atkinson advisor

In September, Warren Buffet wrote a memo to his company’s senior leaders in which he lamented some of the scandals facing Corporate America today.

The opening line from that memo – “The five most dangerous words in business may be ‘Everybody else is doing it.’” – has found its way into a number of media stories and onto a number of blogs.

The entire memo should become compulsory reading for executives everywhere.

Buffet’s genius is his obsession with a culture that emphasizes doing the right thing. With 200,000 employees at Berkshire Hathaway nationwide, Buffet recognizes that some employees will err in their ways. At the same time, he fully expects the culture to realize the error, fix the error quickly, and then find ways to prevent a similar error in the future.

The final sentence of the memo says it all.

Last week, the fraud and conspiracy trial of former Enron executive Kenneth Lay and Jeffrey Skilling started. The trial is perhaps one of the most anticipated in the history of corporate America.

The aftershocks of what started on Oct.16, 2001 — the day that Enron reported $618 million in losses that touched off the scandal — have already changed the business landscape.  The entire Enron episode exposed corporate America at its worst. We can only hope the trial closes this ugly chapter for good.

The court of law may eventually find Lay and Skilling not guilty but the court of public opinion has already rendered its verdict.

While the lessons are many, the most important is that reputations — business or personal — are nothing without credibility.

Most marketing falls into one of two categories: business to consumer (B2C) and business to business (B2B). Understanding the distinctions is important to shaping and executing the right marketing approach.

Consumer motivation centers around personal needs. We need better cleaning products, more luxurious cars, better tasting food, more affordable medicine, etc. Sometimes, we turn to our favorite brand; sometimes, we comparison shop. We make the decision and complete the transaction quickly.

Business motivation centers around company needs. We need to cut costs, increase revenue, improve security, hire better people, etc. This process is far more complicated. We turn to trusted sources for referrals, issue RFPs, interview prospects, and usually hold a series of meetings to make a decision. Then, we start working on the contract.

The difference in the two purchase processes stems from the long-term implications. Ninety-nine percent of consumer purchases have no long-term implications. By contrast, ninety-nine percent of business purchases do have long-term implications. Individual reputations and even jobs are on the line with each business purchase.

B2C marketing can focus on features and translate those features into benefits for the consumer. The long-term implications of business purposes requires that B2B marketing focus on results achieved for previous clients and thus results promised for the prospect.

NASCAR has come a long way since it started its engines on the sands of Daytona nearly 50 years ago. The sport has grown into a multi-billion dollar enterprise with a captive fan base of one quarter of the nation’s population. The typical fan — once thought to be a beer-guzzling hillbilly — now has a median income of $60,000.

NASCAR has done one heck of a job transforming its reputation. Here are just a few of the things the sport is doing right:

• Brand identification. NASCAR fans identify with and root for not just the team but for the team’s corporate sponsors. In fact, NASCAR’s ability to push products (and drive up stock prices) has led some Fortune 500 companies to completely abandon sponsorship deals in other sports.
• Accessibility. NASCAR is one sport where fans are actually encouraged to visit drivers in the garage, which is their equivalent of the locker room. Drivers are also accessible to media and never miss an opportunity to mention their corporate sponsor in an interview.
• Emphasis on diversity. NASCAR is definitely trying to bring more diversity to the sport. Former Los Angeles Lakers guard Magic Johnson is heading a diversity initiative for NASCAR. Pop singer Vanessa Williams and American Idol judge Randy Jackson have participated in major NASCAR events this year. The sport is also trying to expand and build tracks in major cities, such as Seattle and Staten Island in New York City.

Businesses can learn a lot from NASCAR’s example when it comes to building strong brand equity and consumer loyalty.

The percentage of executives who want to be chief executive officer is today half of what it was in 2001 — down to 27 percent from 60 percent, respectively. Burson-Marsteller discovered this trend as part of its annual “CEO Capital” research.

Shortened CEO tenure, intense media scrutiny, and greater government oversight (e.g. Sarbanes-Oxley) are likely drivers of this new reality.

This trend creates a quandary for corporate America. CEOs are vital to the vision and direction of their organizations. In fact, research has show that CEO reputations account for more than half of their companies’ reputations. And, CEOs provide leadership and inspire confidence in times of crisis.

For years, great leaders have shied away from politics because of the intense scrutiny. Let’s hope we can reverse this CEO trend before great leaders start eschewing the corner office for middle-management obscurity.

At least 60 percent of an organization’s reputation is driven by its CEO’s reputation. Like it or not, the CEO is the face and voice of the company; the steward of its vision and value; and the personification of its brand.

In times of crisis, the CEO becomes the star witness in the court of public opinion. What the CEO does and says in a crisis may, in fact, decide the company’s fate. Two quick examples:

• Former Exxon CEO Lee R. Raymond was slow to acknowledge and visit the site of the Exxon Valdez crash. The public and the investment community never forgave him, and the company never regained its market position.
• Martha Stewart has ducked, dodged, and delayed since an insider-trading investigation against her started in June. And her company’s stock price? It’s down more than 50 percent.

Crises do not have to threaten a company’s existence. The following five cardinal rules provide a foundation that CEOs can use to communicate effectively when crises do strike:

1. Empathy – Always begin by saying you are sorry and concerned. Credibility is determined in the first 30 seconds of contact. Showing concern is half the battle.
2. Candor – A “spin” mindset and approach is a mistake. Be candid and forthright — stick to the facts.
3. Speed – Respond immediately with what you know and update those reports frequently as more facts come in.
4. Involvement - Don’t play ostrich like Exxon — be visible to your associates, the media, and other key stakeholders. Demonstrate that you are deeply involved in addressing the root cause of the problem.
5. Balance – Work to get balance between the advice from lawyers in the court of legal opinion and advice from public relations counselors in the court of public opinion.