Michael Porter sets agenda for 2011

Sure to be a must-read piece for those involved in corporate communications, financial PR, corporate governance and public affairs, is an article by Professor Michael Porter and colleague Mark Kramer in this month's Harvard Business Review.  Famous for his work on competitive forces and industrial clusters, Porter is damning on business, short termism and failure to put society or "shared value" at the heart of its business activites.
 Michael Porter.

"The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community."  A major theme of the article is the concept of "shared value" which the authors say is not CSR or philanthropy but "reconnecting business with social progress."

Coming from the pen of such a leading figure in business strategy, and in a leading business publication, the article is sure to put more focus on the stakeholder/shareholder debate; and also the more modern framing of the argument around concepts such as sustainability and the need for organisations to think about and implement such concepts in a more fundamental way.

Is Rolls-Royce too wedded to key stakeholder relationships?

Following Rolls-Royce's handling of communications as a result of the major engine problems on the new giant Airbus has been instructive if somewhat painful from a UK PR plc perspective.  No wonder, that according to PR Week's latest edition, it is in discussions with leading consultancies on getting some additional help. One or two of the media have even linked it to BP in terms of a major UK brand not understanding the new rules particularly in a crisis PR situation.

(Image: Wing damage to Rolls-Royce powered Quantas new generation Airbus A380 which landed safely in Singapore.)

What are the new rules?  Well that is an exaggeration - but I think that social media has enhanced the role of a more generalised public opinion as opposed to a key stakeholder approach which is the approach which Rolls-Royce took in response to the situation.  The trouble with this is that the company decides if a stakeholder community is important and of course it may be that public opinion decides that actually travel safety issues are of a great deal of interest to many of us, not just investors, customers of Rolls-Royce and regulators, something which Lex in the Financial Times pointed out. The response of Quantas, operators of the plane in question, was particularly instructive and showed it understood about the need for a wider communication approach to the incident.

It turns out courtesy of CorporateComms that the Director of Communications at Rolls-Royce does not believe in the impact of social media which seems unfortunate in the context and particuarly so as other media are now developing this aspect of the story.

For those PR practitioners interested in reading more regarding the role of generalised public opinion particuarly in crisis PR situations, there is a very good paper in the academic journal Corporate Communications by Oyvind Ihlen of the University of Oslo.

Wikileaks exposes public and private communication dilemmas for organisations

The explosion of coverage about Wikileaks and its exposure of US diplomatic correspondence has raised a whole range of political and foreign policy issues and comments; as well as a wide ranging debate about the role of information, social media and its impact, new forms of media and so on. 

From a PR perspective, I find it interesting that leaders and some media commentors have been so outwardly unsettled about the process as though the way you speak publicly about a country and organisation can be radically different about the way you communicate it in public.  To have such a disconnect, I would suggest is not feasible in a global networked society.

Certainly I think we have the right as citizens to know that the ruler of Saudi Arabia is encouraging the USA to bomb Iran or that China is accepting of the idea that there should be a  unified Korea in due course.  These are important pieces of information that should have been brought out of the private sphere into the public sphere.

Might organisational culture issues also be at work here.  Could the diplomatic service of countries be somewhat traditional in their approach to communications - believing it is acceptable to have two modes of operation - the public sphere mode and the private sphere mode and only in  the latter mode where you are totally "honest" about the country and rulers.  Of course Habermas would have been able to point out that "rational discourse" is a facet of a genuine public sphere something which does not appear to be going on - it all appears to be stored up for the private message to Washington.  In terms of reputation, legitimacy, transparency and relationship management having such a gap between public and private communications raises serious issues for an organisation.  In an networked global environment, traditional communications approaches by the diplomatic service or other large organisations - and banks seem to be next in the Wikileaks crosshairs - are no longer feasible and will need to be re-thought.

