I’m not qualified to know whether Mr Thiam was more right than wrong in seeking to buy AIA. What I do know is that too many CEOs believe that they are laws unto themselves or that today all stakeholders are equals.

So the assertion by Pru shareholders of their power to stop the bid for AIA is a timely reminder of where the priorities and corporate lines of accountability lie. The deal’s collapse makes it clear to CEOs everywhere that they must listen to their shareholders more.

I’ve been predicting that in the future shareholders will, and need to, assert their power more and more. That’s because – contrary to popular mythology – one of the lessons from the last boom and today’s bust is that shareholder-value was not over-valued so much as marginalised in the pursuit of short-term interests. Real long-term shareholder value was denigrated by management teams which ran companies more or less for their own benefit whilst covering themselves in the rhetoric of wider stakeholder interests.

My bottom line (and the firms’)? Shareholders may be quite good custodians of long-term value after all. Perhaps even better ones than the “stakeholders” who bang on about sustainability.

I’m not saying that always applies or is even what’s applying in this case. I’m saying that it’s wrong to assume that modern shareholders always fit the short-termist stereotype that’s foisted on them.

What’s more, it may be that Mr Thiam has understood where the long term prospects of the Pru really lie (it may be that his spate with shareholders was mostly about the price of AIA rather than his strategy).

The challenge now is for the Pru to repair its broken relationship with its shareholders, particularly with Prudential Action Group, which planned to oppose the deal at a shareholder vote due to be held on 7 June.

Personally, I hope that the impressive Mr Thiam survives. I believe he should be given room to learn from this setback. But if the price is his head, so be it, because it will provide a much-needed reality check throughout the corporate and PR worlds.

No related pages.

Before we go on, it is worth building on part 1′s theme: what exactly do the Stockholm Accords expect to achieve? Here’s what the event’s website says about their objective:

“The aim of the Stockholm Accords is to articulate and establish the role of public relations in the “communicativeorganization”[sic] within a fast-evolving digital and value-network society.”

In essence, the Accords suppose that we live in a new “networked society in which communicative organizations are vital to organisational success” (forgive the clumsy words, they’re theirs, not mine).

In essence my beef is that this exercise over-complicates everything. Most PR is an effort to help clients both be and appear more attractive. You can usefully enrich that proposition by noting that there are internal and external audiences; that everything about an organisation can be part of its good or bad messages; that building up a good reputation may be useful for when things go wrong (as they will). One may want to stress how non-stop and intrusive and persistent modern observers are. Perversely, the globalised, modern world is more like a village than ever: everybody thinks everything is their business.

As I argued in part 1, the Accords ignore the obvious: society is, and always has been, networks personified. Moreover, all human interaction depends upon communication and relationships, or nothing whatever would have been or will ever be achieved. Of course, the digital bit is sort of new. I say sort of because the internet is now second or third generation. It strikes me that the Accords’ authors are really saying that their thinking boils down to considering technology’s influence on human behaviour. This narrow obsession has sent them and their new definition of PR’s role off in the wrong direction.

There’s no wisdom in a mob, but there’s often treasure buried in crowds. So, of course, I accept there is something in Reed’s Law. (See: “The Law of the Pack”). I accept its proposition that digital networks can scale exponentially by transforming technological platforms into social networks that add value. But in the business world, Reed’s Law is just a statement of potential. It remains a theoretical construct that might prove to be hopeless if taken too far. The commercial world is in recession. It is not currently up for the risky experimentation and investment that would be required to test the weaknesses and strengths of Reed’s Law. This is something I discussed in part 1 No. 2 & No. 14 (without mentioning Reed). In part 1, I also cited SM’s irrelevance in the British General Election and its only fleeting influence on American politics.

My charge is that the authors of the Stockholm Accords lack historical or sociological insight. Most of today’s social developments from the breakdown of traditional politics, to the shift in community alignments, or the fall of religious influence, to the decline in trust in, and authority of, traditional institutions, pre-dates the internet.

In other words, the internet and social media usage were shaped in the wake of already existing currents, including the already declining mass media. That was particularly the case with SM, which is more often used as a retreat from public life rather than as its lifeblood. That’s one thing China’s SM usage has in common with the West’s. There’s mass disengagement and passivity in society, which is the polar opposite of empowerment, which so many public relations professionals (let’s just call them ‘PRs’) like to crow about. That’s not to say SM is irrelevant, or that it does not have influence or empower people, sometimes, in this or that circumstance or usage.

It is the failure of the Stockholm Accords to look at these real world tensions during the boom and now during the recession, and the Accords’ myopic worship of all things digital, which I criticise. But let me make it plain. This blog celebrates technology and advocates innovation. It is obsessed with understanding them and with exploiting their potential. But it does not endorse technological determinism, which I believe the Accords’ authors do.

So, that’s the preamble. Let’s now look at the Stockholm Accords one by one.

Stockholm Accords on governance:

“The increasingly adopted stakeholder governance model empowers board members and organisational leaders as ultimate custodians of stakeholder relationship strategies and policies, as well as of monitoring their implementation.

“In today’s value networks, a communicative organization requires timely knowledge of economic, social, political, legal and environmental developments, as well as opportunities and risks affecting the organisation, its direction, its actions and its communication.

“Public relations professionals:
• co-create organizational values, principles, strategies, policies and processes;
• constantly report on the dynamics of stakeholder involvement;
• inform, shape the organisation’s overall communication abilities;
•  measure, evaluate and account for results;
• deliver timely analysis and recommendations to ensure an effective governance of stakeholder relationships, enhancing transparency, trust and sustaining the organisation’s ‘licence to operate.’”

My reply

I dealt with the above extensively in part 1. But let me now add a few more brief remarks;

• The stakeholder governance model or doctrine is seriously flawed. An organisation can’t look to outsiders as the first source of its probity and efficiency.
• Firms, governments and institutions primarily pursue self-interest. This will include a measure of enlightened and widened self-interest.
• PR is indeed uniquely useful in our complicated, media-orientated times. But we should beware over-stating the newness of our skills and roles.

Stockholm Accords on management:

“Effective and timely decision-making related to operations and resource management are essential for organizations seeking to enhance their license to operate. These management choices must be sensitive to the concerns of internal and external stakeholders, seeking equilibrium between societal and organizational goals.
A communicative organization listens to its stakeholders, uses this input to improve the quality of its decisions, and communicates through its behavior.

“Public relations professionals:
° help understand and interpret broader societal, political and economic interests and aspirations;
° participate to the solution of organizational issues and lead those that are particularly focused on stakeholder relationships;
° help to legitimize the organization; by increasing the communicative value of products, processes, services; and building financial, legal, relational and operational capital.”

My reply

Yes, PRs are the professional diplomats of the modern organisation’s internal and external relationships. But we won’t do the job better by having theories and ambitions which are too fancy for the valuable but recognisable work they have to do. Way too much of the Stockholm Accords’ approach brings in more posy sociology, management-speak, media studies, post modern guff. This is the way to lose the interest of clients and audiences alike.

Stockholm Accords on sustainability:

“An organization’s sustainability is based on balancing today’s demands with the ability to meet future needs, based on economic, environmental and social dimensions.

“In this network society, sustainability leadership offers a transformational opportunity for the communicative organization to enhance it’s license to operate and demonstrate success across the triple bottom  line.- economic, social and environmental.

“Public relations professionals identify, involve and engage key stakeholders contributing to appropriate sustainability policies and programs by:
• interpreting society’s expectations for sound economical, social and environmental investments that show a return to the organization (the advocate);
• creating a listening culture – an open system that allows the organization to anticipate, adapt and respond (the listener);
• ensuring stakeholder participation to identify what information should be transparently and authentically reported (the reporter);
• going beyond today’s priorities to anticipate the needs of tomorrow, by engaging stakeholders and management in long-term thinking (the leader).”

