Measuring Up

Bring back the Pony Express…

The U.S Postal Service (USPS) is going broke. That’s not entirely new. Throughout the last few decades, our  official government mail carrier has faced a myriad of financial woes which almost put it under.

What I find interesting this time is that a complete lack of foresight and innovation is leading to this once proud institution’s downfall. And, because Americans still depend on their daily mail, we’re also going to see the Federal Government provide yet another bail out very soon. Truthfully, it’s too bad that we can’t take a laissez faire approach, and just let the USPS die a normal institutional death like other organizations which simply aren’t able to keep up with what the market needs, or their competitive set.

The main storyline behind this is that those eggheads who lead the USPS never had the ability to foresee a couple of key factors that impact business:
    1) The economy eventually goes down – When that happened, Americans stopped spending so much on first class mail. That’s one of the key ways the postal service makes money. Sending out tons of junk mail is the other money maker for the postal service. Our recent recession turned the junk mail spigot off. Everything else that the USPS sends out from daily letters to big packages, are money losers. In fact, because it charges only 44 cents per letter, regardless of how far that letter has to go, when volume increases, this organization loses money.
    2) We are moving towards an email, paperless society – Yet, our postal service is in the stone age when it comes to digital products (meaning: they have none) Ever hear of e-letters? Many national postal services throughout Europe (like Sweden, France and Norway) have.  Each has modernized its product offerings, making lots of money and profit because they innovated years ago when everyone saw the writing on the wall.

What’s amazing is that if the USPS was a real company, it would be the 29th largest on the Fortune 500 list. It employs 571,566 workers as well. It also is $15 billion in debt, owing $12 billion to the Federal government. And what’s really ironic is that it spends over $25 million on advertising to promote how mail should be used as a marketing tool (i.e. bring back demand for junk mail). Unfortunately, none of that seems to have helped because all the marketing in the world won’t make a dent in the bottom line when the business model has failed.

I guess we shouldn’t be surprised. Many of the USPS’ senior management (including its current Post Master General) came up through the ranks of this governmental bureaucracy. Without any outside business training or real experience in running other behemoth organizations, it’s very difficult to bring in new ideas or perspectives that have worked elsewhere.

My take has always been to let the strong survive and the weak… well let them figure it out for themselves. Of course we know that FedEx, UPS and the others couldn’t readily step in and just take over the enormous daily mail needs that the post office provides (rumor has it that the USPS delivers 40 percent of the world’s mail). But, there certainly has to be a better solution than forcing the tax payer to pick up yet another bill to save an institution that hasn’t been right since the days of the Pony Express.

When bankruptcy meant failure

Chapter 11 used to have a shameful and negative connotation in corporate America. Quite simply, it meant failure through bankruptcy.

That was the past, though. For decades, many companies have willfully utilized Chapter 11 protection laws to gain a second chance. We've seen it over and over again. Those over their heads in piles of debt, or companies that simply come close to running out of cash use these bankruptcy laws to erase most (if not all) their obligations and problems.

Even though Chapter 11 filing is used as a business strategy now, it's fair to say that most in the business world still view it as a failure to succeed. That's why I find today's news of Sbarro's bankruptcy filing to be so comical. More to the point, specific comments made by its CEO about this news are just plain odd.

Let's state the facts first. The company is suffering from a serious liquidity crisis. In its current state, it couldn't afford to keep paying off loads of debt, while operating its 1000+ restaurants. What pushed it into Chapter 11 is when Sbarro's financing options died. All of this happened because of recessionary matters which also forced the company to shutter 150 stores.

The bankruptcy will allow Sbarro to shed 195 million in bad debt, coming out of bankruptcy relatively quickly, but not unscathed and certainly not completely healthy as it will owe 175 million to debtors and creditors still.

Yet, its CEO Nicholas McGrane, said in court papers earlier this week, “Sbarro is a strong company that will quickly emerge from Chapter 11 and remain very competitive."

Huh? Is that comment just a tad too optimistic considering the company's current predicament? I mean the company has run out of cash.

It also makes the company's senior management come across as pathetically too optimistic, out of touch with what readers will believe and just plain silly.