It should be noted that the British Foreign Office has created a blogging community on its web site giving views from round the world.    Is it a genuine conversation?  Certainly it is an interesting initiative although a search on the site suggested that nobody was confident enough to talk about Wikileaks which suggests that "rational discourse" is somewhat lacking!

The changing rhetoric of the Irish financial crisis

The bailout of the Irish banks by the European Central Bank, heading presumably towards a conclusion over the next week or so, has resulted in a somewhat confused media coverage as a consequence of the apparent uncertainty by the Irish government on how to handle the story.   We have had the crisis linked by Irish Ministers and commentators to the 1916 Rising; to the Civil War; 90 years of independence from Britain; even to the patriot  Michael Collins.   The Financial Times pointedly linked the confusing reaction of the Irish government to a protection of Irish elite groups - a story line which Jon Snow of Channel 4 amongst others had also picked up earlier. As the story developed one could sense the growing exasperation by international media trying to understand the communications agenda or "rhetoric" of the Irish government and its failure to accept the realities of the situation.

Michael Collins, Irish patriot and Minister in first Free State government in 1922 part of the emotional imagery drawn on by Irish government in initial response to ECB support.

There was no sense by the Irish government of preparing the country, of reaching out to the electorate to explain the situation and the opportunities of the situation.  Better to be able to borrow money at 5% rather than 8% as currently.   Right up until this weekend there has been the totally unconvincing message that no rescue was needed.  The reality for the last few weeks or so, is that Irish banks have not been able to access international markets and have only been able to borrow from the ECB.  Robert Peston on the BBC earlier this week was devasting in setting out the severity of the situation and his latest blog confirms the situation.

In fact it could be said that the markets have taken a more rational view of the situation and have decided that the Irish economy could not sensibly take more cuts but needs to grow, hence the need for a bailout and access to more capital.  Liquat Ahmad in Lords of Finance points out, in an excellent book on the main actors in the 1920/30s financial crash, that the problems in that era were accentuated by bankers cutting more and more, when already heading into a desparate recession and failing to understand the measures which should have been taken including recapitalisation which will be the case for Ireland.


In rhetorical terms, one could say that the Irish government's approach to communications has been strong on emotion (pathos) but weak on facts (logos) although that is changing.  Why did the Irish government try to hold a line that support was not necessary backed up by a nationalistic approach about sovereignty?  This will only have heightened the sense of disillusionment of the Irish electorate when they have to change this position which they are now doing.   The Irish government should take lessons from John Major in the UK who pulled the UK out of the ERM, forerunner of the Euro, suffered the temporary brickbats, was totally pragmatic about the situation, enjoyed two years of growth (admittedly less easy in the Euro) and won the next election.

Reputation and social construction - L'Oreal and former CEO Owen-Jones

An intriguing example of the social construction of reputation can be seen in a recent interview in the weekly French business magazine, Le Point of the former, highly regarded CEO of L'Oreal, Lindsay Owen-Jones.  In the article, he talks of his concerns how the Bettancourt affair which has been a powerful back-drop to French politics over the last year, may have impacted on the L'Oreal brand internationally.  However, the social media comment underneath the main piece (and other media which have covered the story)  suggests his own reputation as receipient of a £90M gift from the Bettancourt family which was undeclared until recently, may be more on trial than that of L'Oreal.  However, in the developing online debate, former employees have also come to his rescue, so giving readers the chance to consider a wide range of perspectives.  

Corporate Reputation gains Oxford Professor

PR Week reports that Said Business School at Oxford University has appointed a visiting professor for corporate reputation.  It  doesn't say but I assume it will probably be the first in this area appointed by the university.  Can we say that in terms of the professionalisation of PR, and as an indicator of the growth of the profession this is an important milestone, after all PR has probably been the most active management discipline to date in its use of reputation as a core part of the corporate communications skillset?   Well in practice yes; but not necessarily in terms of academic research and I think there are some opportunities being missed on all sides.

