Disruptive Management: Fostering Transparency, Dialogue, and Innovation in Today's Business Climate
December 06, 2011
JULIA KENNEDY: Welcome to this Carnegie Workshop for Ethics in Business.
For those of you who haven't been here before, the way this works is we go through a few small cases that we work through with you all, because then we are redistributing this conversation to a network of business students and a wider audience, television and audio.
It is my pleasure to introduce Michael Mendenhall to you today.
He is president and chief operating officer of Lipman. His responsibilities are wide-ranging, but they include business operations, new business development, brand strategies, media planning and buying, digital strategy, and Web design.
Previously he was senior vice president and chief marketing officer at HP [Hewlett-Packard], where he oversaw such areas as integrated design, customer intelligence, and global citizenship.
Mendenhall came to HP from Walt Disney, where he was executive vice president in charge of marketing and communications for Walt Disney Parks and Resorts.
He is a member of the World Economic Forum's Global Agenda Council on Marketing and Branding.
This varied experience has given Mendenhall a uniquely big-picture view of how communications professionals and other professionals can really drive management to adopt more responsible practices both internally in their companies and as global citizens.
It's my pleasure to welcome Michael Mendenhall today.
MICHAEL MENDENHALL: Thank you.
JULIA KENNEDY: So, Michael, tell me know changes in global communications have really affected the way companies do business.
MICHAEL MENDENHALL: I think communication has changed overall. I always challenge, when I speak to universities, schools, and classes, how you define communication today. I always go around the room and I say, "Tell me what the definition of a producer would be today, tell me what the definition of a reporter is today, and tell me what the definition of a director or a news outlet is today, and who takes ownership of the communication and the information? What is believable, what is authentic, and what is trustworthy and what isn't?"
In this space, ethics plays a very important role, because really the news comes from anywhere. We have seen individuals in countries change the course of a country, starting with one that becomes many.
What I mean by that is mass communications was once defined as "one to many," and today what you find in communications is we have moved from "many to many," "many to one," "one to one," as well.
So for me it isn't about just pushing messages, which was what you really found in corporations and governments around the world, was the push of the message, the control of the message. We have moved to where it's more of a dialogue now and not a monologue; we have moved to where there is far more interactivity and far more validation to what is being said.
The other thing we know today is that the wisdom of the crowd is more exact and precise than any other measure that you will have statistically, so the idea that the crowd will come to a conclusion based on the information. The wisdom of what they define as the outcome will be more exact than any other measurement.
What you find today is I don't think there is real concern in the idea that we are in this conversation, this dialogue. I think we are finding that transparency and authenticity become far more important, and the idea of engagement becomes important, because when you think about how that world of communications has changed, it is one in which you can't hide today.
I really believe that companies today that believe, through a crisis, being reactive to their communication, are only building a one-way communication monologue with their customers, will eventually fail. I think it is more of a proactive approach to communications within these organizations and/or countries, and it's one in which you know you have ultimately complete transparency and you need to be authentic.
What I mean by that is there is a multitude of channels that exist today and there is a multitude of conversations going on that exist today. You need to be participating, and, more importantly, what we find is you need to be listening.
So much of what marketers and communicators and PR [public relations] professionals have done in the past is it's really about controlling the message, pushing the message, and staying with the message. Today it's a lot less about that. It's more about listening and it's more about entering the dialogue, and it's more about being responsive.
What we find is the companies that are ultimately very responsive and very proactive do far better.
I can give you multiple examples of all these different scenarios.
But I do think what we have really seen in this sort of fragmentation of communication is most companies and/or countries approach their strategy—and they call it a multi-channel strategy—the channels in which people are engaging are things that we have to pay attention to.
What you start to find in this multi-channel sort of mentality is it becomes function over the form or the content. What I mean by that is you start to think about, "How do I multi-channel plan?" And all of a sudden, we have taken the customer, the guest, the end-user, out of the conversation and we're now talking about a means to the end.
That doesn't seem to work as well. So really it is about ultimately the transparency with that customer or that end-user, being authentic with them, being engaged with them, and listening, and putting them at that center.
A lot of people talk about, "Well, we always do that. We always have the end-user at the center of our conversation." And then, when you look at their organizations, they are organized functionally against the channels that then silo their approach, and they spend most of their time worrying about integration and less about the content and the outcome.
I think that's the world we are in today. I do think it is going to continue to fragment. We still have not seen the end of the fragmentation in the media space. I don't think we are going to see the end of it in the digital space.
I do believe that we will continue to see consolidations in certain areas and certain industries in these spaces, and you will wind up with potentially three to four major players who will be competing with each other in these certain channels of communication.
But we are going to continue to see fragmentation as well as consolidation. I think those two things make it very complicated for marketers or communicators. That's where I think you need to have some level of sophistication.
It is not about having just a corporate "coms" [communications] department who sits off and just deals with earnings, deals with financial crises or financial information, but it really is a holistic approach. I have argued before that I think the corporate communications function and the marketing functions need to be much more closely aligned and more integrated in the world we are in today.
JULIA KENNEDY: There's a lot to unpack there. That was a great framing statement.
Now, over the next hour or so, we are going to go into a few cases to look at different elements of what Michael just laid out:
- First, we are going to talk about a case in which we are going to unpack strategies to respond internally to this increased transparency.
- We are going to talk about, second, establishing consumer engagement in which you can really enforce listening as well as sending out messages.
- Then we are going to talk about using integration to foster innovation in your company.
Let's start with our first case. Michael, tell me why you suggested we look at Glassdoor before we drill down to the specific cases.
MICHAEL MENDENHALL: I think, for me, most companies talk about brand equity, shareholder value. These are things that you hear over and over. Now they are looking at goodwill on the balance sheet and how does equity affect that.
I really believe that, most importantly, it's about brand reputation as a piece of driving the equity and that you establish a reputational function within the organization. What I mean by that is many people, when they benchmark, they tend to benchmark relative to what they believe their competitor set is, when in fact every company's DNA is very different.
What I mean by that is the NGOs [non-governmental organizations] that are important to your business may not be the same as those that are important to your competitor. I can give you some examples between HP and IBM.