Does the company have a bright future? I'm not sure anyone knows that answer. More to the point, if this CEO wants to be taken seriously, he needs to understand an important communication strategy— choose words and tone that are both believable and fit within the current scenario he is dealing with.

We often advise clients on this very issue. I've witnessed many cases where executives just didn't understand that their overly positive statements wouldn't come across well. Often, they were edited or changed to more acceptable language. Clearly that didn't happen in the case of Sbarro's CEO. Unfortunately, it's an egregious mistake.

The leak that roared

Today's guest post is by Peppercommer Matt Purdue.

It is a PR pro's nightmare and a journalist's dream come true.

The leak. 

Leaks are making news at a rate not seen since Deep Throat in the 1970s. Of course, there's WikiLeaks, masterminded by the creepy Julian Assange. Today the media is hot on the story of a Swiss banker who leaked information about rich tax evaders to Assange’s brainchild. But other leaks also abound. Goldman Sachs recently announced that it was going to bar US clients and all employees from investing in Facebook because someone leaked information about the deal to the media. Goldman is rightfully concerned that all the media attention could be construed as a violation of the prohibition against publicly soliciting a private placement deal.

With the economy stagnant and mistrust of our government and financial institutions running high, leaks are bound to happen. Disgruntled individuals with an axe to grind love to spoil a mar/comm executive’s day by leaking classified data.

So what's a PR pro to do to mitigate the risk of leaks and minimize their damage? Here are some tips:

Educate and train: Regularly remind all agency and client stakeholders that anyone caught leaking sensitive information will be disciplined and face legal action.

Password protect sensitive documents: It takes about three seconds in Microsoft Word to password protect a file. That password can then be shared with only folks who need to know it.

Use a document sharing site: Instead of emailing documents, set up a password-protected mini-site (a private version of GoogleDocs) where people can upload, view and download important files. These sites also enable users to track who viewed what files and when.

Pick up the phone: Secret emails and texts have a notorious knack for ending up in the Wall Street Journal. If you don’t want to see it in print, don’t type it. If you have a sensitive issue to discuss, use your voice.

Be your own leak: Happens all the time in politics. If you have super-sensitive info to disseminate, consider setting up an exclusive with a friendly journalist before you blast to the news to the world.

Have a crisis plan: Leaks happen. There is no excuse for lacking a strategy to deal with them. Denial is usually the worst option. But if you act fast with smart messages to key media outlets, you might be able to get out in front of the leak as soon as it occurs. Keep in mind that a leaker usually provides information to only one or a few media outlets. If you go to that outlet’s competition, you may be able to bend their ear. No reporter likes being scooped.

These journalists are all wet

Today's guest post is by Peppercommer Matt Purdue

We counsel clients all the time that reporters are changing: gone are the days of balanced reportage and in-depth analysis of the issues facing our society. That’s been replaced at all turns by hyperbole, editorializing and infotainment. If you want an example, look no further than the L.A. Times coverage of the stranded cruise ship off the Pacific Coast.

In a November 10 article, L.A. Times reporters Maria L. La Ganga and Tony Perry break out their crisis thesaurus to ratchet up the drama of this floating PR nightmare for Carnival Cruises. The cruise industry hasn’t been raked over coals this hot since the “Poseidon Adventure”.  As if they’re channeling the folks who wrote the screenplay for “Titanic,” La Ganga and Perry set out to spin a “cautionary tale about just how vulnerable these mega-ships can be.” They use this single incident of a fire on the Carnival Splendor that knocked out power to the ship as a brush to paint every large vessel as a disaster waiting to happen.

They parrot Carnival’s CEO assuming that the passengers must be “very uncomfortable.” They wail about the ship’s gourmet cuisine being replaced by bread and canned milk. Worst of all, they speculate that this episode could be the tip of the proverbial iceberg. They quote the president of International Cruise Victims bemoaning “significant risks as these ships get bigger and bigger.” Call me old fashioned, but I get the sense that someone who works for International Cruise Victims is not exactly an objective expert when it comes to ship safety.

And what actual evidence do La Ganga and Perry present that cruising could be getting more risky? A website called cruisebruise.com that reports “eight major fires on cruise ships in the last five years, compared with just three in the previous seven years.” Cruisebruise.com bills itself as a source for information on murder, death, rape and other seaborne terrors. But let’s put aside the credibility, or lack thereof, of a site like cruisebruise.com. Did La Ganga and Perry consider even for one second that the number of fires on cruise ships could be increasing… because the number of ships is increasing? Could it be that the relative safety of cruising is actually increasing? They’ll never tell us.