We can see this in the Said Business School at Oxford which also hosted last week its first reputation symposium with some leading names presenting such as Charles Fombrun.  Looking through the programme and abstracts there is no mention of public relations and no speakers from the PR academic community which seems to be a somewhat perplexing trend in the subject. 

In terms of organisational practice PR would seem to be the leading management discipline in its involvement with the concept of corporate reputation.  But in terms of academic work and papers this is not the case.  I am not sure why this is the case, but there may well be an element of academic snobbery after all PR is a very young academic discipline and as the University of Bounemouth Conference this summer on PR history highlighted with a fair few skeletons in the cupboard.  But I think there is a need for openness from other disciplines in this respect particularly as issues such as social construction and legitimacy are ones which PR academics have been doing some good work, such as Jensen.   I would also suggest that Revealing the Corporation an important early work in the development of corporate reputation, one of the best chapters in the book was by James Grunig, a well known and now retired PR academic.    



 

A historic summer for the PR profession

The summer of 2010 may be looked back on as rather significant in the development of public relations.  It has been a summer for Accords - for stating principles and definitions of PR practice.  First there was the Stockholm Accord which sought to define the practice of PR overall as part of the World Public Relations Forum.   This perhaps has not had the coverage it deserves but it is an important document on the role and value of PR within organisations and interpreting it in the language and issues facing today's global organisations.  It is a document for PR practitioners but also one which will be very helpful for other senior management professions and stakeholdes in understanding the role of PR.

This was followed in July by the Barcelona Declaration on measurement and evaluation.  The Declaration seeks to set down some broad principles for measurement and evaluation of PR and in particular the need from measuring outputs to outcomes.  It also fires a broadside at AVE, (Advertising Value Equivalents) which has been one of the key but generally discredited metrics used by practitioners in measuring outputs in the form of media coverage.  It also highlights the importance of measuring PR's impact on business results such as sales which as the Declaration highlights raises the issue of PR understanding the metrics used in marketing.  An interesting point which does highlight the interesting overlap between transactional relationships and stakeholder relationships which is at the heart of the marketing and PR ties.

Both are very interesting documents and statements which provide a useful point for practitioner, observers, students and academics.   They do show the growing confidence of the PR profession which the Stockholm Accords highlight and the need to articulate the progress they have made to the wider world.  Having briefly and enjoyably studied medieval history at A-Level, these Accords and Declaration by the PR world this summer, remind me somewhat of the great Councils and Edicts of the early Christian church as it sought to ensure that its authority and primacy of intepretation went unchallenged.  

Finally, and the subject of a future blog, it is entirely appropriate in such a summer that the University of Bournemouth has hosted the first International History of PR Conference.

A Fistful of dollars - IMF report on role of lobbying in financial crash

I attended earlier in the week a very good workshop run by the University of Kingston in London on the financial crisis and the developing political and economic agendas for future financial market regulation.  I went to get additional context for a Financial PR course we are running on the new Masters PR programme at Greenwich starting in September.

The role of media and the influence of lobbying during the crisis was an interesting sub-text in the workshop.  In particular a recent report by the IMF titled A Fistful of dollars on the relationship between lobbying and risk taking by the sub-prime mortgage financial institutions on Wall St was explored.   Essentially the report highlighted that those financial institutions which lobbied most actively against any tightening of regulation in the sub-prime area by the authorities were also those who took the most risks, suffered the worst returns over time and were major recipients of the US government bailouts.

No PR or communication academics are quoted in the IMF report but they could have done as lobbying draws on PR frameworks in its approach to communications although particularly in the US has developed its own route of professionalisation.   Lobbying needs to consider the question raised by Larissa Grunig on the role of PR and quoted by Dejan Vercic "Are we in the business of persuasion? of information? of negotiation? of co-optation? of co-operation".   Perhaps it was better put by both Grunigs later (1992) as framed by two extremes; compliance gaining (asymmetry) and problem solving (symmetry).  Does lobbying do problem solving?  The IMF report is a damning indictment of the destructive role which lobbying can play when seeking compliance not to solve problems.   But the PR profession cannot ignore the wider lessons which the report raises.

