Reputation vs. Character

Reputation vs. Character

By Dick Martin

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martin1The guy who hired me for AT&T's PR department was a former newspaper editor. Like his peers at many companies, he hired only ex-journalists. I had an undergraduate degree in philosophy and a master's in broadcasting.

Though I didn't know it at the time, I was an experiment foisted on him by executives higher up the food chain who were convinced that most people were getting their news from television. And so for the next couple of decades, nearly all the new hires had some broadcasting background.

Then the Internet changed everything. New hires had to know HTML and Java. In the dog-years lifespan of Internet skills, something new has “changed everything” half a dozen times since I left the world of corporate PR about a decade ago. It could even happen again by the time these words leave my laptop and appear in print or pixel. Such is the way of modern communications—the current generation always seems obsessed with something the generation in charge doesn't really understand but nonetheless feels compelled to include in its hiring specs.

Too often, this fascination with shiny new things constitutes a serious confusion of means and ends. When I was doing the hiring for AT&T's PR department, I came to the conclusion that professional writing skills were a leading indicator of basic intelligence. And I suppose today social-media skills are also a staple of the PR tool kit. But frankly, all that is still only the price of entry. People's technical skills are less important than their character.

Johnson & Johnson has always been a company about which people feel good. It may be due to the freshly powdered babies with which it surrounds itself. Or it may be memories of its forthright actions thirty-two years ago when some still-unidentified lowlife laced Tylenol capsules with cyanide, killing seven people. Whatever the reason, J&J always lands in the upper ranks of reputation surveys.

Yet in 2013 J&J became the pharmaceutical industry's biggest scofflaw, racking up more than $6 billion in fines and penalties to settle an array of civil and criminal charges. The Tylenol crisis, which cost the company a few hundred million dollars, was the work of a person or persons unknown. But the most recent charges, which cost orders of magnitude more, were arguably self-inflicted. (Some insist that J&J admitted to no more than a misdemeanor for misinterpreting confusing labeling rules, and the biggest chunk of the fines was related to a product recall.)

You might say that in both cases, the company paid up simply to put expensive litigation behind it. That may be true. And in doing so, J&J is in familiar, if not exactly good, company. In recent months, some of our biggest banks ponied up more than $25 billion in fines. JPMorgan alone paid out some $20 billion in a twelve-month period.

But J&J and other corporations will all have wasted their money if they don't do something about the cultures that spawned these catastrophes in the first place. PR crises almost always result from an ethical lapse. Even an Act of God becomes a crisis when someone doesn't act ethically. Likewise, an engine fire on a cruise ship may be an accident. But when it happens multiple times, you have to wonder whether the ship owners are acting imprudently, worrying more about their bottom line than about their customers' safety.

Every major company has a senior officer who is supposed to ensure that employees comply with laws and regulations. Usually, this person is called a chief compliance officer and is a lawyer, which makes practical sense—lawyers are trained in the nuts and bolts of the law, know how to interpret regulations, and can use client confidentiality to keep all sorts of things from prying eyes.

But compliance is not the same as ethics. Compliance is concerned with the letter of the law, ethics with its spirit. Compliance is rooted in statutes; ethics flows from a company's character. Compliance and ethics overlap somewhat, but not completely. J&J was under no legal obligation to take Tylenol off the shelves back in 1982; the company did so because it decided it would be unethical to expose its customers to a dangerous risk.

More recently, I imagine, someone at J&J concluded that regulations didn't prevent it from marketing drugs for off-label purposes. The Department of Justice and the Federal Drug Administration felt differently. But the bigger question is, “Was it ethical?” If that sounds a bit schoolmarmy, Gus Levy, Goldman Sachs' legendary senior partner in the 1970s, may have put it in terms that even today's greed-is-good crowd would understand. He exhorted his colleagues to be “long-term greedy,” meaning they should pass up short-term profits when they come at the cost of long-term relationships.

I hesitate to cite someone from Goldman Sachs (No. 145 on the Reputation Institute's ranking of 150 corporate reputations) rather than J&J (No. 6), but I think Levy had it right. People can sense whether a company is trying to build an enduring relationship with them or use them as human ATM machines. Reputation is a secondhand phenomenon that can't be managed directly with smoke, mirrors, music, or babies and puppies.

A major white paper by the Arthur W. Page Society recommends a new model of corporate communications that addresses that issue. And a follow-up study describes how major companies are implementing it. The Society is a professional association of the world's leading public-relations people. It's named after AT&T's first PR officer, at whose very desk I worked for six years. Ironically, one of the Society's first leaders was Larry Foster, the PR executive who helped J&J navigate the Tylenol crisis.

While today's members of the Page Society call themselves “chief communications officers” rather than PR people, they define their job as their namesake did—more broadly than simple wordsmithing or story-pitching. They even consider their positions as more than caring for the company's reputation. They see their role as helping to identify and nurture their company's very character. “Character is like a tree and reputation a shadow,” Abraham Lincoln is reputed to have said. “The shadow is what we think of it; the tree is the real thing.”

A company's character is reflected in everything it does, from strategy to marketing, and especially in how it serves all the people who contribute to its success and bear the cost of its failures. No PR person—not even Arthur Page—can do that singlehandedly. But the Page model calls for the chief communications officer “to ensure that our companies and institutions “look like, sound like, think like and perform like our stated corporate character.”

But this isn't Queer Eye for the Straight Guy, where a new haircut, trendier wardrobe, and flashier digs wow the neighbors. If anything, it's more like “Extreme Makeover, Corporate Edition,” where, if necessary, old walls and bric-a-brac are taken down to the foundation. The CCO's role isn't to create a more appealing corporate personality. It's to lead a collaborative effort across the C-suite to build a common understanding of the company's enduring and differentiating purpose, along with the values that guide its achievement—and then help integrate that understanding into the company's core operations and, finally, into its external communications.

So expect more of your PR people. Test not their political correctness but their ability to analyze ethical dilemmas where facts are ambiguous and all answers fall short. Do they see the full implications of business decisions for everyone affected? Can they balance competing interests in a way that respects everyone's rights and duties? Do they have a clear and unambiguous view of your company's character?

If so, then you can ask them whether they know Java.

 

02/05/14 Update: CVS Caremark has just announced that it will stop selling cigarettes because doing so isn’t consistent with its corporate purpose, even though the move will cost it about $2 billion in sales. That’s character.

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