You have community leaders. You have government leaders. All these locations in which and where you do business may be very different from your competitive set.
You have financial analysts, you have industry analysts, who are covering you. They may not be the same people that are covering your competitor.
You have your customer base. That may be very different. It could be similar in some regards but very different.
You have your suppliers.
And then you have your employee base. When you think about a company that only really focuses on the brand and its equity, they begin to lose the ecosystem that surrounds a brand and a company and all the influencers that become important to your market cap, your share price, the perception of your company, how well your products do, etc., etc.
To get to Glassdoor, the reason I picked this was I believe most marketers ignore one of the most important bases today relative to the transparency that exists in companies, and that is your employee base. Your employee base, the health of your employee base, the communications to your employees, the engagement that you have with your employees in building brand advocates, in building advocates for your company, becomes very important.
We know for a fact that one of the top four influencers of a brand today that people look for when they are out shopping for your products or services is what the employees are saying online, either anonymously or not.
So when you think about the importance of that base, it is not that you hold a survey once a year and you check a box and say, "We've talked to the employees and they have told us what they want," and then you execute maybe 10 percent against that expectation.
The problem is you have set an expectation in the survey, and then most companies, again, don't execute against it. They execute maybe 10 percent. They don't have ongoing dialogue with the senior management in driving the communication and the strategy for the company down into the organization.
I really believe that this is one of the most important segments of a company's health today. It is not just what your customers are saying but what your employees are saying about you.
The reason I picked Glassdoor is it's something that many companies pay attention to. If you're not familiar with it—corporate coms people are very familiar with this site—if you go to the site, they rank the employees—this is your own employees, and could potentially be some of your competitors'—ranking and talking about your company and its executives.
It talks about their compensation. It talks about the management style and the culture of the company. It is one that has gotten great attention and great pickup when you talk about the amount of people that go to this site to check on the health of a company. It has crossed over to the point now where consumers now are even going to this site.
When I talk about transparency and the importance of being completely transparent, it's not just to your consumers; it's to all those stakeholders I talked about and the idea of a reputational practice within your company—that becomes increasingly important—and one that's managed, so it isn't just lip service.
So I said to the Carnegie Council, "Let's pick Glassdoor because the employees actually will rate this company and they are talking about this company."
I think in this case you find that the employer has done a survey, the employer believes that they are talking and engaging with their employees, and in fact they don't really act on it, and in fact are they really engaging?
I think that's where we open it up to you to say what do you believe relative to this case study? Do you think the company has done enough to engage and motivate the employee base to be those brand stewards, those advocates of the company, that will affect its reputation?
One of the things you can do relative to reputation—it's something we did at HP—is you can benchmark yourself. We didn't benchmark against our competitors.
We knew, through the reputational research we did, what drove our brand. We weighted, so we knew every attribute that was important to driving the reputation of our company.
But it also demonstrates where you have risk, or potential risk. The reason I say that is one of our competitors in Dell had a customer support service issue with one person online that escalated and brought the company to its knees, and it has not recovered on the service side with customers yet, and that was well over five years ago.
We were very concerned, not only about what we were doing well, and were we managing the attributes that drove the reputation of our company, but where do we see those attributes that were important that we weren't being scored well on, and how did we have to improve that, and what did we need to do. We took action plans against those to protect on the downside or the risk side of the company. To me this is a big piece of that.
So I'd open it up.
JULIA KENNEDY: Great. That's a wonderful framing. Thanks for talking about Glassdoor and why it's important.
Let's look at this specific company, which we plucked out as a company that rates okay on Glassdoor but has significant room for improvement.
This is a major insurance broker. They are huge. They have 52,000-plus employees and $10 billion-plus in revenue.
They get a 3 out of 5. I want to start off the conversation by saying as you look at these seven reviews that we plucked from the many that are available on Glassdoor—we tried to provide you with a range of ratings and feedback—are there any themes that emerge, that stand out to you as issues that maybe higher management at this company should pay attention to?
PARTICIPANT: Can I raise a question? It's about the circumstances at HP. How did you communicate to your employees that you were actually listening to them and taking action? One of the things—I don't really see it in here but I read into it—is maybe employees were afraid to respond.
MICHAEL MENDENHALL: Yes.
One is when you do these surveys they are anonymous; and (2) that you are asking the right questions relative to the company and its employee base; and (3) is how is that incorporated into performance appraisals; and (4) does the senior management own this and believe in it?
We started with the [former HP] CEO [Mark Hurd]. We said, "Mark, for this to be believable, the senior-most leadership of the company, you being the CEO, have to believe in the importance of this, believe in the importance of engaging employees, and we have to begin to embed into the performance appraisal of your senior executives and direct reports, as well as the whole organization, the importance of tackling what we believe is the most important criteria for our company relative to our employee base." So he took that on.
We said this was not just a one-time survey but maybe twice a year. So we started to institute it twice a year.
And we also said that he needs to address it verbally in person to the entire employee base.
You say, "Well, how do you do that with 320,000 employees?"
What we would do is we would hold town hall meetings every quarter. Every quarter Mark would get up and he would address something relative to the survey, how the employees were feeling, what he was hearing, how we were tackling it, what we were going to do about it, the action plans that were going to take place.
So they could see a direct correlation from their input into the survey into the management of the company and the importance of what we were going to hold as important criteria for management and leadership in the company with the employee base.
It really became a very organic thing, because it wasn't just, "Hey, we did the survey, we heard these things, we're going to tell you we heard these things," and then there's no action plan.
I would say biannually he would get into then a full report on this, and he would be the person via videoconference who would address the entire employee base about this. He would talk about—it was very interesting, because we said again transparency is very important; you can't hide and you can't be defensive about what we're hearing; we have to tackle the issues as we see them relative to the company.
He was very up-front about what he was hearing. He may even say, "I don't like what I'm hearing but it's what I'm hearing so we have to do something about it," and he would talk about it with the employees, and then he would take Q&A from any of them.
It became a very open environment relative to this piece and how we managed the feedback and how we managed change.