BP, PR and Ashby's Law of Requisite Variety

Taking a view of BP's PR efforts on social media today compared with the first weeks and it is noticeable that Twitter is being much more actively used by BP than at the start as well as the company's Facebook BP America page.  The Facebook page is also taking in feeds from Twitter comments and commenting on them showing a growing understanding of the integration of the different services.

A comment from BP America's today (14th June) "We want our page to be an appropriate forum for everyone, and an exchange of constructive dialogue from differing opinions" highlights the developing conversation.  This was entirely absent in the first hours and days of the Gulf oil spill.

Tony Hayward, CEO of BP.

BP's PR effort on a range of counts has been heavily criticised.  The latest broadside was this weekend in the Financial Times although the article acknowledged that any company would have suffered major reputational damage over such an incident.  However the FT notably linked communications problems to wider organisational and cultural issues within BP over how it ran its American subsidiary.  In particular a failure to have a senior heavyweight management team run by Americans dealing with the US government and US media (as opposed to its very British-
centric team who have gone down badly) and included in this was the
fact, that BP also employs a British PR consultancy even for its US work, Brunswick. Other commentators have been more direct over Brunswick's failures and I would add that social media has also never been Brunswick's strength.

 Ross Ashby.  (Source: Principia Cybernetica.)

This lack of organisational and cultural sensitivity in BP brings us to one of the pioneers of systems theory, Ross Ashby.  A physciatrist and academic, Asbhy was famous for his work on Systems Theory and Cybernetics and influential to a generation of academics particularly in the (1960s) developing field of business and organisational strategy (not least PR's own Open Systems Theory).  His Law of Requisite Variety ( interpreting in organisational context), says that an organisation must have the capabilities (technical, managerial etc) and "variety" for the environment in which it operates.  The more complex the environment the more "variety" needed within the organisation.   On all these fronts BP has failed - and BP's communication performance is symptomatic of these failures.

UK election - old media and new media - who was the winner?

There has been quite a debate in all forms of media about the role of mass media versus new media in the election.  Jon Snow summed up what many believe that online in the UK election has played a limited role compared with the Obama campaign, although he was writing during the campaign.  Reflecting on it after the  campaign what role did new media play?

Talking to Paul Simpson an active LibDem tweeter, and in the Top 30 Political UK tweeters (as well as a colleague at Greenwich) - he felt that Twitter did not have a great campaign and was used primarily by the parties to amplify messages with lots of aimless re-tweets, but not to develop discourse.  (Is Twitter losing some vibrancy generally?).  A good overview with links and a summary of the overall social media campaign is provided by eModeration which highlights the strong vote for the LibDems on the Facebook poll  where apparently over 400,000 took part.

One point which I don't think the commentators in mainstream media have made enough of, was the good turnout.  There was some talk in the run up to the campaign that there might be a low turnout in the 50s.  In fact the election achieved a UK turnout of 65%;  UK Electioninfo provides some good data on turnouts since 1945.  What is striking is that since 2001, turnout has been growing when it nearly went below 60%.  Are we seeing social media's influence in these figures and is Facebook combined with the impact of the TV debates perhaps the real winner for this campaign in energising young people and getting them out to vote?

Crisis PR at BP

Watching how BP handles the major oil pollution incident off the US Gulf coast is going to be very instructive in terms of crisis PR.   The severity of the situation is immense, even for a company of BP's size and experience in crisis PR situations. It is also in a politically sensitive area just recovering from the effects of Hurricaine Katrina in 2005 which has given an added dimension to US coverage and that is an aspect which is somewhat different than many crisis PR situations facing organisations.

My impression is that after a slow start BP is starting to get its crisis PR team into action with mainstream media in the UK!   However the USA is another matter and social media also looks weak.  The comments on Twitter suggest an increasingly hostile reaction as more information comes out but also quizzical that BP does not appear to have an active policy of communicating across all channels of communication including Twitter.

