Friday, September 23, 2011

Bartz Firing Mess Breaks New Ground for Crisis Pros

September 6, 2011 may go down in history as a day when the rules for crisis communications management changed forever.

In making one blunt statement, “I’ve just been fired,” former Yahoo CEO Carol A. Bartz has likely re-written the rules for successfully managing a change in corporate protocol and leadership.

In a move that should send shockwaves to anyone involved in crisis management and strategic communications, Ms. Bartz blasted an email to Yahoo’s 13,400 employees shortly after she got the axe.

As the story was reported, this bizarre episode began to unfold when Yahoo board chairman, Roy Bostock, called Ms. Bartz and told her she was fired while she was on vacation on the East Coast, flying from Maine to New York.

Yahoo, a company already under fire on Wall Street for losing its way in the Internet space and underperforming financially, made numerous serious missteps in this process.

First, even if the CEO expects it, being fired by telephone is poor policy. Likely, this is a case of an out-of-control board that does not respect its CEO and, concurrently, does not value effective communications management. I would be hard-pressed to believe that any senior communications executive would agree with Yahoo’s strategy.

Where were the company’s lawyers in all this?  It’s obvious that Ms. Bartz had a contract, and when contracts are going to be dissolved, skilled lawyers guide the process, non-disparagement clauses get written, and press releases approved by both sides are generated. There should be no substitute for this process.

It’s also astonishing that Ms. Bartz was allowed to send her email. Any company the size of Yahoo, even one that is dysfunctional, has an MIS director who can instantly delete anyone from the email system, thereby preventing widespread distribution of an email like the one that Ms. Bartz authored.

Not taking control of the technology before she was fired was a critical error. When it comes to controlling communications, no employee – from the custodian to the CEO - should have an opportunity to send emails from the corporate server after they have been terminated. Instant communications has changed the rules.

Clearly, Ms. Bartz had a rocky tenure at Yahoo. Didn’t anyone on the board consider that the reportedly high-strung CEO would do something dramatic?  

Reckless Action

Some have argued that Ms. Bartz is a pioneer in that she told the truth and didn’t fall in line with the “corporate-speak” that accompanies most CEO dismissals. Others have said her action provides increased transparency and insight into how corporate America’s upper echelons really operate. 

In a statement in The New York Times, Jeffrey Pfeffer, a Stanford professor in organizational behavior, says, “The truth helps you improve. When people lose their jobs and there’s no acknowledgement, the potential for learning is lost…Ms. Bartz’s comments also served her own cause. She’s acting as if this is not her fault. She’s controlling the message.”

Homa Bahrami, a senior lecturer at Berkeley, said in published reports, “I would say this is going to become much more of a trend…the chief executive picks up the phone and tells the investors exactly what happened.”

I believe this is academic nonsense.

It’s no secret that Ms. Bartz and the board did not see eye-to-eye during her nearly two years at the helm. In fact, in an interview with Fortune magazine, Ms. Bartz described Yahoo’s board members as “doofuses.”

That is no excuse for what I believe is reckless behavior. While her actions may seem in vogue and fit her shoot-from-the-hip style, they have further damaged Yahoo’s reputation and negatively impacted the stock. That translates into real value taken out of investors’ pockets.

It appears that Ms. Bartz never fully grasped that a publicly-traded company is owned by the “stockholders,” not the CEO or its senior management. What about her fiduciary responsibility to investors? That responsibility includes how and when she communicates, not just matters involving the balance sheet.

Want proof that Ms. Bartz’s actions were selfish and misguided?

Just three days after her email blast, Daniel Loeb, a prominent hedge fund manager, revealed that he had become one of the company’s largest shareholders and called for a major board shakeup. Reports have now surfaced that an investment bank was retained to brief the board on various scenarios that could break up the company or put it up for sale.

As a result, the people on the board who are charged with trying to save the company are under even more intense scrutiny. How could anyone argue that this is helpful to shareholders?

Teaching Moments

This messy and unpleasant episode should put senior communications counselors on notice that the rules are changing when it comes executive departures. For the most part, CEO departures have been “sugar-coated” in how they are communicated. Either the CEO resigns, talks about spending more time with the family, or states that he/she is stepping aside to assure a smooth transition.

Email, the Internet, and social networking have their upsides. In fact, an entire new industry has been created to aid and expand the communications process. But there’s also a downside that should be addressed.

A company can inform and engage its employees through blast emails and social networking in an organized and controlled fashion, but that does not prevent a rogue employee, even a CEO, from turning the tables and embarrassing the board, thus causing concern in the marketplace and potential harm to the organization.

In-house public relations executives and outside counselors need to design and implement stronger contingency communications plans with their bosses and clients. When it comes to change in upper management, every possibility should be considered…including detaching the deposed executive from the corporate email system before it’s too late. No more courtesies to shoot off emails to former colleagues and wish them well.

In the end, part of being a CEO is knowing how to act professionally, both in good times and bad. It will be interesting to see where Ms. Bartz finds herself. I’m betting that no major corporation will want her as “captain” of their ship.
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Richard E. Nicolazzo is managing partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.



Joe M. Grillo, a partner at N&A, contributed to this blog.

Tuesday, September 06, 2011

Apple Stands Alone In PR Savvy

iPhone. iPad. iPod. iMac. iTunes.

