Next Stages

A Look at Executive Comebacks and the Outlook for Corporate Social Responsibility

Our agency’s partners from around the globe meet periodically throughout the year to discuss agency business and to consider broader topics. In June, we met in Atlanta, Georgia, and our speakers included two widely respected voices from the business world: Chris Pinney, director of executive education for the Center for Corporate Citizenship at Boston College, and Jeff Sonnenfeld, a professor at Yale University's School of Management and a nationally recognized leadership expert.

Sonnenfeld recently co-authored a book called Firing Back, which profiles several prominent business executives who made strong comebacks after being fired or facing other career disasters. He spoke to our group about the key characteristics of leaders who are able to make such transitions. Those characteristics help outline critical steps to take after a disaster threatens a career or a brand. Pinney, who has more than a decade of international experience in corporate citizenship, talked about how corporate social responsibility (CSR) is becoming fundamental to the way business operates. CSR can no longer be a few isolated initiatives within a company; it must be an authentic part of a company’s brand.

At first glance their topics seem unrelated. But after listening to both men speak, a common theme was clear. Pinney and Sonnenfeld both talked about moving to a next stage – whether in an individual career or a business environment – and public perceptions of such moves. 

So we’ve tied these two topics – executive comebacks and CSR – together in an issue of Perspectives Extra that we’re calling “Next Stages.” Our "CSR" and "Leadership" articles lay out the major points made by Pinney and Sonnenfeld and include excerpts from each of their presentations. We also have provided a link to a short podcast from Pinney's presentation, so that you can hear some of his insights on CSR for yourself. The "Getting to the Next Stage" article offers insights from several Ketchum professionals who have been counseling clients on leadership and CSR for years. Finally, I'd like to ask each of you to take a brief online poll that will gauge what stage your company's CSR is in and how public relations fits into it. Results will be posted in our next issue of Perspectives and on Ketchum.com.

As always, I welcome feedback on Perspectives. Please e-mail me at ray.kotcher@ketchum.com.

Best regards,

Ray Kotcher
Senior Partner and Chief Executive Officer, Ketchum

Next Stages in CSR

The Emerging Role of Social Responsibility in Business

Observations from Chris Pinney, director of executive education for
the Center for Corporate Citizenship

Consider this: Of the 100 largest economies in the world, 51 are corporations; and the world’s top 200 companies have combined sales 18 times the size of the combined annual incomes of the 1.2 billion people living in severe poverty.

These facts, taken from United Nations reports, highlight the extraordinary position of today’s corporations and are a major reason that the notion of corporate social responsibility has been steadily gaining steam.

Call it CSR, sustainability or the triple bottom line. Any of the terms signal the growing accountability of business to society. While corporations have become major global economic powers, the capacity of government to address social challenges has declined. In the United States, for instance, government spending has generally outpaced revenues since the 1950s – leaving few resources to adequately address issues such as poverty. As a result, third parties are increasingly calling on business to intervene.

So far, many companies have been largely reactive – launching disparate programs to address specific needs. But Chris Pinney sees a significant change under way: CSR is becoming an integrated part of business strategy.

He explains, “Companies are moving into the next frontier, which is how you use this lens of CSR as a business driver – how you build social and environmental considerations into the actual design of your products and services from the get-go.”

Here is what Pinney had to say about key factors underlying this emerging approach to CSR.

CSR is not about charity. The public wants much more from companies than just charity. The key thing companies are being held responsible for now is managing their operations responsibly and developing healthier products and services. In terms of the community, people want companies contributing time, talent and resources toward finding solutions to social challenge. That's a very different operating environment for most American companies. The old philosophy of “If we just get some more money out there, we will be good corporate citizens” just doesn’t cut it anymore.
   
Employees are key. Employees are probably the No. 1 stakeholder for business these days on CSR. Employees are more activist than the general population, and when they think companies are not corporately responsible, they're more likely to take it out on the marketplace by refusing to buy their products or speaking critically about the company to others. A young man who is developing a Web portal to profile companies and their CSR practices recently told us at the Center for Corporate Citizenship that young people a decade ago all wanted to go off and work in the not-for-profit sector and change the world by creating social enterprises. Not anymore. He says today young people want to go into business and they want to change the way business operates.

That’s a whole new approach that companies are going to have to come to terms with. When a CEO speaks out on corporate social responsibility, it has an impact on employee loyalty and productivity. That’s low-hanging fruit for a lot of companies. We still have companies that say they do good stuff but they don't want to talk about it. But other companies are starting to realize that they can't be behind the wall anymore. Employees want to feel good about where they work.