Advertising agencies losing out on data primacy

Interesting perspective highlighted in today's Financial Times that advertising agencies may be losing out to increasingly digital savvy clients and also no longer seen as having access to key sources of data.  According to the Council of Marketing, the key data for organisations in terms of marketing and advertising is now primarily in-house such as web site traffic.  This trend is leading major companies according to the story to build their own resources in-house, draw on specialist IT suppliers and cut back on traditional agencies.  Another element in the move from mass media to interactive media and changing influence of the promotional disciplines.

Citizen takeover gathers pace at United

The pace of developments at Manchester United continues to surprise.  It really is becoming a fascinating story about "ownership" of a brand and the legitimacy of ownership when the customers decide that the owners are not running the organisation in a responsible way.  Certainly it is showing the impact that an involved, committed and passionate community of users and consumers (brand community) can have around an established brand when they want greater involvement.   In the case of Manchester United it is no longer a question of shared ownership of the equity of the brand, which most assumed was the agenda with brand community, the fans are actually setting the agenda of ownership - they want to take control.   The coup of getting David Beckham to wear the green and yellow scarf was a symbolic moment and according to the Guardian, media around the world have covered this aspect of the story taking the story to another level.
(Photo from gulfnews.com)

The Guardian piece also suggests that the club have introduced a range of classic control measures on communictions which any PR consultant can tell them are useless.   The measures including firing any employee wearing the scarf and now they are editing out all mentions of the protest from United press conferences which are covered on its own TV station, MUTV.  That will be the first commercial activity which the protest group, MUST, will target, as the actions of the club are undermining the legitimacy of their own TV station. The owners if they are going to succeed will need to need to build a dialogue with the fans.  They cannot ignore the demands, can they build a compromise position where the fans have a larger stake, which surely is a position for the Glazers to consider?  I doubt they have the capability to develop such an agenda not least because football has traditionally shown little understanding of the role of public relations in contrast to marketing as academics such as Maria Hopwood from Leeds Met highlighted at the CIPR Academic Conference at the University of Stirling in the summer.   

The importance of symbols in the campaign is particularly interesting both in terms of brands but also their historical pedigree.   Beckham wearing the scarf and so symbolising - even anointing its significance - to the whole role of the scarf in its different colours from the traditional brand have a powerful resonance.  All revolutions - or citizen takeovers - have icons, something which Wally Olins, a leading corporate identity  practitioner and commentator, has highlighted in several papers highlighting the use of icons in the French revolution (tricolor, Marseillaise etc).
(Delacroix: Liberty leading the people. 1830. Britannia.com)

Manchester United - fighting for organisational legitimacy against citizen power

I am not up in sports PR but it is fascinating to watch the way that Manchester United as an organisation is fighting for its credibility.  Not as a club - only this week it continued to be as successful as ever on the pitch - but its  present ownership structure is rapidly losing credibility in the face of its own fans, wider supporters of football, undoubtedly the sports media as well as the government - all concerned by the high level of debt on its balance sheet.  

It is yet another example - Trafigura was an earlier one - where organisations depend on a "licence to operate" which is not given by the courts or bought in the market but which depends on the way that an organisation engages with its stakeholders and the wider community to earn respect and support. 


It is no longer too far fetched to see that the fans who have no legal power in the ownership of Manchester United as presently structured i.e a private company; may force the Glasers to sell over the next 12/18 months.  Might this be the first Citizens Takeover in a stakeholder age?  Might the concept get an airing in the forthcoming election?

Financial PR and investor relations in a stakeholder environment?