My reply

Sustainability has to do with robustness and flexibility, which can be darn hard things to reconcile. We need to be modest: sustainability is about the future, a thing we know very little about. We should not pretend to know the recipe for survival (or to assume, for instance, that environmentalists are any cleverer at it than supposedly un-green capitalists).

Stockholm Accords on the new boundaries of internal communication:

“Internal communication enhances recruitment, retention, development of employee loyalty and commitment to organizational goals by ever more diverse and segmented publics.

“In the network society a communicative organization goes far beyond today’s traditional definition of full-time employees, understanding that internal stakeholders now include full-timers with tenure generally shortening, part-timers, seasonal employees, contractors, consultants, suppliers, agents, distributors, volunteers and more.

“Public relations professionals constantly address:
° how organizational leaders communicate;
° how knowledge is shared;
° how decisions are made;
° how processes and structures are created;
° and expand communication to include many boundary publics that are also often considered as highly trusted sources of information about the organization and essential players contributing to the organization’s success.”

My reply

Yes, many of an organisation’s relationships are now both important and fleeting or arm’s length. Actually, that will often require an unattractive wariness. The need for secrecy, privacy and caution is greater than ever and has to be communicated as well as possible.

Stockholm Accords on the new boundaries of external communication:

“The network society mandates that a communicative organization expand its scope and skills to focus on customers*, investors*, communities*, governments*, active citizenship groups*,  industry groups*, mainstream, digital and social media*, and other situational stakeholders*.

“Public relations professionals:
° promote, support and contribute to modify products, services or processes;
° bring the voice of the organization into regulatory and community decisions;
° adopt social networking and research skills and tools to listen to stakeholder demands and report to management so that they may be appropriately interpreted and, where relevant and effective, integrated into the decision making process;
° strengthen brand loyalty* and equity*, thus reinforcing the organization’s license to operate;
° work with all organizational functions, through every step of production and delivery, to craft and implement effective communication programs*.
° actively participate in dialogue*, evaluate and measure results*, and accordingly adjust their practices.”

My reply

This looks like PR’s pitch to stick its nose in everywhere. Nice try, and to some extent justified.

Stockholm Accords on co-ordination of internal and external communication:

“In value networks, each communicative issue* is multi faceted*, multi stakeholder* and inter relational within and between different networks* and positioned in diverse legal frameworks.

“The communicative organization must balance global transparency, finite resources and time sensitive demands dealing with dynamic changes in inside/outside territorial borders and new conflicts of interests emerging from multiple stakeholder participation*.
Dialogue with internal, boundary and external stakeholders must be coordinated with the organization’s mission*, vision*, values*, implementation*, promises*, as well as actions* and behaviors*.

“Public Relations professionals:
° research, develop, monitor and adjust organizational behavior and communication behaviors providing leadership for issues based on stakeholder and societal relationships;
° develop a knowledge base that includes social and psychological sciences, best practices and formative research to create, evaluate, measure and implement programs for continuous improvement.”

My reply

This looks like a pitch for PRs to be rulers of the universe: all-seeing, all-knowing, etc. I don’t mind this accord but it is not so much edifying and energising as yawn-making. How about: “Almost every aspect of your work will convey a message about your organisation, so expect a good PR to take an interest in everything you do.”

No related pages.

This manifesto might seem a lost cause. Speaking at the RSA/Sky Sustainable Business Lecture Series in London, Richard Lambert, director-general of the CBI, the British employers’ group, said “what you might call Jack Welch [1980s] capitalism” was drawing to a close – a reference to the former General Electric chief executive’s championing of shareholder value. Last year Welch dubbed his old mantra “the dumbest idea in the world”. He added: “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”

Richard Lambert advocates that doing good is good business and that:

“The risk now is that the public and political response to what’s happened will itself have troubling consequences. If you don’t trust an institution to behave well, you impose regulations – perhaps to a point that undermines the dynamic workings of a market economy, and in turn holds back the forces of job creation and sustainable economic development”

He’s not alone in thinking that shareholders are now just one of many competing interest groups CEOs work for. In a recent FT interview, Paul Polman, Unilever chief executive, said:

“I do not work for the shareholder, to be honest; I work for the consumer, the customer. I discovered a long time ago that if I focus on . . .  the long term to improve the lives of consumers and customers all over the world, the business results will come.”

I think these intelligent people are setting up a false dichotomy. Shareholder value is not necessarily at odds with social value. Customers and employees are not necessarily at odds with shareholders. Sure, running a socially respectable, customer-facing business may well be the ticket for shareholder value.

So I prefer the more robust approach of Lord Haskins, the former chairman of Northern Foods, who has questioned Mr Polman’s assertion that he does not work for Unilever shareholders, saying:

“Isn’t it the shareholder who appoints him, provides him with the funds to run his business, and awards him with his substantial pay package?”

Moreover, many firms, such as Swiss Re and DuPont, to name but two, still put creating shareholder value at the top of their stated objectives: see here and here.

To echo Michael Skapinker writing in the FT, before we consign the shareholder value movement to the dustbin, it is worth remembering why it arose: to prevent chief executives from running businesses in their own interests rather than those of the companies’ owners.

So here are my manifesto’s key points:

The problems:

• The emergence of a generation of CEOs who ran companies for their own benefit;
• A generalised passion for short-term stock value.

The solution:

• CEOs (agents) should be more accountable to the owners (principals) of their businesses;
• They should agree and assert the kind of firm they are running (long or short term value, for instance);
• They should communicate and sell these propositions.

Some principles:

• As a fan of Theodore Levitt, I’ve no doubt that Welch and Polman are right that great products, services and customer focus are the key ingredients of a successful company;
• No firm can function without a licence to operate;
• Key stakeholders need to be kept onside – employees, customers, suppliers and the like;
• If the longer term is what counts most, CEOs need to do more than they currently do to invest in innovation and in R&D (here’s a useful manifesto addressing this issue).
• Longterm profits matter a great deal to some firms, but that requires great flexibility and constant change.

PR challenge

PRs would do a much better job for their employers and clients if they spoke plainly and honestly about the realities of business. The current recession is caused by a crisis of profitability and negative growth. It is experienced as a crisis of confidence and trust. But it is not helpful to the cause of restoring growth and boosting reputations in society when PRs communicate that profit and growing shareholder value no longer matter most.

Today, the reality is that millions of people are losing their jobs, accepting pay freezes, going part-time, and feeling insecure about their futures, precisely because there’s not enough profit or a strong enough expectation of long-term shareholder value growth in the system. We’d all do better with our PR if we faced the truth rather than evaded it.

No related pages.

Here’s a muse on how the stakeholder doctrine failed both politics and business and how it may not survive the challenge from the BRIC countries where there’s a bit more realism about life.

Let’s start in the present with UK politics. Then we’ll turn to how stakeholder doctrine originated in the trendy 1960s in the business sphere. Finally, I’ll make the case for saving the term “stakeholder”.

What a difference thirteen years makes. Tony Blair’s mission, he said, was to use the stakeholder concept to redefine rights and obligations and to extend accountability in society. Under Mr Blair there was a flurry of government-NGO-private business partnership arrangements. The “Third Sector” swam into view. This was the stuff which Geoff Mulgan and the think tank Demos were promulgating. I suppose the point was that Thatcher gave us popular capitalism and Blair’s mission was to widen the remit to a new participatory, networking society. Trying to move things on, and find a new Tory mission, Mr Cameron castigated Mr Blair’s “bureaucratic accountability” (all that tick-boxing, all those targets which Blair actually inherited from John Major), which he claims he’s going to smash. Mr Cameron has his own “power to the people” agenda, and we’ll see if it happens.