I will say we were going through change, because at the time HP had the culture of a sense of entitlement. No matter how hard you worked, everyone was sort of treated very similarly. Mark was changing it to a very performance-based culture, so you had to perform to be bonused; you had to. So there was definitely a cultural change in the middle of all this.
We were very frequent in the communications. Like I said, he was once a quarter in front of them and then twice a year he was addressing the survey with them. He was also then in front of the employee base. At every quarterly earnings he would also then go live again and address the employees.
That was separate from a whole plan that we had where, no matter where he was in the world for business, we would hold a local town hall, and he would get up and take any questions or Q&A from any of the employee base.
It was very healthy. That was a piece of a more robust employee engagement program. But, having a very robust site, there was a lot of controversy I will tell you around, "Do we permit message boards within the internal Internet site where employees engage every day?" You know, someone may say something we don't want to hear. We absolutely believed it was the right thing to do for transparency, so we allowed that to take place.
We took some risks relative to, "Hey, we're going to see the positive, the neutral, the negative, but we need to see that so we can address it," because today, when you don't address it, it scales very rapidly.
When you think of social media today and the ability for people to create personas and scale conversation, it's extraordinary, and it's very quick. For us it was more about having visibility to what people were saying and not trying to hide, because it's going to scale and get out anyhow, so it's best we know about it.
We developed a very open approach. We did that with both our employees and our customers. We were one of the first people in technology to move to where we went with customer forums so you could see what people were saying on our site about our products.
Not always good, and we would address the ones that weren't good. We had a whole strategy around that. Our actual customer satisfaction scores went up five points from instituting this, which is huge movement statistically.
I think again it is about being open, it's about being transparent, and it's about allowing for the communication. Many brands really still have the control, they want the control, and it's hard for them to let go of that, because it actually can become a better tool for you if you actually listen and have visibility.
JULIA KENNEDY: Great. We have another question over here.
PARTICIPANT: Thank you.
Michael, this is really fascinating, your comments, and this particular case. I think one of the great values of this tool and this process is—my field of work is corporate social responsibility and board governance.
When I look at this and think about my work, no company is perfect, no environment is perfect, and what's really valuable is to begin the conversation to get honest feedback, and, as you say, it's all transparent.
I think what's important about leadership is having the conversation and taking stock of where you are and then thinking about what's your vision of a greater potential, and involving all the stakeholders in that, and then thinking about how you'll get from where you are to where the group and your stakeholders want to be, and then measuring and continuing to have that conversation and involving everyone. It sounds like that's what you're talking about.
MICHAEL MENDENHALL: Yes.
PARTICIPANT: And owning up to that, being honest about it, and working together collaboratively.
You talked about companies and NGOs. There was a time when NGOs and companies worked separately. Now it's collaborative. And again, it's a conversation—where we are, where we're trying to get to, and involving everyone in that conversation.
MICHAEL MENDENHALL: Yes. And I think it's the action plan, that they see action from it, your stakeholders. If you are taking the input, are you using it or was it a waste of time? And how are you using it?
I think when you talk about the transparency piece—it was interesting, because we shared everything. Nothing is always perfect at the senior level, and yet many senior people believe that to the employee base they have to demonstrate complete excellence and perfection.
What we saw is when Mark was actually real about "here's what we're doing really well, here's what we're not doing so well—and oh, by the way, my team missed this," that to the employees, that level of sincerity, the level of honesty, and the level of openness, generated—we saw our scores year over year with the employee base and the morale go up. I think it's this idea that there is forgiveness and there is a margin, and you don't have to be perfect at everything and it's not expected.
When you start to go too much, I think, into that world of perfection, you start to look defensive. So I think it's a balance, and I think that becomes important as a piece of this.
JULIA KENNEDY: I'm actually curious. Just because there's so much intellectual capital in the room, I want to throw out another question to you all, which is: What if you found yourself in a situation where your CEO was not as willing to engage, and you had to make the case for this kind of internal reaction and dialogue to take place based on something that popped up on Glassdoor or an employee survey?
Who do you then talk to and how do you try to work within your company to make this happen? What's a strategy to inject more of this response from upper management to employee dissatisfaction?
PARTICIPANT: I think one of the things, in terms of framing the conversation up around the value of doing this type of exercise—because it's certainly resource-intensive and it's uncomfortable for people at times. You're dealing with information that you may not like to hear, as you mentioned.
I think it's flipping it to see the opportunity in gathering up the information that exists out there, in terms of making you a competitive company, allowing you to progress faster, to innovate more rapidly, to connect it to new products and services and understand your market and your customer better, because in a lot of these companies the employees are also the customer base. It's not a distinct group of people who act differently than the rest of the world.
I know when we work with companies at BSR the value in the stakeholder dialogue or in the internal dialogue with employees is about really understanding better before your competition does.
It's not necessarily about "you must do this, and if we don't, we do this," and it's a punishment and it's a negative thing, but more about "What an incredible opportunity to mine this data and this information from people who understand us the best. If we can do that, we can actually leapfrog or we can be more competitive, or we know something that other companies don't." I think when you see that opportunity you can really motivate in a very different way.
JULIA KENNEDY: Yes. Over here?
PARTICIPANT: In my work I use the Giving Voice to Values program. So I'm teaching students and I'm talking to students about how do you raise ethics questions in the workspace, which is almost always a difficult conversation to have.
Consistent with what Cara was just saying, finding that common ground where the values actually coincide I think is really one of the key issues, because in many ways it's really a negotiation. What you're doing is trying to find space where we can both agree, even though we may disagree on the fringes, but there's something that we can both agree on. That then moves the conversation forward.
Otherwise—and many students actually find this—they find that they can't raise ethics questions in the workspace because either they don't perceive it or the management has not offered that sense of common ground and that sense of "here's where our values actually do coincide," and we can begin to discuss things like ethics and really important values questions.
JULIA KENNEDY: Great. Yes?
PARTICIPANT: I think if I was to summarize my 30 years with PWC [PricewaterhouseCoopers] and looking at many clients, I would have to say that what Mike is talking about is very rare in the real world.