On top of that, do they present any evidence whatsoever that the increase in cruise ship fires is due to shoddy engineering? Careless operation? Drunken sailors? Nope. That would actually take some reporting.

The best advice for PR professionals: Do your homework before putting your clients in front of some of today’s so-called journalists. If they smell fishy, move on. You’ll be doing your clients—and yourself—a favor. Anchors aweigh.

Oh, how the mighty have fallen

Blockbuster, the one-time business growth success story and king of the video industry, is heading into bankruptcy.

Although the company’s fall has steadily been in the works for years, it will become a classic text book example of how new, disruptive technologies can take down what seemed like an invincible business giant. What happened is pretty simple. While this industry leader continued to expand by opening dozens and dozens of new video stores around the country, upstarts like Netflix understood that the entire model supporting video distribution was about to change forever. Because of this, it innovated by bridging the gap by offering consumers a better distribution method (receiving DVD’s through the mail) and more importantly, it understood that the creation and distribution of content via the web would soon trump everything else. So, it signed a variety of deals to secure content partnerships where consumers could stream online video so much easier.

Then, of course, we all became customers of Amazon and Apple because their customer-centric content offerings brought that much more convenience to consumers across the globe.

Blockbuster is a victim of its own success. It failed to see these emerging trends. And, while the company also made a variety of bad decisions along the way, ultimately, it just waited too long to jump aboard this bandwagon. That lack of strategic vision, foresight (or just plain complacent attitude) made Blockbuster an extremely late entrant into a competitive field. Thus, it never could capture significant market share, all the while it continued to consistently plummet with its traditional video business.

Clayton Christenson, the renown author of Innovator’s Dilemma, professor at Harvard Business School (and a former Peppercom client), wrote a lot about how companies need to constantly look into the future to understand the power of new game changing technologies. He believed that the difference between success and failure was pretty simple. These technologies could be leveraged to reinvent or change companies’ business models to meet the coming demands of consumers. In these cases, upstarts like Google, Netflix or Amazon could actually topple their largest and most successfully long standing competitors. Or, these technologies would only serve to disrupt and ultimately kill those businesses because they became irrelevant to their customers.  

My guess is that Clayton (or some other professor) at Harvard Business School will be discussing Blockbuster in class today, as a prime case in point of how disruption worked this very week.

BP translates to Brutal Pattern

I haven’t jumped on the BP bashing bandwagon. Just felt that the media and thousands of other blogs have pretty much covered this disaster ad nauseam. But, I just can’t stay away from covering the latest debacle from yesterday because, in totality, I don’t think I’ve ever seen any one company consistently screw up its public relations efforts so badly in dealing with a serious disaster.

You’ve probably heard the latest. BP’s chairman stood up on the White House lawn and told the world “We care about the small people.” Amazingly, he reinforced that phrase over and over again. And, the reaction was… ? Just what you would think. Thousands of outraged citizens in Louisiana and other affected states were angry, feeling that this big corporate tycoon was incredibly condescending. I heard a few quotes from gulf fisherman that included words such as “humiliated,” “who does he think he is?” and “on top of everything else, this disgraceful phrase (small people) continues to put us down.”

OK. Maybe we should cut the guy some slack. After all, he is Swedish and English isn’t his first language. Right? And, a few hours later he did apologize telling the world again that he didn’t intend  for ‘small’ to be taken in any derogatory way. It was instead meant to describe all the working class people who have been greatly affected by this horrific disaster.  Under normal circumstances I would agree that this bad play on words is simply a mistake. And, should be forgiven.

But with BP, a real pattern has emerged that is unlike anything else I’ve seen in some time. Just about every few days, some senior BP official (usually it’s CEO Tony Heyward) makes an offhanded, negatively received comment to the press, online or to some constituent audience, which simply shows how pathetically ill-prepared the company is on the communications front. Adding to these insults is the fact that BP often communicates one thing (such as how transparent the company will be with media) and then actually does the exact opposite.  The result is turning this company into a complete laughing stock everywhere.

