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December 10, 2010

Nobody said that managing through tough times is easy.

As this stubborn recession persists and foreign competition intensifies, many once-strong companies are nearly bankrupt. Public scrutiny of products and company leadership is at an all-time high. Any ill-chosen word or action can zip around the world immediately — with potentially catastrophic results.

People must see the CEO as strong, fair and in control. He or she needs to paint a realistic picture of the situation, lay out a plan for dealing with it and convey optimism about the long-term outcome. The leader must also show empathy for anyone adversely affected by hard decisions or negative events, while also maintaining professional decorum.

Several CEOs of big companies who ignored one or more of these principles have found themselves relieved of their executive duties in 2010, including Randy Michaels at the Tribune Company, Tony Hayward at BP and Mark Hurd at Hewlett-Packard. The executives were ousted, in part, for avoidable mistakes.

These mistakes range from fostering a hostile work environment, misusing funds for personal indiscretions and failing to meet stakeholders’ expectations.

Communicate with constituencies
Turning a company around, or simply getting one through bad times, usually requires cooperation from a lot of players. Too many corporate leaders overlook this fact.

A prime example from recent years is “Chainsaw Al” Dunlap. As CEO of Scott Paper, Dunlap famously declared that a CEO  has only one constituency — the shareholders. He was  wrong. Investors buy and sell the stock, but they don’t make a company successful.  After engineering the sale of Scott Paper, Dunlap became CEO of Sunbeam, where the board of directors fired him after a disastrous reign. 

So, who are the key constituencies — the people whose good will and support are essential to success?  While the comparative importance of each group varies by company and industry, we can start with these: employees, customers, vendors, media, union leaders, local communities and government.  All can have an impact on the company’s fortunes.

Top management needs to understand the needs and concerns of each group and address  them accordingly.

A CEO must also lead by example. Earlier this year, a Midwestern chemical company asked its employees to take a two-week furlough without pay to help balance the budget. To emphasize the need, the CEO eliminated his own pay for three weeks while continuing to work. This tells employees, “I feel — and am willing to share — your pain.”

A key mistake that many leaders make is to hide or downplay a problem. BP’s Hayward initially told the public that damage from his company’s spill would be small. Toyota concealed the extent of its safety problems, resulting in great embarrassment along with legal and political problems when reports of fatalities from sticking accelerators surfaced. Both companies lost credibility with important constituencies.

These examples demonstrate the need for wise PR counsel as management reacts to tough times. Every decision, action and statement can build or diminish support from key groups. Here’s how PR professionals can help most:
• Be sure top management is aware of, and responsive to, all of the company’s key publics and their concerns.
• Insist that management paint a realistic picture of the situation, present a plan for dealing with it and convey optimism about the eventual outcome.
• Prepare leaders to handle reporters, employee meetings and other important appearances.

 

Virgil Scudder Virgil Scudder is the author of “World Class Communication: How Great CEOs Win with the Public, Shareholders, Employees, and the Media,” which received an Award of Distinction as one of the best business books of 2012. He is president of Virgil Scudder & Associates, based in Miami Beach, Fla.
Email: virgil at virgilscudder.com



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