I saw a lot of instances where management was paying lip service to surveys, where there was an old boys' network and management's favorites were being supported. Those who got promoted were not those who deserved it, and that was very apparent to the middle management and the lower management.
In answer to your specific question, Julia, as to how do we handle those situations where the CEOs are not willing to engage, there were a few things that happened that I can point to from my experience and what I observed.
One was that the only way to shake up the system in those cases was if somebody had the courage to take a stand on an issue that they saw around them in spite of personal risk, or people wrote, either on an anonymous basis or on a named basis with a request for privacy, to request investigation of certain areas, and a polling which was different from the normal HR [human resources]-driven surveys.
So I think what we are dealing with is a very sensitive question in which, in spite of all the management science around us, we don't have a good way to get our arms around, and we really need to think of more creative and disruptive ways to get around what is a systemic problem that really needs to be addressed if companies are more holistic in their responsibility to their employees.
JULIA KENNEDY: Yes.
And then I think another problem that has been identified is even if you do implement some of those creative strategies, how then to move them to the next level. So if you do implement an internal poll, how to make sure it [inaudible].
MICHAEL MENDENHALL: I think, whether you take the action or not, companies in the future are going to be forced into this space because, whether they are the CEO that participates or not, the idea that you have amplification now of your employees.
You've got an Internet that has been democratized, you've got this amplification that can bring change. We've seen it bring change in governments. It will bring change in businesses.
What I mean by that is if on average a male has 150 Facebook followers and a female has 200, and you start to amplify that, you start to feel the pressure.
What happens, and what we have seen in corporate America today, and many of you who deal with the press—the more conventional press, the editors, the managing editors, the beat reporters—they are using these sites like Glassdoor to form their opinions and their story ideas and to do research.
What is happening is these niche sites that people didn't pay attention to, that they felt didn't have the amplifications, "we don't need to worry about it," people are now finding. The ability to find and research information is becoming easier and easier online.
What is going to happen is if they don't pay attention and they aren't transparent with their employee base—and that's just one of the stakeholders; I'm really talking about all of your stakeholders, but in particular your employee base—the story will happen in the conventional press, because it will be picked up on and it will be researched and a story will start to develop. Then you're reactive, you're not proactive, as a company. Then that's when the shareholders and the board members have to take notice, because now we have a problem.
I do think, whether the individual takes care of it or not, the idea of this amplification that is taking place will put pressure. So if you are giving lip service to your employees, if you are not taking action with your employee base, it will seep out of the company, it will find its place in Glassdoor, it will find its place—there are many sites like this—and reporters will find it.
So when they do the roundups on the top CEOs, the top leaders, the top 100, your guy is going to get hammered, or your person is going to get hammered, because they are going to go in and they are going to find this information because they have transparency to it.
They are going to say, "We are using independents here. We're not just having you influence us. We're seeing that people are saying online. They say this. They say that." And people will dig into the stories. We've seen this over and over and over.
What I would say is I think you are right: There's not many leaders or CEOs of companies or organizations today who have embraced this. But if they don't and if they aren't listening—and it was interesting, because when I went through Glassdoor. I started to look at those companies you think have great leaders and those that you don't. It would be interesting for you to go do it.
It's pretty accurate, and there's no hiding from it. The companies that tend to have great market cap and are performing well and you would think have great reputation as brands tend to have the higher scores on Glassdoor for their leadership. There are some correlations that I, just sort of anecdotally, started to see.
I do think eventually if they don't adopt this they'll be in trouble. That was the point.
JULIA KENNEDY: And in a way this argument that you've just laid out, Michael, is something that a communications professional could use, right?
MICHAEL MENDENHALL: Yes.
JULIA KENNEDY: They could say, "I looked at Glassdoor, approached this leader."
MICHAEL MENDENHALL: This is, by the way, just one of a multitude of sites that do this.
JULIA KENNEDY: Right.
But then say, "It's transparent, there are some things that our employees have identified," so, in effect, the communications department then becomes that advocate.
MICHAEL MENDENHALL: Yes.
JULIA KENNEDY: Yes?
PARTICIPANT: I think that generally with CEOs and with boards whom we work with it's not a question of desire, it's a question of ignorance and fear. They know vaguely about this, but they are not necessarily sure of what to do about it.
Just in skimming the Glassdoor comments right here, I realize this is a tiny sample, but it's representative in one way, in that most of these comments are coming from more junior people at the company, and more than likely—although who knows?—younger people at the company. They're talking about cubicles and how the company's executives are old curmudgeons and so forth.
Sometimes, back to your question about influencing better behavior, it's not really about the strategy, it's more about the tactics.
For this CEO, it would be pretty clear what you need to do in order to address this problem just on Glassdoor. You need to engage more with your newer, more junior, younger—whatever you want to call them—employees. I mean it's not about fixing the cubicles. That's representative. That's sort of a metaphor for something else—what I don't know, I don't know the company.
But what first-class CEOs are looking for now is somebody who can help them reach this population who is using sites like Glassdoor to complain, instead of complaining directly to you, the CEO, or through some internal mechanism. It's pretty easy to fix these things if you just have a tactical plan and some facility with social networks.
JULIA KENNEDY: Great. Another comment over here?
PARTICIPANT: So let's say you've done your research and you've looked at the various websites and you've drawn a blueprint of issues the company faces. Would it be reasonable then—I assume it would be reasonable—if you have a recalcitrant CEO or leader who doesn't really get it, is more of a command-and-control type of person perhaps, who doesn't dare to put that foot forward, an option then is to build a support network within the organization to support the kind of moves you need to make, to reach out to employees and commitment to answer employee needs and have a real discussion with them.
How do you do that? How do you set about doing that, Michael, to create a network of people who support this kind of action?
MICHAEL MENDENHALL: I think, first, it goes back to some of the other points, that the board, the CEO, and the senior team of the company need to buy in to the importance of reputation as a part of brand, that there should be a reputational practice, and of that you have stakeholders that may be very different.
I use employees here as an example of just one stakeholder group. I don't want you to think that this idea of transparency is just about employees. I bring that up because it tends to be one that people overlook when they think about this.
I think you made a great point earlier about they are your customer, too. They know your brand and your products and services better than anyone else. When you think of consumer insights, you can learn a lot from them.