Having been on the side of BP’s public relations experts many times, this reality just should not be happening at this point in the crisis. Senior executives should be completely consistent with their messages/statements and they should only be communicated with the understanding that whatever they say (or tweet) will actually be the reality of what they do. We all see that BP is handling the crisis with the opposite philosophy in mind. In the case of yesterday’s “small people” remarks, some senior PR official should have worked with the chairman to make sure that whatever words he chose actually had the right meaning when used among the American people. Come on. This is crisis PR 101… and BP should be kicked out of the class for its reprehensible communications efforts.

It’s hard to say whether senior management simply doesn’t listen to their PR counsel. That often happens at first. But, typically when a disaster reaches this epic proportion, they begin to see the light and understand just how vital the right type of PR is. Or maybe in this case, PR counsel is woefully inadequate. To this candid outside observer, it feels as if both realities are taking place. Either way, something has to change. It’s bad enough that we’re in day 59 and the spill continues to ravage the gulf. The least these big time executives can do is figure out how to stop this amateur level of crisis communications.

“I take full responsibility”

When is the last time you heard a U.S. President actually say that in the context of admitting a mistake?

Can’t say that I remember W ever using words like that around Hurricane Katrina. And I certainly could be wrong, but I doubt former Presidents’ Clinton, Bush and Reagan ever did either throughout the handful of major crises they blundered through.

Last night, President Obama held a closely choreographed press conference to discuss the latest with the BP oil catastrophe. Within this speech, he threw out some typical political rhetoric by blaming a variety of parties for not plugging the leak (front and center, of course, was BP). But, he also conceded that real mistakes were made on his watch and he owned up to the fact that “there wasn’t sufficient urgency in terms of the pace of how those changes (to stop the leak) needed to take place.”

I find the President’s remarks refreshing. Sure, any cynic will immediately counter my point by stating that the President’s remarks were purely politically driven. He had to say something because of how poorly his administration has looked over the last few weeks in its inadequate response to BP’s failure. I’m sure, to a certain degree, political posturing could have been one of many reasons why he offered contrition.

But, the cynic’s rebuttal is probably the exact reason why I feel good about his remarks. You see, past Presidents did everything and anything possible to never have to admit any mistakes… even when it was so overwhelmingly obvious that they were wrong. Just look at W (again) around Katrina. During the worst of those times, the American public had their eyes and ears peeled and pressed wide open, just hoping that our President would come forward and explain how and why under his watch things could have possibly become so bad. Yet, we never heard anything. To most Americans (with the exception of those die hard conservatives), we lost just about all respect for this leader because, in the end, he took absolutely no responsibility for the outcomes of this hellish disaster.

Obama’s concession was not only a smart political move, but it also shows that even when he (and his administration) isn’t in tune with the sentiment of the American people, he somehow finds a way to regroup, recover and make the right communications decisions before falling into a political abyss.

By the way, this is ironic because yesterday I was a few seconds away from writing a post about how our President has become tone deaf through this latest gulf shore debacle. And, of course, apologies (in the greater scope of just how much devastation this spill has caused) really mean very little to thousands of fisherman who have lost their livelihoods and all the wildlife life that has been lost. That is what really matters now. Still, I’m glad that I decided to wait a day before writing a post that would have typically taken just another jab at our President.

A celebration or abomination?

This ballooning crisis that Virginia Governor McDonnell faces because his state is officially “celebrating” Confederate History Month is well deserved. Media, bloggers and many others are up in arms because he initially removed anti-slavery rhetoric in the official charter behind this month. The stupidity of that act is honestly hard to even understand.

So, of course, he recently apologized to a national audience by inserting language to demonstrate that he (and his State) do not support slavery in any way. Bravo Governor. A third grader would have probably made that same next move if given a multiple choice exam, to contain the damage. However, to me, the problem of this Month runs much deeper.