The growth in interest and prominence of the stakeholder approach to organisations (as highlighted at the recent World Economic Forum), in contrast to a shareholder focus, poses an interesting problem for f inancial PR and in particular investor relations.  How do they adapt to this new environment as both have grown and become highly profitable parts of the PR industry (investor relations would see themselves as a different profession) in an environment where shareholder focus has been dominant?  Will their role change; will they become less powerful and influential within the communications framework of major publicly quoted companines and how will they reconcile the stakeholder agenda? 

Of course it could be argued that stakeholder communications is a fig leaf for organisations in their dealings with society and that shareholders and the requirements of financial markets are going to dominate, whatever organisations say in public.  We can see this in the recent acquisition of Cadburys by Kraft.  The Chairman of Cadbury's was able to say without embarrassment that the board of Cadbury's had done their fiduciary duty to shareholders by selling the company.  Although in a later speech to the Said Business School at Oxford he did highlight his concerns that so many key shareholders by the end were just hedge funds.  .

However, there are more fundamental issues at work which need to be considered.  Both financial PR and in particular investors relations are a product of the "efficient market theory" which is that markets are inherently efficient and the price of an asset fully reflects the information available.  Markets by implication are also ently hungry for information to further improve market pricing and their overall efficiency.  

Caption: Alan Greenspan, former Chairman of the Fed and strong supporter of the efficiency of markets. (Google Images).

In this context, the role of both professions can be seen as assisting market professionals in the efficient working of markets by providing information, admittedly from the company's perspective, which have been seen to date to enhance market efficiency.   However, now efficient market theory is badly discredited as a result of the financial crisis, if not before.  The significant asset bubbles in property were not properly priced and a recent piece in the Financial Times shows how badly - with 90% of one of the most toxic form of derivatives, CDOs were issued in 2007, having defaulted.  A clear example of not market efficiency but information asymmetry with buyers understanding a great deal less than sellers about the assets they were buying.

It will be interesting to see how this develops and whether both professions are starting to rethink the implications of the financial crisis.  I have not seen much evidence of a debate going on but would welcome hearing about this if anyone has further information on the subject.  It would be an interesting subject for a one day conference at Greenwich.

In the meantime it is interesting to note that the Walker Review of Corporate Governance, a potentially influential report, published November 2009, by a senior City figure commissioned by the UK Treasury, uses the word "stewardship" in terms of the role of major shareholders.  Now "stewardship" is a term, normally associated with great Estates where they are passed from one generation to another, with no idea of selling the assets which you have inherited.  The same principle can be seen with many family firms, where inter-generational transfer is a key requirement.  Shareholders as stewards - that takes some thinking about and what are the implications for financial PR and investor relations practice?

Social media and semantic web insights

Last few days there have been a number of major articles and presentations on social media and the internet which look to be a good resource in terms of making sense of it and considering future developments.  The presentations were at the World Economic Forum at Davos and the article is from the Economist.

Two hour workshop on social media at the World Economic Forum with all the main players participating and chaired by Loic Le Meur, a leading French blogger and social media commentator.  First 10 minutes were good and hopefully the rest will be equally good.

Tim Berners Lee on the semantic web and web scale developments.  A good five minutes.

The Economist and social networking.

World Economic Forum has had some very good sessions on social media and this was an excellent one with Chad Hurley, YouTube; Bill Gates and EU Commissioner Viviane Redding (v.good) from 2007.  Still appears to be available on Google Video.  Always good to see what still applies and what was seen as the key development three years ago.

Celebrity culture survives waves of ad revenue destruction in USA

 The Guardian highights a fascinating but gruesome picture of US magazine publishing and impact of recession and internet on magazine advertising revenues.  The article draws on annual figures for 2008/9 published by Magazine Publishers of New York.  What amazes me is how much advertising revenue, Time magazine still generates at over $400M in spite of a 13% fall in ad revenue during the year. 

People magazine is the king and queen of the print media - a celebrity magazine - it is just shy of a $1bn ad revenue and still growing!   Its web site is also still growing.  Started in 1974 and apparently a spin-off from Time magazine.  Mass media when successful is a formidable money making machine.

Picture credit