As the New Labour project makes way for David Cameron’s Tories (or something less new than New Labour), we should remind ourselves that the slogan was a fiction. The new active politics was top-down, not bottom-up. This really did mark a significant shift from past practice: Tony Blair’s infamous decision-making “sofa government” was the most unaccountable clique to rule the UK in modern times. It was perhaps even more closed than aristocratic rule once had been. The involvement of stakeholders turned into the manipulation of stakeholders and the sidelining of a democratically elected parliament.

Of course the idea that politics is everybody’s business – that we are all stakeholders in it – is the very core of modern democracy. The term may have gone out fashion in politics, but the political class is obsessing on how to engage people, which is much the same as trying to make more people feel like stakeholders. Indeed, the tragedy is that so many people don’t feel and act like social stakeholders. They’ve volunteered themselves to be on the sidelines, not least by not voting. It’s tempting, too, to think of anti-social people as being the reverse of stakeholders. It’s enough to make one nostalgic for the idea that people are stakeholders in the degree to which they pay taxes and don’t sponge, but that’s another story.

But whilst the idea of everyone being a social or political stakeholder – at least in principle and as an ideal – is valid, and whilst the phrase was borrowed by politicians from business, I don’t think it make sense in a business context.

So now let’s go back a bit and look at how stakeholder doctrine worked its way into business.

The 1960s origins of stakeholder doctrine

The word stakeholder has been around most likely since the 1930s, perhaps before. But its modern persona began to take shape in the 1960s. According R Edward Freeman’s history of the term:

“The actual word “stakeholder” first appeared in management literature in an internal memorandum at Stanford Research Institute (now SRI International, Inc) in 1963. The term was meant to generalize the notion of stockholders as the only group to whom management need be responsive. Thus, the stakeholder concept was originally defined as  “those groups without whose support the organization would cease to exist.”

The groups defined as stakeholders back then consisted of little more than shareowners. So it was tightly defined and designed to help organisations understand and achieve their corporate objectives. But over time, as Freeman describes it, the meaning of stakeholder theory changed dramatically. It began to include people whose personal interests were closely related to those of a firm (employees and so on).  As the doctrine evolved it eventually came to be defined, as Freeman put it, “any group or individual who can affect or is affected by the achievement of the organization’s objectives.” It later evolved to mean the whole of society. This radical development in stakeholder theory dates from around 1975 with the introduction of the “stakeholder audit”. The aim of this was to measure the social costs and benefits of business to all its stakeholders and to give them equal importance to financial results. So what was a deliberately narrowing term transmogrified into its reverse: something as wide as possible.

Freeman identified “stake” as an “interest” or a “share” (in an undertaking) and he considered three groups of stakes: Equity stakes (held by shareholders); economic or market stakes (employees or customers); influencer stakes (interest or activist groups).

Of course, stakeholders like publics are often found in more than one role. Employees can be shareholders, customers can be activists, suppliers might be creditors etc. Their interests might be contradictory in the different roles they occupy. Moreover, the stakeholder’s perception of his or her own interest might not be measurable clearly either by consultation and or research (that’s an issue I’ve looked at on my PR blog in relation to Edelman’s trust survey results here here here).

Reasons to cutback on stakeholder hype

Here are my concerns about the stakeholder doctrine in business:

• Firms were no longer run for the benefit of their owners who risked their capital in them.
• The objective of business with stakeholder theory became the balancing of stakeholder interests (this precluded favouring one group over another) rather than maximising shareholder value by achieving specific corporate objectives as defined by the owners.
• The foundation stones of capitalism are the concepts of private property, the rights of its owners to exploit it, and the first duty of its agents being owed to principals. Those foundations have not been overthrown in a social revolution. Rather they remain legally binding but weakened by populist nonsense in the public domain. The suspicion has to be that stakeholder theorists are crude propagandists trying to effect change by the back door, or that they are self-deluded.
• Stakeholder theory created ambiguities for corporate governance – exactly to whom and for what is management accountable?
• If management is effectively accountable to everybody, then it is not accountable to anybody.
• If “active publics” define stakeholders, as Jim Grunig seems to suggest, then perhaps that gives them power over the silent majority that they don’t deserve? For sure, laws and democracy were long-ago designed to limit activist power in the interest of the greater good.
• The specificity of the terms stakeholder, public and “activist public” as useful categories is rendered meaningless if one accepts Freeman’s definition of what constitutes a stakeholder, which includes the unborn, the environment and much more.
• At its most absurd stakeholder theory identifies irreconcilable forces as each other’s stakeholders. Hence Greenpeace becomes a stakeholder in the nuclear industry.
• Stakeholder theory does little to tackle the real problem business faces today; which is that managers have become unaccountable to their owners for their poor results. Today’s recession is partly caused by irresponsible bankers destroying shareholder value because they pursued short-term interests. The recession is about falling profits, failing businesses and their social consequences, not a shortage of CSR (BTW: corporate governance is not primarily about the relationship of corporations to society).
• Right now, business has to make brutal decisions. Consensus will matter but so will speed and agility. Stakeholder management techniques, if taken seriously, are slow. They lack the robustness to be tough and to set priorities which produce clear winners and losers.
• The insight that stakeholder theorists claim as theirs that relationships, networks and consent are crucial to business success has been known since trading in goods and services began.

How some of this works in politics

• Politicians who big-up stakeholder politics on the basis that it’s participatory can be taken with a pinch of salt. New Labour went in for the Big Conversation and masses of consultation, but it often turned out to be a sham.
• In the modern perverse definition, stakeholders are self-defining. Victims – or anyone who says they feel strongly – have to be listened to as though they were experts.
• Representative democracy empowers people who go to the trouble of getting elected: stakeholder politics risks undermining that process.

Whose side are PRs on?

One of the startling logical implications of stakeholder theory for PRs is that we no longer remain representatives of our employers. Rather we become brokers of different interest groups, listeners, facilitators and managers of the many stakeholder relationships an organisation has. In this brave new world PRs are more likely to want appear on the side of activists or competitors than on their employer’s side. This fiction needs a reality check in the interest of transparency.

What then was the great attraction of stakeholder theory? In my view it was the opportunity to have power without accountability or risk. This compelling doctrine is a hippy hangover from the post-World-War-II boom. It promised all the benefits of business and political life without the responsibility and disciplines of them; no wonder it became popular among freeloaders.

How to rescue the term stakeholder

Stakeholder theory therefore requires a radical overhaul because the challenges ahead call for risky and accountable leadership. So it will either reform, get real, or be blown away by necessity as the democratic West reorganizes to compete with the BRIC countries.

We should begin with this proposition. It’s a nice compromise, I think. Stakeholders are people with a stake in a firm’s – or any entity’s – well-being. So yes, it can be much wider than shareholders or voters alone. What’s more, legitimate stakeholders may differ very strongly about what a firm’s or country’s aims should be, just as shareholders and voters can. Plenty of people who are not strictly speaking stakeholders may have very interesting and useful views to contribute. Having skin in the game is not the measure of a person’s value to a firm or to the rest of us. But the more skin you have in the game, the more of a stakeholder you can legitimately claim to be. If we are to rehabilitate the stakeholder category usefully, we must first cut the crap.

Note: I owe a debt to Elaine Sternberg’s “Stakeholding: Betraying The Corporation’s Objectives“, SAU, 1998, for insight on this challenging topic.

No related pages.

As somebody who once was accused of organising a race riot in Handsworth, Birmingham, I know something about definitions.

My first defence was to say that if it was organised, it was not a riot. The police perhaps kindly ignored that challenging thought and moved on to my second line, and accepted it: I was attending a conference in London when it happened.

