and government. Specifically: Enron, Worldcom and Parmalat undermined the business sector; CBS’s Dan Rather and The New York Times’ Jayson Blair tarnished the media; and British and American handling of Iraq hurt government trustworthiness.

Cutting down Wall Street wealth

Andrew Ross Sorkin, the NYT’s M&A reporter, writes in his column today that current Wall Street “Masters of the Universe” are falling on hard times – well, comparatively. And rightfully they should. [See “Money grows on trees” post.]
 Their behavior has been deplorable.

While millions of Americans are unemployed – and more to come – these Villains of the Universe are getting slammed where it hurts – in their finances. Look at what Sorkin says The Villains’ new and lower personal worth is, based on the shares they own in their respective companies.

Vikram S. Pandit, Citigroup – was $31 million; now $3.7 million.
John A. Thain, Merrill Lynch – was $28.5; now $6.5 million.
Lloyd C. Blankstein, Goldman Sachs – was $465 million; now $167 million.
Kenneth D. Lewis, Bank of America – was $121 million; now $18.5 million.

Postscript: With the antics of Wall Street, it is not surprising that today’s consumer confidence index fell to 37.7% from 38.6% last month [Dec]. Also, more consumers’ believe business conditions are "bad" [47.9% vs. previous 45.8%]. Consumers who expect increasing personal income dropped from a low of 12.7% to 10%. Glum getting glummer!

Obama hammers Citigroup's Falcon

Bulletin Web headline from ABC News:

"Citigroup to Refuse Delivery of New Jet Under Pressure from White House [8:43 a.m. ET]"

To have put themselves in the position to be admonished by the President's office is a serious lapse of business acumen, and further undermines the public's opinion of "big business" and bankers in particular. Good that Citigroup was responsive, belatedly, though. Sounds like a job Rahm may have been given.