Investors are coming online. Socially responsible investment (SRI) funds perform as well as, or better than, any other index fund. People are starting to realize that, and it’s the fastest growing area of the investment industry. Every single major financial institution in the United States is now putting out an SRI of one kind or another. This is interesting because it’s saying people have actually used it as a consideration in their investment decision, or they considered it but then rejected it in the end. For most investment houses, it’s a risk-management tool. Companies that have good socially responsible investment policies are less likely to get into trouble in a global economy.

CEOs are getting it. A McKinsey Quarterly survey recently showed that 16 percent of CEOs believe that business should focus solely on providing the highest possible returns to investors while obeying all laws and regulations. But a whopping 84 percent of CEOs believe that large corporations should generate high returns to investors while balancing with contributing to the broader public good. CEOs understand that the social contract has changed. So the main question now is “How do you manage this?”

Everybody understands now that CSR is not something you view as issues management anymore. You don’t just set up a CSR group in the public affairs department that produces a nice little report. That isn’t going to work. People from across the company, all the line managers, must be on board and understand what the implications of this new operating environment are for their business function. And companies must have the right metrics in place to manage performance in each line division.

An Emerging Role for Public Relations

Certainly many companies will issue reports on their CSR efforts, and public relations professionals should help develop those, as well as continue to help companies get their core CSR messages out to the media. But there is a deeper role emerging for public relations as companies increasingly are judged by third-party standards. That is stakeholder engagement.

Pinney notes, “Part of the help that companies need now, particularly as they expand operations globally, is finding out how to connect with a local community and figuring out who all their stakeholders are…. A lot of people, even in public affairs, have not really had any training in models of stakeholder engagement. This is a professional competency that public relations professionals need to develop. You need to skill up if you’re going to do this stuff well.”

Next Stages in Leadership

How Great Leaders Make Great Comebacks

Observations from Jeff Sonnenfeld, Yale University
professor and leadership expert

What do former U.S. President Jimmy Carter, banking industry leader Jamie Dimon and homemaking expert Martha Stewart have in common?

All achieved great success, faced potentially crushing failures, and rebounded. But more significantly, according to leadership expert Jeff Sonnenfeld, they share one characteristic that makes such comebacks possible: resilience.

In today's world of always-on media, leaders who encounter major setbacks face not only the standard struggles of trying to rebuild a career, but they must do so under great public scrutiny. This is where a true test of leadership – and the ability to manage public perceptions – comes in.

Most high-profile figures share common traits that may include rare skills, stature, wealth, connections and even luck. But none of those things or their combination automatically equals resilience. Sonnenfeld notes that leadership in adverse circumstances entails making conscious choices rather than simply riding the wave of predestination.

Carter lost his bid for re-election in 1980, but he then went on to author several best-selling books and has become renowned for his national and international humanitarian work. Jamie Dimon lost his job as president of Citigroup, but he didn't simply take the first big job offer that came along; he picked Bank One Corp. and led it into a merger with banking giant JPMorgan Chase, where he now sits as chairman and CEO. Martha Stewart served five months in prison for a felony charge related to an insider-trading scandal; since her release in 2005, she has expanded her line of housewares, returned to daytime television and continued to be a dominant voice in cooking, gardening and homemaking – defying commentators who predicted the end of her homemaking empire.

Carter, Dimon and Stewart each made conscious choices that aided their rebounds and showed a great ability to manage their public images.

Five Keys to Resilience

Here is how Sonnenfeld described five components of resilience that underlie the choices such leaders make:

1. Fight, not flight. When you look at recent media frenzies around HP's issue with pretexting, you see an example of a company that was afraid to embrace critics. They were embarrassed and they didn't master the facts, so they weren't prepared to reframe the situation. Often, the advice that embattled companies receive is “Don't engage.” But fight, not flight, is the answer.

2. Recruiting others into battle. When Bernie Marcus was fired as head of Handy Dan Home Improvement Centers, he took the president and the CFO, who also had been let go, and together they started a whole new business – The Home Depot. That demonstrates using networks effectively but also shows a moral responsibility for those who take the shrapnel with you.

3. Rebuilding heroic stature. Heroic statures have to do with rebuilding a reputation – impression management. It's not personal hardiness. It has to do with how the outside world sees you. If you do something wrong, be contrite. Don't do a celebrity rehab turn and say, “If I offended....” You've already lost the battle if you're qualifying it with the “if” word. If it's genuine contrition, show how you're going to atone for your action. If you did nothing wrong, scream it from the mountaintop, originally. Don't miss the press cycle.

4. Proving your mettle. Continue to do what once made you great. That's what Donald Trump did after going into bankruptcy. When you look at the whole west side of Manhattan, his name is blazing everywhere there again. He lost 100 percent equity there through financial difficulties, but using his name, his connections, his expertise and his comeback initiatives, Trump managed to work his way back into a significant state. He showed that he could still do what made him great.