But I digress. Here’s some examples of some crises.

When Edward VIII abdicated from the British throne in 1936 so that he could marry his American lover Wallis Simpson, it created a crisis. It did so because it threatened the nation’s sense of itself and might even have wobbled the UK’s constitution. The credit crunch was a crisis. It threatened to very severely disrupt capitalism by destroying huge amounts of wealth (especially savings) and confidence. Note: what actually happened was very nasty but has so far fallen well short of what was threatened. So it was a crisis and we seem to have got through it.

Those events threatened abrupt or decisive change. They created very real and deep fear. The worst outcomes were seriously in play, and did not materialise.

There are, of course, cases where dramas needlessly become full-blown crises.

For example, there are the cases where people imagine a danger which would be dreadful if it did occur. One was Three Mile Island in 1979. The ironic thing about Three Mile Island was that the worst case scenario core meltdown occurred within the first minutes of the accident. It was such a non-event that nobody noticed, not even the plant’s operators. Meanwhile, the world’s media stood outside the plant for weeks hyping up the “what ifs”. (BTW: Three Mile Island still generates electricity today, just as electricity was generated by Chernobyl’s nuclear reactors until very recently.)

Here’s another twist. Disasters are quite often not crises. That’s to say, a chaos is unleashed, but nothing very much is threatened. When Richard Branson interrupted his holiday to fly to the scene of a Cumbrian train crash in 2007, that was not crisis management, so much as good PR and (for all we know) a compassionate act of a good boss responding to a disaster. Of course, if Branson hadn’t turned up, and was thought callous, that might have produced a drama for Virgin, since one cannot afford nowadays to be invisible at such moments. Even so, it would not have been a crisis.

Interestingly, when it comes to accidents, firms rarely get punished as hard as did Windscale, Value Jet, and Union Carbide, all of which anyway survived their genuine crises. Yet it is at least possible that rebranding a disaster or crisis-hit organisation merely produces a legacy of bad-taste jokes and ill-feeling about slippery PR. That’s to say, there may be a deep understanding among the public that accidents do happen. That understanding can withstand, I maintain, the media approach (and victim reproach) which tend to assume that total safety is available and would have been achieved except for the villainy of firms and governments.

As people speculate about Toyota’s fate, the fact is that there’s never been a major car firm destroyed by a recall or by an accident. Companies destroyed by sudden events are normally in the class of totally corrupt Enron and its grey accomplice Arthur Andersen. In both companies trust collapsed because their skulduggery accurately defined what their brands were about. Their reputations were beyond repair, and quite rightly so.

Then there’s the likes of Ratners. The collapse of that company had more to do with a loss of nerve in response to a gaffe than, arguably, necessity dictated. But Ratners’ experience was another exception that stands out precisely for that reason. If you doubt that, just look at the positive share prices of oil companies today and then review their accident-prone histories.

But let’s stay contemporary here. Toyota’s worldwide recall is not a crisis in the true sense of the term. It is actually a drama focused on a narrow range of issues. The chances are slim that it will become a long-term disaster for Toyota. That’s not to say that slow sales, halted production lines and global recalls of millions of cars is business as usual. It is just to remind us to retain a sense of perspective.

For a start, who’s panicking? Who thinks their Toyota (their car, their share, their job) is really threatened here? Here’s the important thought: we see this storm and we think, “Toyota’s a damn good car-maker and will be an even better one after this”. Maybe a few victims (some half-embarrassed that they panicked instead of finding neutral), with their US lawyers rubbing their hands behind them. But I don’t think anyone seriously believes that Toyota’s existence is threatened by its current problems. Though I imagine that the pressure must be bloody uncomfortable for Toyota’s bosses, and not good for the nerves of Japan’s stock exchange in the midst of recession.

Before we lose our nerve, or tell Toyota to, we should remind ourselves how well Ford survived its tribulations with its “exploding” fuel tanks in the Pinto and Mercury Bobcats (1.5 vehicle recall). It was claimed they killed 27 people. Ford ordered the recall – and did not contest the accusations – because it was more motivated by supposed public perception than by what it knew to be true (The Suicidal Corporation: How Big Business Fails America, by Paul H Weaver, a Touch Stone Book).

So most things labeled as being a crises aren’t any such thing.

We PRs need to consider very carefully whether we should avoid the elephant trap which is laid for us here. We should perhaps develop a determination to avoid reacting to every drama and panic and even disaster as though it were a crisis for our clients. The media, after all, is in the business of making a crisis out of drama, and we all too often risk doing half their work for them.

Heather Yaxley writing on PR Conversations hit the notes well recently. She attacked PR crisis management theorists for their panicky hyper-active overreaction to dramas:

Tell it fast becomes tell it before you know anything.  Tell it all means let the media and its rent-a-quote experts speculate about worst case scenarios.  Be open means unlimited social media engagement (regardless of what the legal or other ramifications may be). Have the CEO (or celebrity if a personal faux pas has occurred) lead communications with mandatory appearances on chatshows, a tour of news stations,  and a YouTube apology.  Mea culpa – the universal panacea: “I’m sorry if…” – anyone resisting the calls is bullied until they comply.  The pound of flesh must be paid.

I fear she rightly roughs me up a little for my recent piece Where was Mr Toyoda yesterday? She certainly compellingly argues that every so-called crisis is different. She adds that too many PRs try to impose commoditized crisis management plans onto unique situations:

It’s a comfort blanket of how to…, what not to do…, common mistakes and miracle cures.

I would add that PRs often corrupt the everyday management of risk in business. The sensible cry from PRs for clients to stay ahead of the game risks turning the commonsense desire to spot problems before they occur into crisis management paranoia.

The result is the creation of a risk-adverse culture which inhibits innovation. That’s a point that is well argued in Paul H. Weaver’s The Suicidal Corporation. It is why I’m recommending people read it. The creation of a risk-adverse culture helps spread indecision and insecurity. During media hurricanes it becomes a sort of PR own goal. In other words, making decisions under under pressure calls for risk-taking, but risk-taking like winning and losing is habit forming.

The truth is that people admire and respect risk-takers and they make allowances for their failures. Moreover, unpopularity in the media is just as temporary and superficial as popularity. Bad headlines don’t destroy good reputations, no more than positive ones make them. Good reputations are based on innovation, delivery on promises and a certain arrogance based on success. They are sustained by people’s experience of the brand  (El Buli, Ryanair, Apple, Toyota and much more).

Hence, rather than becoming hyper-active advocates of risk-aversion, PRs should instead do more to inspire courage and balls into the mindset of their clients. PRs could do much more to push back on media and other agendas and to help their clients ride out the storms they face with their integrity intact.

The reassuring lesson from most Toyota-type troubles is that consumers are as quick to forgive as they are to condemn. So I’ll risk a prediction. There’s every chance, as Insigna’s Jonathan Hemus says here in The Guardian, that Toyota will come out of its storm with its reputation enhanced (though his advice is too skewed toward institutionalized risk aversion for my liking).

So a crisis is a crisis when it threatens the viability of something or other. Otherwise it doesn’t qualify. The job of PRs is to make sure situations never do qualify or to clear up the mess if the you know what hits the fan.

Oh, I never did advocate that people riot, dread the thought. But I do own up to having been a revolutionary, which is something completely different.

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They died in August 2009. This weekend Toyota will start work on 2.3 million recalled cars in the US by inserting a stainless steel bar under the accelerator pedal to stop it sticking (though the cars in that recall do not include the type the family was driving). However, the company will also recall millions more cars in which there’s a threat that the mat could trap the accelerator.

