CEO REPORT: PR takes center stage with CEOs - We asked the nation’s leading CEOs to assess the importance of PR in today’s business age. And for an added bit of fun, we asked them to rate the PR skills of their fellow CEOs. Adam Leyland ex

The public at large may be suspicious of PR. Journalists may underplay its role. But try telling that to the new-age CEOs. The annual PRWeek/Burson-Marsteller CEO survey has found overwhelming evidence to suggest that after years of under-appreciation and misunderstanding, CEOs increasingly value public relations and its practice, and are more and more clued in to reputation management.

The public at large may be suspicious of PR. Journalists may underplay its role. But try telling that to the new-age CEOs. The annual PRWeek/Burson-Marsteller CEO survey has found overwhelming evidence to suggest that after years of under-appreciation and misunderstanding, CEOs increasingly value public relations and its practice, and are more and more clued in to reputation management.

The public at large may be suspicious of PR. Journalists may

underplay its role. But try telling that to the new-age CEOs. The annual

PRWeek/Burson-Marsteller CEO survey has found overwhelming evidence to

suggest that after years of under-appreciation and misunderstanding,

CEOs increasingly value public relations and its practice, and are more

and more clued in to reputation management.



The survey polled CEOs at companies in all size ranges, from Fortune 500

giants to companies with sub-dollars 1 billion in revenue. In each

revenue bracket, there was a widespread recognition of the importance of

PR. Four out of five CEOs (79.9%) believe that PR is more important to

their company than it was five years ago.



Among the very largest firms, with revenue of dollars 5 billion or more,

the number is even higher, at 90.9%.



More encouraging still is the fact that an even greater number, 85.1%,

believe PR will become more important in the next five years. Indeed

100% of CEOs at companies with revenue of more than dollars 1 billion

believe this to be so.





Why is this?



It’s a complex web of factors, but this wouldn’t be America if money

didn’t come into play. In the past, intangibles such as brand value,

employee retention, strength of management and others have been played

down as factors influencing stock prices because they do not show on the

balance sheet. But the clear majority (85.5%) of CEOs now believe that

effectively managing their company’s reputation affects the stock price

(see table 6). And in the largest companies (with revenues in excess of

dollars 5 billion), more than nine in every 10 CEOs (91.4%) accept this

as fact.



Exactly what has created this shift in share-price formulas is hard to

say. One of the key ingredients has been the dot-com startups, which are

the last word in intangibles: overnight they can be valued at prodigious

prices, based not on results but on a loose mix of buzz and potential

and proximity to other business models. ’When venture capitalists hand

the check over to the latest dot-com,’ says Lou Capozzi, CEO of MS&L,

’their advice is to hire a PR firm.’



But it’s not only hype and potential that is educating the new

generation of CEOs. A recent study of the Fortune ’Most Admired

Companies’ rankings, conducted by the Council of Public Relations Firms,

finds a direct correlation with the amount of money and time and

attention spent on PR and IR. A Fortune Yankelovich survey of Fortune

subscribers in 1998 similarly found that companies with high corporate

equity (based on a weighted combination of awareness, impressions and

likelihood to engage in supportive behavior) had 12% higher P/E ratios

than those with low equity. For the average Fortune 100 company, that

translates into a market capitalization increase of over dollars 5

billion.



’Obviously, we still live in a world where

’earnings-per-share-per-second’ have a profound impact on company

valuations,’ says Gus Weill, chairman, US Corporate/Financial Practice,

Burson-Marsteller. ’But this survey clearly shows that CEOs understand

reputational issues - often far-removed from financial performance - are

an increasingly important component of stock price.



’Today, companies and their CEOs operate in a dizzying swirl of scrutiny

from more audiences, on more issues and through more channels than ever

before. It’s no wonder that PRWeek’s survey reveals such intensive

concern about reputational issues.’





Stakeholders



One of the key audiences to which Weill refers is the new investor

community. ’Among the several reasons for the growing importance of PR,’

explains Burson-Marsteller chairman Harold Burson, ’is the growing

interest of the average American in business because of greater stock

ownership by the workforce as a result of 401k plans, IRAs and the

like.’



At the same time, Burson perceives the media’s increased and more

intensive scrutiny of business, which has become not only front page

news but also a major component of television news.



’The demand for information about companies and the news hole available

to convey messages have both grown exponentially,’ adds Rubenstein

Associates chairman and CEO Howard Rubenstein. ’With this increased

scrutiny of business, the importance of image and appearance has

increased a great deal, and more attention is being paid to the

perceptions of various constituencies.’ For CEOs, this means that they

must have an enormous grasp of detail and the ability to get their

message across.



It is the function of PR counsel - both inside and outside the company -

to see that he or she has the relevant information and the means to

convey it succinctly and efficiently.





Media



Another key factor in the rise of PR in the corridors of power is the

fragmentation of the media. ’Public relations will become more important

because the media will become more complex as they proliferate,’ says

Burson. ’This will make it more difficult to disseminate messages that

can differentiate one entity from another. As this happens, public

relations will become less an art and more a science.’



Moreover, PR’s ’science’ will lead to the ’proliferation of media and

technologies to carry it,’ says Philip Webster, president of the Webster

Group. ’The globalization and instant nature of communications, (which

together) have resulted in a geometric expansion of communications

messages, and a far greater need for PR professionals to craft and

manage them.’