But they are also the ones that will be very vocal, as well as someone who may have a bad level of service with your company and/or good. So I do think it has to start there.
I think today it's going to be very hard for a CEO who is uncomfortable in this space to delegate this to somebody else. He is the leader of the company. He's who the employees look to. Even though they may have a direct relationship with their boss or they may have a direct relationship through a reporting structure in a business group, still, ultimately, he is the person who is responsible for the company, the strategy, the growth, and the leadership.
I think there are ways. You had said earlier some very good ways to show how it helps drive business.
I think it's about growth, demonstrating the growth that comes from this, and demonstrating the risk mitigation also as a piece of this. There are values to both of those.
A CEO will tend to see things in the financial model or the value-creation model. I think the more you begin to quantify and build a practice around this, they are going to begin to realize they have to participate in some way.
It's not something—I don't know if that was your question—that I think you can delegate to somebody as a CEO. I think you have to take ownership of this.
PARTICIPANT: That question is more, if you find yourself up against a wall, is there a way to develop support within the firm or the company? What I hear you saying is actually you demonstrate the need.
You do the research, create the facts. You create the environment where it's obvious that business success is determined by being forthright, being authentic, engaging with all those stakeholders, and transparent, as opposed to trying to find a way to build support tactically within the company. You can get yourself fired that way probably.
MICHAEL MENDENHALL: Yes.
JULIA KENNEDY: Okay. We have one comment from George over there and then I think we are going to have to move on to our next case, because we've got a lot to do.
PARTICIPANT: Actually, to your point as to how to engage and how to do these things that a CEO has to, the "how" comes to mind. I spent most of my time in large financial institutions, a commodity service and a commodity business and very directly tied to money.
The question, I guess, is: Do you find that there are variations—I mean a CEO has to take some responsibility for a strategy of communications. Will he or she have to tailor that strategy, which areas get priority, which areas get what kind of action? What are some of the variations you have seen for different industries, different productive processes, different marketing methods, and so forth?
MICHAEL MENDENHALL: That can vary widely. But I think it again gets back to the question of a company's DNA and what drives the company's growth, what drives the company's brand, what are those equities, what are those attributes that the different stakeholders assign, and what levels of importance.
For instance, when we were at HP it was all about the quality and design of the products and services we offered. It drove the brand in an enormous way.
Therefore what your design practice looks like; how innovative are you, have you fostered an environment of innovation; are we two years ahead of that development cycle; what does our support and service look like—support and service was critical in that business, and we spent a great deal of time reengineering the support and service piece of the company. Those things really drove the brand with consumers.
When you got to financial analysts, it was very interesting. What we saw was a lag effect as we think about the company's brand and our reputation and the research we did around the financial piece. That was six years earlier the company had some financial issues. Here you had with Mark year-over-year compounded growth, great results, wonderful new products that were being brought into the marketplace on the printing and computing side, 40 acquisitions that I thought were integrated fairly well into the company.
You started to see this great scale, a strategy play out on the tech side, yet the financial community still was saying they weren't happy with the performance. We couldn't understand the correlation because you couldn't correlate it to what the reality was, because the reality was the stock was moving, it had gone from the 20s to the high 50s. What were we seeing?
What we found was that on the financial side with the analysts there was a lag of almost five years. They were more skeptical, that stakeholder group. And so you needed more consistency, and it was over a five-year period, to demonstrate movement. This was with our brand.
What we found was we can't move that needle immediately, but there are certain things we can do when we message. So we went about messaging to that market very differently than the consumer market.
The consumer market was all about products, services, the quality, the design. To the financial community, to us it was about reinforcing the strategic plans around financially how we were managing the company. So you would see us change relative to the earnings.
What I will say is each company is different and each stakeholder group is going to assign attributes that may be somewhat different. You want to know how they score you on those attributes collectively. So we would benchmark ourselves against these things, and then we would develop action plans around each of those stakeholder groups.
It wasn't us as much saying, "Where's IBM, what are they doing?" It was, "What are we doing, what does the marketplace look like, and how do we make improvements in what they think about our brand?"
Most people would say, "Oh, you compete with IBM"—"Well, not really; we only compete in a small section with IBM." "You compete with Dell"—"Yeah, but that's only the hardware on the consumer products side." "Oh, you compete with Cisco"—"Yeah, but that's only networking."
When you would say to HP or some of these bigger companies "Who's your competition?"—well, everyone is at some point because you're a $130 billion company and you're in 183 markets around the world.
It was really about what drives our growth, what drives our brand, against those stakeholders. So it's hard to say—because each industry was different.
When we did this at Disney, there was a very different set of parameters around what drove Disney. A lot of that was around families, children, safety, family-friendly programming. Content was the big driver, and how we managed that content against families and children was very important.
It was one of the reasons why there was a moment in time when McDonald's hadn't improved their menu and a decision was made at the Disney Corporation that we would no longer with our feature films and our brands participate in the Happy Meal programs. That had to do with what we saw about managing a reputation.
I was very fortunate in the two companies that I was with prior to Lipman, two very different companies, very different attributes, depending upon the audience that drove the brand's success, the equity in the company, the growth and the health. Yet, both had very robust reputation programs and reputational risk programs.
I think for me if there's anything that comes from this, it's not just your employees are important and transparency is important, but that the brand reputational management of a company—and it is about the brand—is so important, not just equity. A lot of people look at equity and they try to quantify that. I think the reputation of the company will have the greatest impact on the brand. That practice I think becomes incredibly important to marketing and communication professionals. The alignment of the communication with the marketing becomes important.
But I don't know. It doesn't directly answer, because each company and industry is very different. But it gives you an example of just how companies have taken the work and said, "We need to make some adjustments and improvements to protect the brand relative to what we are seeing in the reputational work we are doing."
JULIA KENNEDY: I want to talk about another stakeholder for a while. We talked in depth a lot about your employee base. Let's also talk about the consumer base.
You brought up a lot that HP did to engage its consumers. One strategy that you have mentioned to me in the past was that HP built an online community for its consumers to engage directly with one another, to have a dialogue not necessarily with a service professional at HP but with another consumer that might be able to answer their question.