Many people – including some accident investigators and Steve Wozniak, the co-founder of Apple - doubt that Toyota is addressing the real problem. They claim that it lies in the car’s software governing the electronic throttle control rather than with the pedals and mats.

There’s been 26 reported incidences in Europe. But news that Toyota first dismissed cases of accelerators sticking as a quality rather than a safety issue has damaged trust here. Meanwhile, the US media and the internet are full of stories of cars driving over cliffs. It’s a PR nightmare.

We know from experience that perception and fear are not easy forces to combat. Especially when at least four lives have been lost and customers are fearful for their own safety (Toyota used the adjective “rare” carefully to keep the level of risk in perspective).

But it is no wonder that the fallout from this episode has hit Toyota’s sales hard. Some Toyota owners are now too scared to drive their cars. Lawsuits are stacking up.

So Toyota had no alternative but to put the full weight of its brand’s reputation behind fixing the safety and the perception problem.

To its credit, in October 2009 the company’s president Mr Toyoda — grandson of the company’s founder — expressed his sorrow over the deaths and he apologised for the company’s performance in the US. He candidly admitted that Toyota was shamefully unprepared for the global economic crisis that has devastated the auto industry, and is a step away from “capitulation to irrelevance or death.”

However, yesterday, the same Mr Toyoda did not lead Toyota’s press conference in Japan which was called to set out the company’s global recall policy. That was a mistake. His absence was an embarrassing PR distraction, as highlighted in The Times today.

Therefore, it is difficult to challenge the view, expressed in the same article, of Ed Merner, president of Atlantis Investment Research in Tokyo:

“The whole thing has been very badly done. They hid from the problem for a long time. They didn’t attack it with full energy and they didn’t react with full energy. It’s crazy that they spend so much on advertising and now they are letting all the goodwill get washed away.”

Toyota better have some clear answers when they come to Washington later this month for their Congressional hearings into the crisis. And Mr Toyoda would be well advised to come in person to face the grilling.

Nevertheless, I rate the chances as high that done right Toyota can fix, reform and move on from this dual crisis of recalls and recession just as many other carmakers have done in the past.

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At the moment we a have a theatrical clash of positions. It goes something like this. The Finnish reactor currently being built – which is an example of the type the UK hopes to build – is already three years behind schedule and 3bn euros (£2.71bn) over budget. So what hope a UK nuclear programme being timely or affordable? Ah, responds the UK’s Nuclear Industry Association (NIA):

“The industry is confident that we can have the first new stations operating in the UK by the end of 2017. The UK’s innovative approach of full design assessment prior to any construction means that we will avoid many of the delays which can be seen elsewhere in the world”.

Then up pops the British regulator, Kevin Allars of the Nuclear Installations Inspectorate (NII),  to say he’s every bit as tough as his colleagues in Finland (not that he’s saying regulatory success equals delay) and, just to prove his point, agrees there’s never been a reactor built to time or budget in the UK.

The truth is that neither the regulator nor the industry has a helpful position. Neither does anything to enhance the reputation of the industry or to advance its case in the public domain. Rather they do much to knock the industry’s credibility and to bewilder the public. So how do we move things along?

The real debate should begin with why we need nuclear energy in the first place. At the top of nearly everyone’s list right now is fighting global warming (see UK Energy Secretary’s Ed Miliband’s recent national policy review statement). I fear this is the argument grabbed by industry’s PRs. It’s a dead end.

That’s not because global warming isn’t happening. It is not even because those most worried about AGW (anthropogenic global warming) are often those most opposed to to nuclear power. Nor is it because all ten sites identified in the UK face worries about GW-driven coastal erosion, rising seas, warming cooling water and storms. No, it runs deeper than that.

The trouble is that if dealing with climate change is ever taken seriously enough to panic, the major response is likely to be to aim seriously to reduce electricity demand. Bang would go the major benefit of nuclear energy. It is, after all, a virtually limitless secure energy supply source which boosts output and satisfies demand.

If AGW is taken seriously, the argument for an expensive and tricky source of energy would be commensurately somewhere between very weak and politically unfeasible.

Nukes don’t fit well into a no-growth-to-low energy low carbon unambitious world. But that’s what the EU is committed to right now (European Commission, Energy Policy for Europe, 10 January 2007, p5). It is an outlook that fits quite well with Greenpeace’s view:

“Gordon Brown very recently committed the UK to generating around 40 per cent of our electricity from renewables by 2020. If he means it, Britain could become a world leader in clean energy and his case for nuclear evaporates.”

So it does. Moreover, Greenpeace also rightly points out that nuclear power can only deliver a 4 per cent cut in carbon emissions some time after 2025 (though I’d hope by 2021). That said, it begs the question why Greenpeace gets het-up over building a few new coal plants today, which must be equally as insignificant in percentage terms (a case of one smart argument undermining a dumb one, I think).

Then there’s the energy gap argument. There certainly is a real threat that the UK’s lights could go out at sometime in the not-so distant future. But is virtually impossible to say when, or under what circumstances this would happen. There are too many variables for that.

For instance, old conventional plant can be made to worker longer than its original planned life. There’s an emerging world network of gas pipelines (and no it is not all about Russia), not to mention liquefied natural gas. Then there are renewables coming on stream, and there’s innovation. And when push comes to shove, as demand exceeds supply, rises in price could be used to dampen demand.

I don’t know what carbon price would seriously dent demand, but I suspect it would dent demand somewhat before it would encourage nuclear power.

Dieter Helm, Professor of Energy Policy at the University of Oxford and a Fellow of New College, has captured well how events continually alter the energy landscape in unexpected ways:

“Though the recession has brought a breathing space on the demand side of the equation, it has markedly worsened investment on the supply side. The credit crisis has made it harder and more expensive to finance investment; just when the investment is needed, finance has dried up.”

So how do I size up the debate and advise the nuclear industry to position itself? Well I think its case might go something like this. Britain is in recession, the world is in recession. The Far East is currently getting the edge on the West and it is doing so by not skimping on energy growth when it comes to coal or nuclear power.

The Tories might talk about a new age of austerity but if they want to hold out hope or hold on to power they had better have something more upbeat to offer. That can only be the prospect of economic growth – that requires investment in energy infrastructure and generation on an increasing scale. That supply will need to be secure, on tap on demand (unlike wind) and at a predictable price.

That all speaks to nuclear power strengths. In short, nuclear’s future may be rosy because AGW is not taken seriously, electricity demand is not seriously limited, and there are fears of a serious energy gap especially if it’s decided that AGW matters, but not enough to drive serious (demand-denting) policy.

So who cares if the first couple of UK new nuclear power stations are a little late, over budget and more difficult to build than predicted? That’s life when it comes to making visions come true when it comes to major infrastructure investment. It’s no big deal. For sure, as we build nuclear plants en masse the economies of scale will accrue.

But there’ll be no nuclear revival of significance or true merit so long as the debate remains stuck where it is. It is time to ramp up the nuclear message and link it to economic growth, security, prosperity and hope (a point made well by the authors of Energise! here). It is time to assume that we want a great deal of electricity and at moderate prices (prices only slightly ramped up by carbon taxes) and preferably with an acceptable carbon footprint.

This argument would be gung-ho, cynical, sceptical, realistic. It would be upbeat. Oh dear, what a tough authentic sell.

For the record, I spent almost ten years working in the nuclear industry in the UK, Ukraine and Switzerland, including for the Nuclear Industry Association.

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Roman represents the future of our trade. His quality of thought is becoming more common – though far from common enough – across the in-house and agency world.

Roman Geiser

He embodies how PR is maturing as a business under a new generation’s leadership as it enters its Golden Age.