Quite simply, why would any government within these United States pay homage by celebrating a confederacy that supported human slavery? In my mind, extolling the Confederacy is completely incompatible with a multi-tolerant, racially diverse democracy, and ultimately, patriotism itself. The Governor is misguided. He became a Saturday Night Live joke when the man declared that slavery just wasn’t a significant aspect of the Civil War. Reread your history books, man. While, the war also focused on state sovereignty by trying to gain independence from a federal government it didn’t agree with, don’t forget that infamous line given by a sitting president not too long ago, “It’s the economy, stupid.” Slaves were critical to the South’s booming agriculture products. Ensuring that African Americans stayed in bondage was a foremost priority to keep the South’s economy prosperous.

The Governor claims that this entire idea was implemented to simply bring greater tourism to his state during a bad economic time. The problem I have is that this backwards Confederacy should never be celebrated at all. Instead, it should be understood because the War provides great insights into a host of socially, political and economic issues. But, that’s a major change in nuance that someone should have thought about first. Already, the South romanticizes too much about what some still call the “War of Northern Aggression.” Highways, statues and schools were named and created in honor for Lee, Stonewall Jackson, Jefferson Davis and others. Say what you will about honor, glory and anything else they might have thought they represented, these men fought to keep slavery intact and that’s an affront to the African American community and so many others who immigrated to Virginia since the Civil War. What kind of mixed message does it send to our children when people say that these were great men who also supported the continuance of human bondage?

As an analogy, should there be a day, week or month named to remember and understand the Holocaust? You bet. We should always remember. But, think about how Jews around the world would feel if Germany decided to create a “Holocaust Celebration Day”, or a “German World War II Pride Day,” instead. I could just see those busts of Hitler, Himmler and Goering lining the streets of Berlin, now. Oh, what a wonderful dedication…
This governor has certainly gotten himself into quite a pickle. Maybe some good will come from it though because crisis often brings about change. If enough citizens speak out, we may just be able to keep that word ‘celebration’ from ever being associated with the Southern Confederacy again.

If I can't understand it, why would I trust it?

Ever hear of the online small business review site known as Yelp? I hadn't until recently when it became the subject of some pretty harsh public scrutiny and a few class action law suits, to boot.

You see, Yelp's value proposition is that reviews are based on a very intelligent "algorithm" that crunches hundreds (or thousands) of opinions from people who have directly experienced specific small businesses everywhere. These businesses are everyday neighborhood restaurants, retail shops, and a host of service companies. The more customers enter their opinions on such topics as price, service, quality and brand appeal, the more relevant Yelp becomes to any consumer who wants valuable information before deciding to buy from a particular small business.

Here's the catch. Yelp makes money by selling advertising on its site to small business owners. Many of these small business owners are up in arms (and have been posting their angry comments on Internet chat boards) because they claim that Yelp sales representatives are pressing them to buy advertising with a clear threat that if they don't...the reviews will be manipulated in a not so flattering way. Talk about a conflict of interest and a serious legal dilemma, if in fact, these accusations are true.

Last Sunday, this Q&A with Yelp's CEO appeared in The New York Times (link to Talking to the Chief of Yelp, the site that businesses, love to hate). You can see that Jeremy Stoppelman tries to diffuse the crisis by answering a number of very pointed questions about this small business owner claim (which he flatly denies ever took place) and a variety of other misunderstood issues regarding Yelp and its model. The company has also recently posted direct answers to these heated questions on its blog and this video tries to simplify what Yelp is all about by proactively answering a variety of questions in a very friendly tone with explanations that are also easy to understand.

With the exception of one critical flaw, I commend Yelp for moving quickly to try and diffuse this situation through open, transparent communications to all stakeholders. Unfortunately, this flaw is something I can't overlook, though and it focuses on Yelp's nebulous algorithm. Yelp's entire positioning is to provide the consumer with trustworthy reviews that can be counted on. Yet, the algorithm used to calculate this information is murky. And, when Jeremy is asked (in The New York Times article) to explain how this algorithm (or filter) is used to determine whether a review is trustworthy, he refuses to reveal anything. In fact, his answer is downright patronizing ("I really can't be very specific. The more that we explain the algorithm, the less effective it becomes"), as if we (the readers and his consumers) are too small minded to understand it.

I'm a firm believer in measurement. But, whether one uses formulas, algorithms are anything else to get at an end outcome, the methodology has to be something that can be implicitly understood. If not, why should anyone believe that the actual score (or in this case, review) is verifiable. Jeremy's absurd answer stopped me in my tracks and turned me off to Yelp. That's kind of ironic since it's the lesser of the issues that this company is actually dealing with right now.