I guess my question to you all is: If you were in charge of this online space, how would you referee it? How would you set it up so that there was a true exchange but you made sure that it was a quality dialogue between consumers? So how would you create this online space for consumer dialogue?
PARTICIPANT: I think it raises an interesting question. But one of the things that I was struck by is we were giving a lot of credence to the idea that there is a lot of wisdom in crowds. But I also think we have seen a lot of failures in the wisdom of the crowds. So we have seen the financial meltdown.
It seems to me that there are times in which a crowd can be the best mechanism to solve a given problem, and sometimes it's not the best mechanism. Whether or not you are talking about employees or engaging a broader consumer group, you need to have a more discriminating framework to think about when do you want to use that group versus when do you want to have an individual.
If I were then thinking about how would you set up a program to engage your consumers, I think you have to first say what's your end goal, because some things may be too complex, that you may not actually want to engage them. They might be better at one type of problem-solving technique. And then, in other situations you might want a different kind of stakeholder group or a different mechanism.
It seems that there is a lot of power in crowds that lots of companies have not leveraged, so I think there is huge competitive advantage to be gained from that. But I think unless companies are also thinking about it from the angle of is it actually going to give them advantage or is it going to be sort of they're just doing it because another company is doing it and they are copying them? That won't give them any advantage.
So thinking more carefully about what specifically—is this a problem that deserves a crowd or is it not?
JULIA KENNEDY: Any other thoughts?
PARTICIPANT: I suppose that technology has created a communication platform that will be unparalleled, and content and opinion will always find a way. So the concept of refereeing is a bit of a difficult one in today's world, and will continue, because change is happening so quickly.
I think to your point it isn't so much whether or not you choose to engage them or not. I think you actually have to engage them, because if you don't, they'll engage themselves on a platform that is not supported by you in some fashion.
I think the real issue is: What do you do with what they are saying and how do you address it?
Sometimes what they are saying is not correct. Then it becomes a messaging strategy around, "We've heard you, thank you, but this is the direction we are taking and here's why."
But you have to provide that platform because the platform will exist somewhere else, and if you don't engage, then you run a huge risk.
JULIA KENNEDY: So you have to provide the platform and use it to respond. I think that's a really interesting and important insight.
PARTICIPANT: But the idea of refereeing is almost impossible.
JULIA KENNEDY: Right, yes. Point taken.
PARTICIPANT: I think it's an interesting question. We have not quite finished lionizing Steve Jobs, who was the master of non-crowd-sourcing anything, who believed that he knew what the consumer wanted before the consumer would ever even think about it.
But I think your point is right. Somehow we've got to figure out ways of refereeing, but it's going to be refereeing in a very interesting way in engaging with these people, because even though Steve Jobs didn't pay attention to the crowd so much, he also got on the Web, he got on emails, he engaged with the consumer, he answered consumer complaints, he was very active in dealing with issues and clarifying what would and would not happen—"We will do this; we will never have Adobe Flash." His engagement was clear and I think very respected. To me it's rare that you find somebody who has that ability.
MICHAEL MENDENHALL: I'd love to respond. I had the pleasure of working directly for Steve for six years. There's a lot said and then there is the reality of what went on.
I think we should bring clarity to what we mean by a crowd, because I think your definitions are blurring into what is big data and how you use consumer insights and quantitative analytics for insight work, which is also sourcing huge crowds of people.
When I say "crowd," what we knew about crowds is that if information is put out, they will self-correct it, and the larger the crowd, the more accurate the information will be. Wikipedia is a great example, and you've heard many, many pieces of information. It's probably the most accurate historical information that exists today. They've done many, many studies and research on this.
So when I say "crowd," what we found is a crowd could be a group of procurement people within your procurement department. At HP, let's say we were buying memory, and we were buying futures in memory two years out. There is hedging that goes on if one person in procurement is responsible for buying memory. That costs a company in its operations hundreds of millions of dollars.
What we found through the wisdom of a crowd and the accuracy, the crowd being those professionals, was that if we used everyone in procurement to define what price that we should pay a year from now for memory, that we were more accurate, more precise, and saved hundreds of millions of dollars to the bottom line. One versus many.
I want you to not think, "Oh, the crowd is a bunch of just random people online" when we define the sense of crowd. Crowd could be a crowd of professionals, a crowd of your consumers, a crowd of your suppliers, a crowd of your analysts. What we know statistically is they will be far more accurate than any one individual. So I want you to understand that piece.
The piece that Steve Jobs did so well, whether he would tell you this or not, is he pulled enormous insights out of all of your behaviors. He was one of the first people who studied quantitative analytics. So every movement you made online, they tracked. They knew how to cross-sell, how to up-sell, how to position, how to design. He adapted things very rapidly and very quickly. So he was a listener and he was watching analytics.
If you define, "I knew what I thought before they saw it," it was informed by insights that he was seeing online. You all leave a digital pattern, and he recognized every one of those patterns.
I don't want you to think this was a guy who just didn't use any kind of crowd wisdom or insights to make decisions. He was clearly a genius relative to design and user interface, and he was very intuitive that way.
But he had tremendous resources on every single one of you—any of you using iTunes, any of your purchases. He was one of the first at point-of-sale to bring in digital purchasing capability. He sees your entire purchase behavior with his company.
Then he could append and he could see what you did before you came to his site, what you did after you left. He could see if you appended your credit card information to it. He could actually see, did you purchase from a competitor or did you purchase from him when you left? There is a tremendous amount of information they were gleaning from your digital footprint.
I would say to you if you define crowd by that, he was definitely into crowds and gleaning information.
If you define it another way—I gave you an example of how I think of crowds versus just the population in general.
So I do think crowds are important and have great insight and great purpose. Statistically we saw it. We actually wrote algorithms at HP in our HP Labs that mimicked the behavioral patterns around crowds. We had predictive technology that was 99.9 percent accurate.
There are some studies that you will find in The L.A. Times that actually got leaked that shows there is a lot of predictive capability to crowds when used properly.