His take on things ranges from radical ideas for repositioning Swiss banks, to questioning the effectiveness of the S in CSR.  He’s prepared to think big about what disintermediation could do for his clients, while staying alert to the possible downsides for society as a whole. He is cleverly nuanced about social media (a tad over-enthusiastic for my taste, but there you go).

He joined the agency world seven years ago. His background was as a public affairs lobbyist for an umbrella organisation of Swiss businesses. Then he was hired by Jäggi Burson-Marsteller, a formerly family-owned business based in Zurich and Bern, which was bought by BM, Young & Rubicam.

So, as he readied himself for his journey as a PR agency EMEA COO, I asked him to give us an insight in to his business and thinking. Here’s the outcome:

Strategy, evidence and today’s market

PS: I’d like you to describe what the recession has done to your clients, to explain how well your business in EMEA has fared.

RG:  It really depends market by market and positioning by positioning of each unit we have in our organisation. In Switzerland, we work for industries such as energy, pharmaceuticals and food.  If you take those three industries, they’re doing pretty well in the recession.

We see a clear trend to specialisation and focus.  The mid-sized agencies in this market – those offering 360 degree service – have an issue. Clients either want an agency that really understands their business, or an agency with functional or specialist expertise, for instance agencies that are 100% specialised in digital media and social media.  So there is a need for all agencies to find a sweet spot.

We see a certain cautiousness. There’s a psychological impact on even healthy businesses. Investments are taken more slowly than before.

Some services have become commoditised.  However the more strategically an agency is positioned the better it is protected from the crisis.  So offering product PR in the fast moving consumer goods area, for example, has become a low margin business.  Or even doing financial communications around standard transactions like public offerings has become internalised by banks and commoditised.

That means the higher up the value chain you are, and the better the quality of service you offer, the better off you are during the crisis.  Services like doing press releases, or just media relations in multi markets – those are not services where you can differentiate your brand. They are really price-based discussions which put your margins under pressure.

Burson-Marsteller is known in the industry as being extremely strategic. Of course, all agencies claim that!

PS: What exactly does ‘strategic’ mean?

GS:  If I take the Swiss example, we are very successful in healthcare.  We have a team of scientists here.  We have four medical doctors and a professor at Rockefeller University.  You need that kind of calibre to really bring evidence to the table to provide analysis. Then you can have a discussion with the client based on “This is the existing mindset and this how we get to where we want to go”. For me, that insight and knowledge and in-depth analysis based on qualitative and quantitative research is evidence-based.  And it starts at the beginning of a project.

Froth on the boom’s coffee or the caffeine in the latte?

PS: Do you agree with me that PR was guilty of putting the froth on the late boom’s coffee? Or put another way, if bankers have had to say sorry, do we need to, too?

RG: I understand where you’re coming from. One of the key reasons to have a PR agency, or a trusted advisor, is to bring critical faculty to the table and to ask the right questions. And, for sure, in certain industries the PR industry profited from the hype and we were part of the overall economic system.  At the same time, I believe there were great attempts to warn and also to support CEOs in their function.

PS: To warn?

RG: Yes to warn. You like to quote Dr Leslie Gaines-Ross on your blog. She recently highlighted how the trend from celebrity CEO to credibility CEO, more of “please show me” and not just the glamour stuff, began some four or five years ago. And that’s a kind of clear anti-hype warning that came from the PR industry itself.

Burson-Marsteller tried to engage the Swiss Bankers Association, for instance, in some pre-emptive reputational research during the boom. But what do you do when a decision-maker tells me “Thanks for your advice but we don’t have an issue”? That’s why I feel we did our job properly.

What kind of capitalism comes next?

PS: Will the new boom produce a different capitalism, particularly considering that the world’s most dynamic economies are going to be amongst its least democratic?

RG: I don’t think that there will be new models to capitalism.  I mean, it’s a pretty well established domain, right? There will be a new global balance of economies being at the table as equals with with the US in some fields.  That, I believe, is certainly more than a trend.

PS: Is there a new morality to capitalism?

RG: First, capitalism is not anti-moral. Second it’s been in practice for decades. So it won’t have a new shape or new dimensions in future.

I wouldn’t jump to saying: “Here is the new global regime with new power bases”. For instance, I still see the US, just by its historic capability for revitalisation, reinvention and innovation, as a strong leader and player in the future.  But it’s interesting to see that the most recent growth and first signals for recovery came clearly from China, also from India, but basically from China, which is new.

We shouldn’t underestimate the power of the old economies. In a world which is getting much more complex, with multi-stakeholder management, with so many stakeholder groups having an impact on your business, that calls for managing complexity.  And if you look at the continent which really has experience of managing complexity from language to cultures, it is Europe.

Where is PR headed?

PS: What are the three major three trends that will dominate the PR landscape over the next ten years?

RG: The key trend definitely is social media and digital communications and the shift of paradigm from mass media into more dialogue-oriented communications. That’s a huge shift. But its impact varies from market to market, culture to culture. For instance, Switzerland is highly digitalised, but it also values privacy. People don’t speak up on blogs here, as they do in the UK, and give their opinions.

Second, I would say, is the balance of purpose and performance in an organisation in order to build trust longer term.  It’s basically the question of: “What is the purpose of a corporate, of a multi-national?”.  It’s very often around employees.  It’s around the products and the services for consumers.  So it’s around the mission and vision of a company

The third trend is multi-stakeholder transparency in a globalised world.  Companies operating around the globe need to demonstrate transparency and to explain themselves to many more stakeholders in the age of trend No. 1.

It’s not about structures but about leadership

PS: How will PR agencies change their business models and services?

RG: The first one sounds easy, but it’s extremely complex to make digital communication more than an add-on to your communications programmes. Very often you say “What could we do digitally?  Do we do a website? And yes, there are new trends like Twitter.  We need to offer that in our communications programme”.  And that’s the wrong attitude.  I believe digital or kind of low-cost media needs to become an integrated part of all communication concepts.

At the same time, you need to understand your business extremely well to see the limits of digital social media, such as in pharmaceuticals for obvious regulatory reasons.  Going into it with a kind of hype attitude can be dangerous. It’s new, but it’s more than just a fad. But it’s not a revolution. It’s an evolution. It’s an evolution which brings the business more into the dialogue-oriented sectors of communications.

The multi-stakeholder global trend goes into new agency models, which I believe are going to be more international.  PR agencies are still coming out of the first phase of family-owned businesses with very local business models.  But we are becoming more digital and more international.  Offering that service to your client becomes more and more important.

Of course, managing the matrix of markets and practices in agencies is extremely demanding. It needs people who like to work together. And it starts at the top.  So if you have a management team or market leaders who like each other and work together well, you have the key ingredients for not working in silos any more.  So there is no real ideal structural model. You can have all kind of bonus systems and financial incentives. But what is really needed is investment in a team that works together collaboratively and which produces success stories together. That’s the way to go.

What are reputations made of? A five point list

PS: How would you explain the success of Apple and Ryanair’s PR, both of which, for different reasons and in different ways, seem to do everything wrong, and yet seem to get everything right in terms of their reputation and business strategy?

RG: My explanation would be that it is always multi-dimensional. Let me list the top five elements that create great reputations for firms.

First, is how they develop talent and how attractive are they for potential employees.  Take Apple.  They are doing that extremely successfully.

Second is product and services of high quality.  You can be as digital as you want.  You can be as corporate responsible as you want.  If you don’t get your product right, if you have a problem explaining your hedge fund to your target group because you don’t understand it yourself, you might ask yourself the question, “Is my product really a good product”.  In the case of Apple or Ryanair, they have solid services, good products, which fit into very specific target groups.

Third, transparent leadership structures.

The fourth is financial results and performance. If you drive a business which is financially sound, you create the momentum for a sound reputation. And that brings me to number five.

