In government, communications people are policy people; they know the details as thoroughly as those charged with the implementation of the policy…In business, communicators aren’t always business people nor are they close to the strategy of the company.”  He added that many CEOs fail to understand the value of communications. 

In my experience, the public relations counselor with the full grasp of the company’s strategy and technical understanding of its business are also able to relate the strategic value of communications to their CEOs.   PR counselors without this knowledge base are often seen in a tactical function and brought in after the strategy has been set. 

As is the ongoing theme of this blog, the PR skill required to be at the C-level table includes the strongest possible understanding of business in general, an analyst like knowledge of industries, a C-level understanding of a client’s (internal or external) business model and the ability to use this knowledge to help the C-level management manage a company’s reputation.

Here’s a sampling of headlines from the Wall Street Journal

March 16
The scandal grows into a major news item
AIG Faces Growing Wrath Over Payouts

March 17
Top show major outrage and call for punishment:
President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which …

March 19
Outrage:
The AIG Controversy: ‘Outrage’ Overflows on Capitol Hill as Lawmakers Denounce Bonuses
WASHINGTON — Lawmakers really want the American people to know that they, too, are “outraged” about the $165 million in bonuses paid to American International Group executives.
Hearings and panic it’s getting out of control:
Obama’s AIG Panic
The AIG Beltway bonfire continued yesterday with the spectacle of Ed Liddy, AIG’s government-appointed CEO, enduring the wrath of Congress for embarrassing the Members with post-bailout bonuses. What we now have is a full-blown political …

March20
Rash action:
House Passes Bonus Tax Bill — 90% Hit Would Affect Major Banks; Senate Mulls Similar Action Amid AIG Furor

March 21
Looking for actual facts:
The AIG Controversy: Decoding Details Behind Bonus Tax
Regret:
The AIG Controversy: Obama Seeks to Soften the Punitive Legislation 
Final Stage: We just made things worse
The AIG Controversy — CAPITAL: Rescuing the Economy Just Got Harder – WSJ, March 21

They all need to listen to the tape of the US Airways pilot who landed the plane in the Hudson River.  He makes decisions by first thinking of the broad, public implications (risking landing in a crowded area), then thinking about is the best choice even if it’s a high risk one (the river) and then goes on.  And he does it all with more calm then I’ve ever seen in the office.  So if you listen to inspirational tapes, throw them out and listen to this instead.

In the case of the IOC, a common sense approach to reputation analysis would have told them the initial decision had potential disaster written all over it.  In the case of Yahoo, a similar previous decision by MSN would have shown them the potential for damaging their brand as one consumers can trust.

In both cases, I suspect they did not seriously, or at least properly, weigh the potential economic damage by the reputation impact.  Had they, a week of very strong criticism would have been avoided.

So how does a company weigh such decisions?  There’s no one magic formula but a basic approach would be as follows:

1. Do a social and regular media forecast analysis to determine how the decision may be covered.  This includes determining probably positioning based on previous reporting of similar decisions, confidential facts that may be leaked or uncovered, and how widely it may be covered.  This should be based both on previous reporting as well as the use of panels of former journalists under NDA (yes, such panels are available).
2. Survey relevant audiences as to how the decisions will impact their view of the brand (obviously this has to be done carefully, and in many cases on a blind basis, to avoid damaging leaks)
3. Include questions relating to economic impact such as likelihood of watching programming or using a service after hearing news
4. Use data from the previous question to determine what the potential revenue or investment impact is over the short and long term
5. Calculate if the cost of not making the decision (or changing it) is greater or less than the economic impact.
6. Determine if there is a second stage plan that can take place should the communication of the announcement not go well.  This plan (such as Yahoo’s – see below) should recover the cost of the goodwill with the remaining reputation impact being worth the risk.  This is core to the risk analysis.

Obviously, this is a simplistic approach but the bottom line is this: regardless of messaging and positioning of a tough (and bad) decision, the bottom line is to project the worst news reporting context, the impact on buyers and investors and see if you still want to make that decision.

Taking a look at the Yahoo case, they may have already done this.  They quickly announced a compensation plan for buyers of digital music.  Obviously, the cost of the plan is was worth rebuilding some good will.  It’s quite possible they had the plan in the pocket and took the risk of not initially announcing it figuring that if the reporting was negative (and it was), the cost of asking forgiveness was still worth the remaining reputation impact.