Simple product names that have come to define the best technology company on the planet and embody the spirit of Steven P. Jobs, a man whose brilliant vision and personal touch with consumers has made him a living legend.

Most of the plaudits about Jobs focus on Apple - the value of the company’s stock, the insanely successful products, the constant innovation, the billions of dollars of cash in the bank, and the company’s ability to figure out where consumer markets are headed.  I believe the organization also stands alone in one other critical category: Strategic communications.

In my view, never in the history of American business has such a pivotal CEO faced a life-threatening illness that has been so linked to company valuation. For what seems like an eternity, Apple has been Steve Jobs, and Steve Jobs has been Apple.

On Wednesday, August 24, 2011, all that changed when Jobs told Apple’s board of directors he was stepping down as chief executive. Using one of the oldest forms of communications in today’s universe of tools, he sent a straightforward letter to the board with no news media interviews granted. This is controlled strategic communications at its best. The dispatch is carried universally with key messages imbedded throughout the text.

The actual 143 words in Jobs’ letter are worth noting:

“I have always said that if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come. I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee. As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple. I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role. I have made some of the best friends in my life at Apple, and I thank you all for the many years of being able to work alongside you.”

Jobs’ style of tightly-managed communications is part of a pattern that has been criticized at times, but is still effective in protecting his privacy and not creating a media circus surrounding his health. Many will recall his first major announcement in early 2009, when he said his dramatic weight loss was caused by a hormone imbalance. Just a week later, he announced a medical leave of absence for several months. In June of that year, a Tennessee hospital confirmed that Jobs had received a liver transplant. Once again, these communications were all written statements, with no interviews either from Jobs or the company.
  
This pattern of communications continued in January of 2011, when Apple announced Jobs was taking a medical leave of absence…this time not specifying a reason or how long he would be away. Questions were raised about the severity of Jobs’ health issues and its potential impact on the company’s stock, product development and business operations, but the company did not miss a beat. Some may have been frustrated with the lack of specificity and transparency, but there were no Apple missteps in the process.

Apple and Jobs also deserve praise for the way the transition to a new CEO has been handled. John Dvorak, noted tech columnist for MarketWatch, likely has it right: Lots of companies in Silicon Valley would love to hire Tim Cook. Given that Jobs is considered to be critically ill, handing over the title to Cook had to be done sooner rather than later. If something happened to Jobs while Cook was “acting CEO,” the job may have been up for grabs. This approach is crisp, clean, and clear-cut. Cook is the new CEO and Jobs has the new title of “Chairman.”

Keeping it Simple

Internally, Apple, which has more than 46,000 employees, also kept it simple. In an email to all employees, Cook’s 225-word message was a blend of cheerleading and a tribute to Jobs. The entire email is instructive in its carefully crafted composition:

“I am looking forward to the amazing opportunity of serving as CEO of the most innovative company in the world. Joining Apple was the best decision I’ve ever made and it’s been the privilege of a lifetime to work for Apple and Steve for over 13 years. I share Steve’s optimism for Apple’s bright future. Steve has been an incredible leader and mentor to me, as well as to the entire executive team and our amazing employees. We are really looking forward to Steve’s ongoing guidance and inspiration as our chairman. I want you to be confident that Apple is not going to change. I cherish and celebrate Apple’s unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that — it is in our DNA. We are going to continue to make the best products in the world that delight our customers and make our employees incredibly proud of what they do. I love Apple and I am looking forward to diving into my new role. All of the incredible support from the board, the executive team and many of you has been inspiring. I am confident our best years lie ahead of us and that together we will continue to make Apple the magical place that it is.”

The orchestration of Jobs’ announcement is a perfect example of how to execute crisis management and general strategic communications by:

·         Controlling the message
·         Ensuring accurate and timely material news to all audiences simultaneously
·         Maintaining brand, management, and corporate credibility
·         Minimizing any damage to reputations of individuals involved
·         Reducing the risk of future business problems
·         Focusing on the future

This may appear easy, but in practice things can rapidly get out of control. Just look at what happened to Hewlett-Packard when it announced (simultaneously) that it was exploring “strategic alternatives” and might sell its dominant personal computer business, it was scrapping its new, much ballyhooed TouchPad tablet computer, and it was acquiring a British software concern for more than $10 billion. The stock plunged 20%.

This communications fiasco came about a year after CEO Mark Hurd was forced to resign in the midst of allegations of sexual harassment and expense account irregularities. The one-year decline in H-P’s stock price is more than 45%, while S&P’s 500-stock index gained about 3% over the same period.

On September 16, 1997, when Jobs rejoined Apple, the stock price that day closed at $5.48. Recently, it was trading at about $390.

Last week, London book makers offered odds on where Apple stock will end the year now that Jobs has resigned as CEO. If you’re curious, the odds are 5-1 that the price will be $400 or more. My view is that even if something happens to Jobs, nothing drastic will happen to the stock. The company is like an aircraft carrier. Even major competitors like H-P surrender if a rival product to Apple doesn’t sell. Although it might be difficult to imagine, Jobs’ DNA may be so ingrained in Apple that the company could get even better!

Jobs or no Jobs, it’s hard to foresee anything stopping a company that seems to have the best of everything…including a strategic communications team that knows exactly what it’s doing.

Joe M. Grillo, a partner at Nicolazzo & Associates, also contributed to this blog.