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The illogic of focusing on logic when managing a crisis.
By Dick Martin
The chronicle of companies behaving badly seems to expand with every news cycle. Some entries reflect corrosive greed; many, simple stupidity. What they all have in common are legions of PR types swooping in like Mighty Mouse—hands on hips, feet spread apart, cape billowing—to save the day and douse the fires of opprobrium. Or at least lessen the CEO’s heartburn.
Sadly, the weapons these PR heroes pack are strictly Mickey Mouse. They’ll shoot off a volley of talking points and news releases, stage a distracting stunt or two, and generally try to change the subject. In all this, they’re likely to repeat the same mistake companies have been making since the first reporter crossed the River Styx to flack for better pay: thinking they can argue their way out of an argument.
Can’t be done. Corporate scandals have less to do with the stuff of logical argument than with the mysteries of intuition and emotion. Most institutional scandals amount to public betrayal. And, for the most part, when people have been betrayed, their opinions are a tissue of rationalization for the way they feel. The more significant the institution, the more deeply they feel it. (Ask the Roman Catholic Church.)
Psychologist Daniel Kahneman, who has studied the nature of decision-making for decades, calls this process “fast thinking.” It’s a form of cognition, but it happens in the most primitive part of our brain, the seat of intuition, emotions, and memories. It operates by association and rules of thumb, not by reasoning, so it spits out answers twice as fast as the higher mental faculties that developed later. It helped our prehistoric ancestors survive in the jungle, but it’s still in full operation and it’s surprisingly stubborn. Objective facts can’t shake it.
For example, when John Roberts was nominated to the Supreme Court in 2005, half of registered Democrats opposed his appointment. Not surprisingly, when a pro-choice group ran a TV commercial accusing Roberts of dismissing a case against an accused abortion-clinic bomber, opposition increased to more than eight out of ten Democrats. When the activist group publicly withdrew the commercial, admitting it misrepresented Roberts’ decision, the percentage of Democrats opposed declined but, interestingly, remained 29 percent higher than before the ad ran. The commercial’s emotional impact outlasted its factual content. That helps explain why two-thirds of Republicans still believe President Obama is hiding something about his early life, including his place of birth. Or why more than a third of Democrats believe President George W. Bush had advance knowledge of the 9/11 attacks.
What fuels these attitudes is nonquantitative, though it can be measured. It’s irrational, though it has its own logic and carries more weight than anything on a balance sheet. What drives consumers is emotion. It moves them long after they’ve forgotten why they first felt it. It can be provoked by stimuli far removed from the ideas that aroused it in the first place. And it literally becomes the filter through which they experience reality.
When an institution or its leaders are in trouble, people’s negative attitudes reflect their thinking less than their feelings do. Once rooted, no rational argument can dislodge them. Bob Allen, once the CEO of AT&T and one of the most decent men I know, became a symbol of corporate greed back in the 1990s because he eliminated forty thousand jobs at the company while it was making record profits and he was drawing a multimillion-dollar salary. It made absolutely no difference that the downsizing was due to a corporate restructuring almost everyone agreed was necessary, that most employees affected would continue to be employed at divisions being sold, or that the company had among the industry’s most generous termination plans. The downsizing began a series of interconnected crises that ultimately resulted in Allen’s replacement.
When the guy who replaced him, Mike Armstrong, announced even more downsizing just ninety days into the job, he combined it with freezing executives’ salaries and eliminating their chauffeur-driven commuting service. It was a popular move with rank-and-file employees and made the business pages as a sign of how serious he was about cutting costs and changing the culture. In fact, exactly one executive commuted to work by company car at the time. Already slated to retire, she was driven to and from the office until her last day. And annual salary increases were a minuscule element of executive compensation. Bonuses and stock grants, which continued, and even grew under the new CEO, were what really mattered.
Armstrong was a master of the symbolic gesture, understanding that anything that speaks to people’s hearts travels faster, and resonates more loudly, than anything addressed to their prefrontal cortex. By suggesting shared sacrifice, Armstrong spoke to people’s sense of fairness. But there’s a caveat: Actions still have to be credible. Once people discovered how hollow Armstrong’s symbolic actions were, they turned on him and the company.
You also can’t assume credibility. Jack Welch had plenty of credibility in some areas, but he spent the last decade of his tenure at General Electric fighting efforts to make the company clean the Hudson River of toxic chemicals dumped there before anyone knew their danger and they were banned. GE fielded study after study, justifying its minimalist approach. Still, no one bought the notion the company was interested in anything but protecting its treasury. So when Welch’s successor concluded that the company’s future lay not in TV programming and financial services but in environmentally friendly industrial products, he knew he would be scaling the mountain of cognitive dissonance.
As a result, GE spent three years preparing to launch its “ecomagination” program. First, it reached an agreement with the Environmental Protection Agency to clean up the Hudson River. But then it had to convince its own employees that the company was serious about producing more environmentally efficient industrial products, explaining that rising fuel costs, tighter environmental regulations, and growing consumer expectations would translate into demand for cleaner technologies across all of the company’s infrastructure businesses. Simultaneously, it began a dialogue with its major customers to ensure that they too saw the inevitability, and even advisability, of tougher environmental regulations. And in the process, it set concrete investment and sales objectives for its major product lines.
But even in launching the program in 2005, CEO Jeff Immelt was candid about his motivation. “Green is green,” he said. Ecomagination was not being adopted because it was trendy, or even the moral thing to do. It was about making money by giving customers what they need. A few cynics cried “greenwash,” but the larger environmental community took a wait-and-see attitude. They quickly saw it was more than a PR program. Within two years, GE increased its portfolio of clean-energy products to sixty from just seventeen. BusinessWeek credited the program with increasing the company’s brand value by $6 billion—at a time when the company’s stock price was at best flat. In just eight years, ecomagination revenue topped $100 billion.
Could the average consumer spell out just what products GE was selling? Beyond light bulbs and appliances, probably not. Ninety percent of GE products churn away deep within the bowels of large industrial companies, out of the average consumer’s view. But they knew—they felt—that the company was committed to something they cared about, something important.
That doesn’t mean CEOs need to get all touchy-feely. Good public relations is more than playing to people’s emotions. But connecting emotionally is the surest path to people’s rational faculties and the only way to ensure the information they need to make an intelligent decision actually reaches them. Particularly if they can see you only as the stereotype of a company behaving badly.
From The Conference Board
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