I think there is that piece and then there is the analytics piece.
JULIA KENNEDY: I'm seeing hands pop up all over the room. Why don't we start with Dick? Do you still have a comment? Cara, John, Christian.
PARTICIPANT: I think the premise of where we've taken this conversation is that not engaging is not really an option, but it's how you engage. This comes back to your point, which I think was a great point, about it really depends on your corporate strategy, the environment that you're in.
One area that is hard to figure out is how do you prioritize with whom you should engage, because it takes a lot of time, and this isn't the only thing that any one executive is doing, so you have to figure out where you get the biggest bang for your buck.
But I think engagement is critical. The way in which you do it and the amount in which you do it is always a question based on the circumstances.
JULIA KENNEDY: Cara?
PARTICIPANT: That's a great segue to what I was going to say.
I think that there is a difference between—we were talking before about engagement and refereeing. I think you have to let go of the illusion of any control.
With the technologies that are out there, there are ways in which you can use analytics to look at behavior and all of that that you were just talking about. But I think the idea that you are going to then control or referee or any of that, it's absolutely an archaic idea.
I think that there is a way in which you can understand about influence and you can understand about how to use information and course-correct perhaps to inform or influence, but not control.
In terms of that, I would just offer as well that I think anyone and everybody can call themselves your stakeholder at this point. No corporation has the resources to respond to all of the stakeholders that claim to have influence on your business.
So I think there is a way as well in which you need to look at not only who do you want to influence but then who within those stakeholder communities and those crowds and those people there are influencing others. There are ways and technologies to map that and to look at really the nexus points of influence within those. But the idea of control I would say is gone.
MICHAEL MENDENHALL: I think it's important what you say, the influencer piece. I think, Dick, to your point that's the whole point about a reputational practice, is you're looking at those key stakeholders strategically that influence your company and its health, and you are looking at how that influences the brand, and then you are looking at who are those groups then that become those influencers and how are you mapping a strategy and benchmarking against yourself relative to those influencer groups.
It is a piece of your reputational practice. It is an influence strategy that becomes important.
One of the things I always say to folks is there is a lot of novelty that people chase in technology, there's a lot of novelty that is chased in marketing.
One of the big misnomers is the amount of followers you have on Twitter is what generates influence. In fact, we did a whole study in HP Labs with the participation of Twitter, and it was not that at all. So it wasn't the amount of followers that necessitated influence.
As you start to build out a strategy around who these stakeholders are that are important, you want to be careful not to chase novelty, you want to be careful not to be led into "volume is the most important thing." It is the people who do influence. They are on Twitter.
If you use the right algorithms, and they exist with many companies—one is SocialFlow; if you don't know of them you should get to know them. They can help you develop a whole influencer strategy against that stakeholder group.
But, depending upon what your strategy is, I do think it's best that you benchmark yourself and you build a reputational practice relative to this. You'll be far healthier and you'll be more proactive. I think I've said that earlier.
JULIA KENNEDY: All right. We have John and then Christian.
PARTICIPANT: I think others have pretty much covered what I was going to say.
But if we go back to the distinction between crowd sourcing and setting up a kind of forum for stakeholders, consumers, your buyers, users, as a publisher I've discovered a couple of things that did seem to work for us.
One is that I wouldn't say you don't referee, but you engage in "referee lite," which is to say you prevent actually abusive behavior, narcissists, people who are cutting into one another and undermining the basic function and facility of a forum.
When you need to, you answer questions directly. If someone says this product was awful and I had this experience, you come in and you try to resolve that, or at least say here's our view on that.
Then, as Michael said, you listen and learn, particularly about yourself, and then react internally, as opposed to externally, by getting involved in that conversation. It's really interesting to see what people say to each other about you and your products as opposed to anything you'd really want to react to. In that sense you get sort of a social radar about your editorial product, your commercial product, whatever.
MICHAEL MENDENHALL: I think to that point—and I agree, I do think it is less about refereeing in the refereeing sense.
I'll give you an example of crowd. We had a product that HP put out. A claim was made by a person that this product was flawed, that it had some issues with it that would have been very volatile. It started to spread virally, to where mainstream press picked up on it and started placing calls to us and wanted us to respond.
We were in the process of chasing down the engineers in Israel who had worked on this to understand did in fact we test this. We thought we did, and this claim can't be right.
The initial reaction was for the company to put a statement out immediately saying that this was false, that this was not correct, and have a quote from the engineers.
I held back and said, "That may be necessary at some point, but let's hold and wait for the dialogue and wait for the crowd to respond and then respond, because we don't want to come across defensive. We'll bring more attention to this."
It was a fairly big issue. You probably didn't hear about it because it did go away.
In fact, the crowd did respond. People took issue with this person's claim, saying, "That's not the case; I have it; it's fantastic." The general media then dug in and found out that the guy had fictitiously made this up, and he had to publicly apologize. We didn't have to do a thing. And we came out much better.
I'm not saying that's every case, but I'm just saying to you there are choice points here that you will have relative to how you manage your communications. It's not always to be reactive, it's not always to be in a monologue, and it's not always to be sort of defensive about the position of the company.
So I do think you've got to let the dialogue happen, and you want to listen—I was saying listening is so important—and how you respond to what you hear becomes very important, and when. It's not as conventional as it once was, to where the company should just issue a press release that has a company statement on it.
I don't know. You're in crisis com [communications], so I'm sure—I've been waiting. Certainly I could have called you two years ago. You probably are in the thick of things, where some companies have been prepared and have managed the risk, and probably others aren't prepared and they're caught on their heels relative to this space. It would be interesting to hear some of your perspectives.
PARTICIPANT: I think a lot of it, very frankly, is age. There are the people who grew up without social media versus the people coming up who have. I have always suggested that you utilize their knowledge because we don't have it.
But I forgot what the question was.
MICHAEL MENDENHALL: The question was you've probably seen crises, without going into specific companies, where some are more prepared in this space than others and where it has been helpful or not.
PARTICIPANT: I always call those clients that can respond my "enlightened clients," because they do understand the need to respond quickly. And again, even if it's identifying a problem and not jumping on it, to see. If it's like a wave in the surface, waiting for that wave, you might want to just stay there for a while.