The last one on my list would be CEO reputation.  And here again both Ryanair and Apple score through the roof on that one.

It is the balance between these five factors creates a good reputation and trust. You do not need to be top on all five. But it’s always a dimension of those aspects.  And other reputation studies maybe have a different ranking. But it’s those that I’ve listed which are the key drivers that count.

Time to ditch the S in CSR? And what is CR about?

PS: Is CSR a marketing tool or a genuine attempt to inject morality into capitalism?

RG: This really comes under my “purpose and performance” answer. Let me explain. I prioritise the  concept of responsibility rather than the social bit of it. That’s because “social” is corporate giving and sponsoring. But corporate responsibility goes to supply chain management and to diversity in the workplace. It goes to labour standards in all kinds of countries. It goes to compliance issues, too.

If you take corporate responsibility or give that angle to CR as a communication platform, we are talking evidence-based communication. We are talking about content and not just about how you brand it or how you position it and how you make a better marketing tool out of it. It is really about how you run your business and how you act responsibly in the roles in which you operate.

Elevator pitch to put Swiss banking back on track

PS: Good to hear. I’ve always advocated dropping the S in CSR and also for promoting business sustainability much more forcibly than we currently do.

Now, moving on. Please pick an unpopular person, institution, firm or country and make an “elevator pitch” for it.

RG: I’d pitch the financial sector in Switzerland.  And what I’d be pitching would have nothing to do with communications.

PS: Okay, go ahead.

RG:  Behaviour drives communications and reputations. It’s all driven by behaviour.  And the first behaviour recommendation I’d make to the Swiss banks would be not to base a product or the financial sector on a system of differentiation of tax evasion and tax fraud.

The only differentiation that matters is excellence in Swiss banking. There are huge assets which come with excellent banking and the positioning of it. So Swiss banks should not hide behind a smart legal differentiation of evasion and fraud. That’s not the way to go.

Second, nobody likes secrets.  We do like privacy, though.  Why is Swiss banking branded “banking secrecy”?  It’s the protection of the individual and the protection of one’s privacy that matters. And that is a different concept.

My third point would be look at self-regulation. I say don’t wait until the regulators push their positions on you.  Self-regulation can be a very healthy way to come out of the crisis stronger and to keep enough room for your core business.

My fourth is look at the products, because the banking products have become too complicated. There are many ways to shape products in more understandable ways. After all, good products, as we discussed earlier, are one of the key drivers of reputations. Products need to be much more transparent. Any risks in those products require a clear assessment of the portfolio. Sometimes in the boom years, the underlying risks were not clear even to specialists working in the field.

Power shifts in media – good news and not so good news

PS:  Ask yourself the question I should have asked you.

RG: A point you haven’t mentioned is the role of old media, if you want. There is right now a power shift of who produces relevant content and who has the power to invest in content?  And that shift goes from media to the PR sector.  It goes to in-house PR, external PR. And as a PR man, I could say it’s a great strength. But as somebody who is socially or politically aware, I would say it can do harm to the balance of democracy, because media have an important role there.  And sizing down all those newspapers, and taking away their ability power to do in-depth research is a problem.

At the same time you have big companies, PR firms basically involved in paid-content production.  It doesn’t mean that the content is not correct, but it always presents one perspective in a discussion and I believe there still needs to be strong media to play a role in public debates.

Certainly, big corporate can become the media. Why not have Nike TV doing sports programmes? But I like the “competition of ideas”. If you want to have a competition you need a few players being part of that competition.

PS: Do you have any closing remarks?

RG: Yes. If you ask our founder Harold Burson what makes a great PR person he says “curiosity”. And I think it is fascinating right now to be a PR person. There are so many things going on. We are challenged more than ever before. There’s loads of opportunity. I think we can say it is a new age, as you say, a golden one.

PS: Thanks. Great stuff, if I may say so.

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One person who thinks she knows the difference is Echo Research’s Group CEO, Sandra MacLeod, who asserts In PRWeek:

“Where marketing loves command and control, PR thrives on influence and relationships. The concepts of customer, employer and global citizen brands are merging. This, if ever there was one, is surely PR’s time.”

I think Ms MacLeod is wrong to say that the difference between the two disciplines is one of approach. I disparage her tacit implication that marketing is a blunter, more clumsy instrument than the deliciously professional and nuanced, human, PR. Her view reflects a popular misconception that needs dispelling. So here goes.

It so happens that I read her thoughts while midway through re-reading Greater Good: How good marketing makes for better democracy, by John A. Quelch and Katherine E. Jocz (Harvard Business Press, 2007). So let me review its wisdom a little.

At the core of Greater Good is how marketing not only exists to sell goods and communicate ideas (just as PR does), but also mediates between consumers and suppliers to ensure the market gets – from feedback – what it desires. Or as the book puts it on page 3, the economic function of marketing “is the interface between supply and demand”.

Hence, two-way engagement, interaction, dialogue and feedback are the essence of good marketing practice (just as it is the essence of good sales practice). As the book says:

“Consumers are engaged and involved with marketing and the consumer marketplace. They relish expressing their identity, being part of community, and exercising their creativity – not through every purchase decision they make but through those in which they have chosen to be involved.”

Moreover, a marketing-led company such as Apple, which is closely bonded to its customers, is a command and control-led body at the level of management. The two concepts are not contradictory, as anybody can testify who has studied Professor Theodore Levitt’s – of Harvard Business School – explanation of Henry Ford’s innovative use of production line techniques.

The authors of Greater Good also interestingly point out that a testimony to the power of marketing to forge relationships with consumers is how many of today’s top brands have their origins in the 1800s: Johnson & Johnson, Kodak, H.J. Heinz, Ivory Soap, Coca-Cola, Cadbury’s, Nestlé, Unilever, Siemens and many more.

Perhaps one should also remember that a successful brand is as much in the hands of consumers as of its shareholders; let’s never forget what happened to New Coke.

BTW: I intend to review Greater Good in more detail at another time. There’s much to be said about what politics and marketing have in common and what differentiates them. There’s much good insight in Greater Good, but I shall make the case that the authors overstate the synergies between marketing and democracy, because politics is about power first and foremost, and marketing is not.

But, meanwhile, I recommend Greater Good to anybody in the PR industry who wishes to read a contemporary account of what marketing does and how it is responding to new technology and societal challenges.

Now it is back to today’s subject matter: the relationship in future between PR and marketing. Here’s what Lord Bell said when he echoed earlier remarks from Lord Chadlington:

Integration is the new buzz word, but it is not about lowest common denominators: it is about being channel-neutral, it is about ensuring the whole is stronger than the sum of the parts.

For the PR industry, it is not about the old battle for a share of advertising dollars, but how to work collectively, with all the other disciplines, to a common strategy so that wherever the message appears, it contributes to the overall reputation objectives. Everything must be complementary, not contradictory. There also looms an obsession with new compliance procedures and new regulation across the world, an inevitable but wrong reaction to a collapse of trust.

Coordination, integration and alignment of messages and objectives, then, is the aim of the “new” game. But, of course, it has always been the case that much PR has been marketing – selling - by other means, rather than developing reputational strategy. PR is at its unique, necessary, useful and amusing best in that latter role. But it always did wide work. Edward Bernays, for instance, pioneered issues management as a tool to flog more product whether he was running soap competitions or inspiring women to light Torches For Freedom.

We know that advertising is having to adopt what were once thought to be PR strategies. That’s because firms are having to be more and more clever in hunting down their audience members, and catching their attention.

Moreover, the recession has resulted in a much stricter regime of cost control and increasing demands for return on investment. And, as Lord Bell points out, there’s an obsession with new compliance procedures and new regulation across the world.