I think that Yelp still needs a little help...

Dealing with a severe crisis? Which stage are you in?

Yesterday I heard former GE CEO and legendary business guru Jack Welch espouse his crisis management philosophy. Naturally, the news was mainly focused on Toyota. The Squawk Box anchors eagerly wanted to hear Jack’s thoughts on what Toyota should do now and how (if any) crisis management approach can work for the embattled company, at this point. Jack rattled off his five stages that corporate managers typically go through during a severe crisis such as this. I found his comments to be pretty insightful and accurate (based on the many crises l've counseled clients on).

Each stage actually focuses on the worst actions/situation that often occurs when companies make extremely poor decisions (i.e. Toyota). I have to say, from my experience, there are plenty of examples where some of Jack’s stages were not realized because the severe crisis was contained as effectively as possible and some of these behaviors were never exhibited. Here’s what Jack had to say:

Stage 1:  Denial – The crisis hits. And, it’s really bad. Most senior executives and their subordinates walk around for days (and sometimes weeks) in complete denial. They believe that their company is too fortunate (and good) and are generally thinking, “Bad things just don’t happen to us.” Toyota had been the shining star within the automotive industry for close to a decade. While Jack wasn’t inside the company, he feels that denial was an absolute reality in Toyota and it helped to create bad decision making (or no decision making at all), which led to bigger and bigger problems.

I’ve seen many corporate executives stay in this denial phase far too long and similar results ensued.

Stage 2: Containment – In the worst case scenarios, Jack points out that even the most capable leaders try to make the problem go away by giving it to someone else to solve. Of course, that never works because the ultimate decisions need to be made at the top (for such severe crises.) Also, those subordinates who now own the problem are left to their own devices to create solutions… and that usually doesn’t end in any type of smart (or sometimes legal) solution.

Quite often, by the time Peppercom has been called into a severe crisis situation, we’re already past the initial containment stage. And, as Jack stated, it’s because someone down the ranks made an awfully bad decision about solving the problem. So, now we’re offering advice as to how to communicate the damage and next steps to key stakeholders.

Stage 3:  Shame Mongering – Now the problem is out in the open (which could mean that the media and audiences on the Internet are writing/discussing it).So, human nature takes over and there is a shameless dance of self defense where fingers are pointed and the blame game begins. Jack feels that this stage is very problematic because executives are often too engrossed in protecting their own hide to focus entirely on fixing the problem at hand.

On the flip side (to what Jack said), I’ve consulted with a few really well managed companies where this shame mongering stage never took place. I witnessed senior executives stand up and fully accept responsibility for the crisis at hand. That was refreshing to see.

Stage 4: Blood on the floor – Understanding how Jack managed with an iron fist (and a neutron bomb), I knew the word blood would be highlighted in one of his stages. We’re all familiar with this part. Who is going to “take a bullet” or “fall on his/her sword” for being ultimately responsible for this crisis? Many times, this person will wipe out an entire crowd with him/her  before accepting failure. Once the company does this, it is basically telling the world that those responsible have been punished, we’re a better company now and let’s move on.

We’ve seen this happen at Merrill Lynch, Bank of America, General Motors and a variety of other companies that went through the worst of crises in the last 18 months. Quite often, when a crisis reaches that magnitude, the CEO is on the chopping block because a new leader will signify a fresh start.

Stage 5: The crisis is fixed – According to Jack, despite prophecies of doom and gloom, almost all companies that survive a severe crisis are actually better off. The old cliché what doesn’t kill you makes you stronger is ultimately true. Those organizations have hopefully fixed the issues that led to the problem. More importantly, because they made it to Hell and back, managers and employees understand so much better how important it is to understand vulnerabilities and not take as many risks. And, they are all better prepared to manage a crisis, should one happen again.

I agree with this last point except in the case of many Wall Street companies who specialize in financing.  While in each case the major crisis hits and then things finally come back to normal, the fact is that because this industry’s risk/reward system is completely out of whack (i.e. making money becomes important at almost all costs,) many companies never really learn (or seem to care) about the next crisis until their leadership finds themselves smack in the middle of one again. And then, it’s just too late.