But there are a lot of companies that couldn't respond before and can't respond now. Very frankly, listening to all of this, nothing has really changed from the time I got into crisis management to the point that—now the way to disseminate is different, but you are still winding up with egos and you're winding up with people who don't feel the need—"I'll wing it; it will never happen here"—versus the people who say, "It might."
So I think this is more an ego-driven problem in a way than anything else.
JULIA KENNEDY: Yes?
PARTICIPANT: Don't you think that it all depends on who is doing the listening?
These comments are wonderful. But in monitoring social media particularly, a company the size of Hewlett-Packard has literally tens of thousands, perhaps hundreds of thousands, of people and different constituents who are constantly feeding the loop. One person can't possibly monitor that.
MICHAEL MENDENHALL: That's interesting. In fact we didn't. We used technology, which is really what many of the tech companies and many companies today, as you think about business process optimization and the idea of efficiency and how this technology—it has become so good that the capabilities for technology to listen for you is incredible.
You can scale much better using that. So in fact we had many algorithms doing that for us. Then you don't have a huge staff doing that. You could probably count them on your hands for Hewlett-Packard.
PARTICIPANT: Can they pick up a negative very quickly?
MICHAEL MENDENHALL: Yes.
PARTICIPANT: Mike, let me ask a question. We have so much technology that enables us to reach out to various consumer groups and to elicit their wisdom and so forth. Let me ask a question that perhaps Mr. Andrew Carnegie may have asked if he was sitting in this room, just hypothesizing for a moment.
The biggest consumer group that is in the forefront of our news today is a group that pretends to be the 99 percent, or takes that position. And yet, we are seeing a situation in which everybody is choosing not to connect with them. The mayors and the city councils keep them way at a distance. Business groups are not connecting with them. The politicians and governments are very wary of the sentiments that are being expressed therein.
On the one hand, we are saying, "Let the dialogue happen, that we've got to listen." Business has so many tools through technology and Facebook and Twitter and everything else to connect to what is at the pulse of our society today. Can we bring this wisdom of business of connecting to listen more effectively to this group, and perhaps—
MICHAELA MENDENHALL: Which group are you referring to?
PARTICIPANT: The 99 percent, the Occupy Wall Street.
JULIA KENNEDY: [inaudible] you'd be the CMO [chief marketing officer] of the business sector when it comes to the 99 percent of the stakeholders.
PARTICIPANT: Let's say we were challenging business and the techniques that you have to [inaudible].
MICHAEL MENDENHALL: This will be anecdotal, and I don't want to bring the politics into the conversation.
But as a brander, one of the things you learned so well from Steve Steve Jobs is simplicity of message, focus, intent and purpose, singular vision, and consistency.
I think for me there is a sentiment, if you probably did a sentiment analysis, that in the United States there is a frustration with the financial services, the financial sector. The idea that they would brand themselves Occupy Wall Street led people to believe, "These are people who are frustrated with what we're seeing as unethical behavior happening on Wall Street relative to the compensation and the management and maybe the unethical behavior." So there was a movement.
But as it started to define, it became ill-defined, and the movement became about 20 different things, and people didn't have that sort of singular vision anymore—well, they say this, but they're doing all this other stuff.
I would think that if you polled—and again this is all anecdotal—that, unfortunately, as marketers, that group has failed, because the title of their brand or their product, Occupy Wall Street, meant one thing and became quickly diluted and ill-defined. So I think people lost interest.
I think you'd find that the general consumer sentiment has lost interest in what they are doing. I think the politicians have lost interest. It's like they don't stand for anything, because they haven't been focused, they haven't branded well, and their communication has been poor.
So all anecdotal, but as a brander, looking just as a marketer, I think they have failed in their mission. It has to do with I think the great tenets of building a great marketing strategy and a brand platform. To me, I believe they have lost that.
I think you will just see over time diminishing effect, whether they use social media or not, because they lost their sense of purpose, their focus, their singular vision, the simplicity of what they were going to stand for.
That's where in fact, when you see the movements in the Middle East, just look at good examples of singular, focused definition around an issue, consistency of message, consistency of delivery, and look at what has happened to governments over in the Middle East. Those were great branders and understood communication, understood the consistency, the message, the importance.
I think this group has deluded itself. I know that doesn't answer it, it's anecdotal, but I think if you researched it, you would probably find that.
JULIA KENNEDY: We are running short on time. I do want to ask you one last question to try to tie together this wide-ranging, sort of high-altitude conversation we have had today. I want to thank you all for your contributions.
It sounds like you are really arguing that the key to success in corporate communications and the role of corporate communications can be as an advocate within organizations for all kinds of different business and management practices. And so I'm curious if you think that this is happening in lots of different marketing organizations or if you'd like to see it happen more.
MICHAEL MENDENHALL: I think there needs to be more integration, and its organization functionally between the corporate communications function and the marketing/commercial officer function who handles the customer and all the customer intersects, because you can't really—where do you bifurcate now the responsibility?
Some of the biggest discussions that take place in corporate America today are social media, social conversation, who manages it. The marketers will say, "Social commerce is important, so we are going to manage the social space." The corporate coms people will say, "No, but social outreach and a social strategy around blogging, tweeting, our Facebook; the communication aspect of what we do is important,we need to own social." There's this sort of overlapping gray area functionally.
I think these two groups need to work more closely together and bring definition to that, because the importance of communications in the marketing function is critical. It can't be completely stripped aside and put into a separate function. It needs to be a part of the strategy and the planning up-front and should be brought to the table.
So there definitely needs to be more integration in my opinion between the two functions. That's when you really begin to see it work well.
Many companies still seem to bifurcate the two. One just handles corporate. Maybe product communications is somewhere else. There is a lot of overlap in the new media world in that space, and I think there just needs to be more definition brought to that.
JULIA KENNEDY: I wish we had more time to explore that because there is a lot of meat there.
Thank you so much for your wonderful comments. It has been a great workshop. Thank you.
MICHAEL MENDENHALL: Thank you.
JULIA KENNEDY: Thank you all.