Doing away with silos and antiquated departmental demarcations that often produce contradictory messaging makes sense. It is a price both marketing and PR are going to have to pay as we all move on in the post-Credit Crunch environment.

I believe that PR is going to do well where it can prove (or convince) that it can do better than marketing and, in particular, advertising. To what degree advertising is going to become more expensive per eyeball, or less persuasive per dollar on social and mainstream media, I wouldn’t like to say. But I acknowledge that advertising has a proven track record and role that are hard to dismiss, which explains why its budgets far exceed those allocated to PR.

But overall, we might well see PR emerging (or merging) as a major vehicle of marketing: an innovative way of selling stuff and ideas in the digitally networked world. But we will also see plenty of PR professionals still engaged in their traditional roles as advocates in the courts of public opinion and as burnishers of reputations.

So yes, PR and marketing functions will increasingly integrate. Moreover, I maintain that just as PR can do marketing, marketing can do PR, but only up to a point. While neither discipline is inherently superior, there will always be a difference – although not always a clear one – between defending, say, a political policy or corporate reputation and licence to operate, and marketing, say, a chocolate bar.

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Beyond cool white wine and lapping waves, my thoughts are also inspired by TPPR – As It Happens’ remarks on the recent Echo Research 2009 Summit. Here goes.

There’s no doubt that the recession, the near-recovery and social media are changing the PR world. Weber Shandwick’s Colin Byrne in his post Emerging from recession, provides an insightful vision of where our trade is headed that I recommend. But before I add my insights to his, let’s take a swipe at some hype.

Here’s Andrew Keen at his most pessimistic expressing views on the blob many hip PRs lunch out on:

[Clay] Shirky is, of course, absolutely correct. The core reality of the Internet is its absence of a centre. The distributed Internet, all edge and no heart, has done away with the centralised structures of power of the old industrial world. And without a core, the news can’t be controlled by a central power. It can no longer be owned.

The Internet is like a blob, a centreless yet all powerful monster, impossible to destroy and yet able to devour everything in its path

I don’t question the fact that the action on the internet is at the edge of the Web. But I do question that it devours everything in its path. Where’s my evidence? Asia, that’s where. And in particular South Korea. Consider these facts:

• South Korea is the most wired and advanced wireless nation on earth with 95% of households possessing broadband connectivity;
• According to Wired magazine, US broadband speeds average 5.1Mbps, compared with 20.4Mbps in South Korea.
• The three other countries that lead in broadband and mobile communication take-up are Japan, Hong Kong and my place of residence, Switzerland.

So, if we want to see a vision of new media and PR’s future, we should look at these countries. The trends that we see, however, are not the ones most PRs are forecasting. For instance:

• In South Korea regional newspapers are growing in circulation alongside digital media. (Overall circulation of newspaper fell by around just 1% in 2008, which is hardly a meltdown in a country with one of the biggest appetites in the world for traditional print media.)
• Highly-wired and wireless Japan remains the world’s second-largest consumer, after China, of newspapers at 70 million copies per day.
• Moreover, circulation of Switzerland’s leading national dailies – Blick, NZZ and Tages Anzeizer – are once again creeping back up.

Then there’s the question of commerce. The social networking phenomenon CyWorld in South Korea has signed up around half the population and 90 percent of 20 to 29 year-olds, and most of the country’s businesses (including Nike, Pizza Hut and Coca Cola). Unlike Twitter, MySpace and Facebook, it has long been profitable, as has QQ in China.

CyWorld’s business model based on micro payments is hardly revolutionary. It’s drafted straight from the “old-fashioned” Theodore Levitt and Abraham Maslow school of marketing: providing customer-focused solutions that promote self-realization.

Norman Lewis, chief strategy officer and VP at Wireless Grids Corporation, USA, explains it here beautifully:

“Personalised applications and tools are in demand across the globe because they are indispensable for the construction of individual stories. Customisation, demarcation and self-expression are the requirements of a generation that regards self-expression as itself a form of communication.

“In Asia, in countries like China, Korea and Japan, this takes the form of social networking and the buying and selling of digital goods. The only thing that is distinctly ‘Asian’ about this is the fact that service providers in Asia have developed business models and technologies that can monetise these impulses directly rather than indirectly through advertising.”

Yes, my friends, advertising will not chase social networking dead ends for much longer. It will return to its old haunts. Moreover, we are going to have to learn to pay for the digital goods we receive online just like they do out East.

Now let’s turn to some of the other issues raised at the Echo Summit and highlighted by TPPR’s blog.

Radical connectivity? Internet penetration worldwide is approaching 25%, many (most?) of whom are not connected via broadband. Hence, well over 75% of the world’s population are not “connected” and play little to no role in the world of digitally-linked consumers.

Here’re two push backs. The role of the internet in securing President Barack Obama’s election has been much exaggerated and his online presence since has been top down rather than bottom up or flat. In the UK, the biggest innovation at the forthcoming general election will not be the use of the Web as a campaign tool, but the introduction of TV debates between the leaders of the three major parties.

PR and democracy?
Perhaps Paul Holmes, who chaired the Echo Summit, had insight that I lack when he linked social media penetration and PR to democracy as if they were intertwined. For start, in some cultures, social media may not be mostly political, let alone democratic, or dissident or insurgent. Anyway, over the next decades some of the most dynamic economies in the world are going to be the least democratic. (They’ve got educated, disciplined cheap labour – you can’t dismiss that combination.)

Put it another way: as globalization is driven East to West rather than West to East there will be no automatic link between Holmes’ – rightly forecasted – Golden Age of PR and democracy. We should also not forget that social media was pioneered in the East, rather than in Silicon Valley, in the first place.

PRs are going to have to manage its Asian clients in the West without advocating revolution in, or getting overly political about, the East.

Active citizen consumers and voters?
CyWorld dwarfs the likes of eBay, iTunes Facebook as a source of commercial, social and political interaction. But South Korea still ranks at number 40 in terms of economic freedom in the world. And, as it gets more digitally connected it slips further back in the pack of nations on The Heritage Foundation & WSJ list.

I highlighted in an earlier post how Japan’s long-term recession has resulted in a more robust confrontational PR environment that might well resemble the one we are heading toward.

Consumer choice?
We should not forget how adaptive capitalism and its corporations were when they took account of the likes of Jerry Rubin’s 1960s revolutionary Yippies, who proclaimed “never trust anyone over 30″. However modern brands, customized to coincide with their every lifestyle choice, went on to target them profitably beyond their contented retirement.

China, India, Indonesia, perhaps even Russia and Saudi Arabia, will also be able to understand modern networked consumers, tribes and affinity groups and all. They have already shown how they can fathom their underlying motivations to invent services and business models with the same gusto that made Che Guevara an unlikely capitalist marketing icon for Jerry Rubin’s generation (inversion and redefinition are underused terms in PR).

Conclusion
Of course the world is being transformed. But it strikes me that it is not being transformed in quite the way some of the commentators at the Echo Summit suppose.

There’s going to be no return to business as usual. The future in the West will be shaken - and maybe shaped – by South Korea, Japan and China’s robust tough turbulent version of capitalism, from where much of the next round of worldwide economic growth will be generated.

Given the complexity, segmentation and new driving forces in the world, PRs are going to have to be more sensitive than ever to market intelligence and much better at understanding the often hidden shifts (let’s stop taking opinion surveys at face value) in consumer motivations, behaviour, cultures and consciousness.

In short, I’d say, PRs need a lot less hippy, leftie, dreamy, wired-radical 1970s flower shirt studentism. They need more alertness and realism.

There’s going to be more and sharper differentiated messages to manage and tougher reputational issues than ever to handle. Hold on to your hats!

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