5. Rediscovering your heroic mission. Understand your purpose. It's that existential reason for existing. Why do you still want to be a leader? What are you going to do that's different?

Getting to the Next Stage

Observations from Ketchum
Partners

Today's business environment presents a slew of areas that can snare corporate executives, and the growing importance of corporate social responsibility is one of them. Public relations can play a major role in helping businesses and their leaders get to the next stage, whether it is recovering from a setback or maximizing CSR initiatives. In this roundtable discussion, Ketchum partners address both topics.

Robert Burnside, Partner and Chief Learning Officer	Peter Fleischer, Partner and Senior Counselor	David Gallagher, Partner and CEO, London	Denise Kaufmann, Partner and Global Account Director
Sean Fitzgerald, Partner and Managing Director, Ketchum West	Jerry Olszewski, Senior Partner	Barri Rafferty, Partner and Director, New York	Lorraine Thelian, Senior Partner, North America

From a public relations standpoint, what do you see as the key to an individual or company being able to restore public image after a major setback?

Robert Burnside: In difficult times, the CEO is an icon for the health of the firm. His or her personal moral qualities stand as a proxy for how others judge the firm's health. Personal preparation to demonstrate the right mix of confidence and humility is critical.

Lorraine Thelian: Be truthful, acknowledge mistakes immediately and discuss what steps will be taken to make things right. In addition to being the right thing to do, if done immediately and transparently, it serves as a disarming prelude and takes the wind out of any attack. 

Barri Rafferty: Absolutely. Another key thing to keep in mind is that the public today is savvy to spin and more responsive to humble apologies or proactive responses. They also look at speed of response and are not willing to wait. They will fill in the gaps with assumptions and begin rumors to fill the void.

David Gallagher: Our affiliate agency in Scandinavia has a great model, which they have shared with us, on this question. If you look at credibility and visibility on an X-Y axis, the upper right quadrant is most desirable – high credibility and high visibility. After a setback, there is a tendency to shift left – to high visibility, low credibility. The implication? Take yourself (or brand or company or cause) down to low visibility, work on restoring your credibility, and then seek the high visibility opportunities. Former U.S. Vice President Al Gore is arguably a great example. After losing a hotly contested election, he took himself out of the limelight, invested himself in a cause he cared deeply about, and later found his way back into the spotlight, where he is possibly stronger and more credible than before his defeat.

What advice do you have for clients that are expanding their CSR efforts? What are the key things they should be considering?

Thelian: Get involved in an initiative that is sustainable within the organization over a long term. This probably requires the initiative to be something that is complementary to the organization's business and culture and engaging to employees, rather than simply the passion of just a few leaders of the organization.

Peter Fleischer: Be authentic in your choices. Select causes that link naturally to the essence of your brand, deliver on your brand promise to your customers and that inspire your employees and other stakeholders. Here’s a case in point: Dave Thomas, founder of Wendy's, never knew his birth parents and spent his whole life shuffling from foster home to foster home. He dropped out of school to work in a restaurant that became his surrogate family. That was the idea behind Wendy's: a quality, family-style restaurant that made hamburgers the right way. When he became successful, he formed a foundation to help kids like himself. The entire Wendy's system has adopted that cause, raising tens of millions of dollars to find permanent loving homes for foster children.

I often tell this story to clients as an example of a gold-standard CSR initiative. It’s hard to imagine a cause more authentic, more inspiring, more linked to brand essence and more powerful in telling the brand story. While other brands may not have something quite as compelling in their DNA, the Wendy's story can inspire them to dig a little deeper to ensure that authenticity is a key factor in their CSR journey.

Denise Kaufmann: Any CSR efforts must be rooted in the company's overarching business philosophy. Many companies still look at CSR as corporate philanthropy, but that is only one dimension of what being a "socially responsible" company is all about. All actions are under scrutiny, including how management runs the company and how they treat employees. Their actions have to make strategic sense for their business model or they will not be authentic.

Sean Fitzgerald: First and foremost, a company must complete an assessment of its own vulnerabilities in its selected category of CSR activity. For instance, if a company aggressively commits to and touts a "green" initiative yet continues to run operating facilities that severely pollute the environment, it likely will damage its reputation to a much greater extent than the green CSR initiative could ever hope to improve or repair.

Jerry Olszewski: Corporations should be deliberate about their CSR commitment and approach it with the same sophisticated analysis as their business strategy. Once there's a commitment to a CSR platform, invest in it with time and money, measure its success and, maybe above all, stick with it. There are no quick fixes in CSR.