All of these factors are expected to have a growing influence on the

lives of CEOs. ’The trends that are increasing the importance of PR will

only accelerate in the next five years,’ says Rubenstein. ’The

globalization of business, the intensity of competition, the

proliferation of media outlets, the impact of instantaneous

communications and the ubiquity of the Internet will all continue. The

number of issues in every sphere - public policy, investor relations,

regulation, community affairs, sales and marketing - will increase and

diversify. All these converging demands will boost the need to reach out

and to respond.’





The Internet



But it’s the Internet, of all these factors, that potentially presents

the biggest PR challenge - and of course, provides the most work. As

Rubenstein says, ’The company web site is taking on tremendous

importance as the front-line medium through which current and potential

customers, investors, employees, suppliers, press and general public

gather basic information.



And other sites, such as Edgar, which is operated by the SEC, as well as

trade associations, news media, investment, industry and special

interest sites, routinely carry detailed information on companies.’



The upside is, of course, plain to see. ’The Internet has revolutionized

PR,’ says Richard Edelman, CEO of Edelman PR. ’It has given us a direct

pathway to the consumer, enabling us to circumvent the media as a filter

and to build relationships directly with consumers, while still allowing

us to work as intermediaries with the media.’



This gives CEOs and PR pros an invaluable opportunity to put a message

across without meddling and editing in the journalistic process.

Shareholders can now see the full text of a company’s quarterly earnings

announcement within minutes of its release, rather than rely on an

edited wire service version that appears in a newspaper the following

day. Increasingly, events like news conferences, analysts’ calls and

annual meetings are available on the Web, bringing the company and its

executives ever closer to the general public. And the ability to make

large amounts of information available to the world at the touch of a

mouse will ease the demands that general information requests put upon

corporate PR departments.



Above all, it’s instant. ’The Internet allows a company to act quickly

in seizing marketplace opportunities and in presenting its case

unimpeded in times of crisis and confusion, says Jack Bergen, prexy at

the Council of PR Firms. ’While it won’t replace the reputation factors

in the traditional media, the speed and confidence with which the

company deals with the Internet will itself affect the overall

reputation.’ By the same token that one can instantly respond in a

crisis, so the speed of decision-making and the bar of accountability is

raised.



’The Internet makes it harder to manage the company’s reputation,’ says

Bergen. ’It demands a speed of communicating that challenges the pace of

decision-making in most organizations. It also give a potent outlet for

critics of the company. These factors raise the importance of PR to the

organization, strengthening its case for resources and internal

influence.’



’In today’s dynamic marketplace,’ adds Edelman, ’the public has

virtually instant and universal access to information. This has led to a

demand for transparency and immediacy of response from companies. In

effect, companies are now subject to the same demands for information

from individuals as they are from Wall Street analysts. This is no

longer a closed game - everybody’s in the game and they all want a level

playing field.’



As well as being instant, the web is constant. ’The Internet is always

’on,’’ says Larry Weber, chairman and CEO of Weber PR. ’It is 24/7, and

a company has to act immediately. And its free-form, democratic,

anyone-can-participate nature means you cannot hide anything. Think of

Intel and the chip disaster, or more recently, Ford. It’s right there -

warts and all - for all to see.’



’If the essence of corporate reputation is what people say about your

company, then the Internet puts word of mouth on steroids,’ adds Harris

Diamond, CEO of BSMG Worldwide. ’Several recent studies have found that

people profess to express themselves more aggressively and more

truthfully on the Internet. Of course, this can work to the advantage or

detriment of a company. True, you can obtain important insights, which

can help you build a stronger, more responsive company.



’On the other hand, if service stinks, if performance lags, if your

employees hate you, not only will you hear about it, so will everybody

else - including other customers, shareholders and your rivals,’ Diamond

adds.



And it’s not just in crisis, of course, that the Internet provides new

headaches. It’s also a freewheeling forum of gossip, half-truths and

downright lies. ’The downside of the Internet,’ says Burson, ’is that it

provides a low or no-cost forum to cranks and critics alike. No

verification is required and legal recourse for the most outrageous

libel is doubtful.



The challenge for all institutions - and public persona - will be to

develop real-time response mechanisms.’



’The notion that we can ’control’ a message in the Internet Age is

ludicrous,’ concludes Don Spetner, VP of corporate communications and

advertising at SunAmerica. ’This is a frightening proposition for many

corporate executives.’ The survey asked CEOs to assess the impact of the

Internet in managing company reputation. What it found was that 62.2%

believe it is playing an ’important’ role, 31.6% think it is playing a

minor role and only 6.2% think it plays no role at all (see table

7).



In larger companies (with revenues of dollars 1 to dollars 5 billion),

more CEOs consider the impact of the Internet more minor (40%), but none

believe it to play no role at all. In the largest companies (with

revenues in excess of dollars 5 billion), the impact is downplayed still

further, with only 54.5% thinking it will play an important role, and

9.1% arguing that it will play no role at all.





Multiple tools



It’s hard to assess these last findings altogether. Could it be that

larger companies have several key constituencies who are likely to be

influenced without the intervention or involvement of the Web, like

government officials and stock-market analysts? More likely it is the

fact that in companies of this size and complexity, no one tool can be

said to have an overriding influence; that the CEO and PR team have

several tools with which to manage the reputation of the company.



Or could it be that a large number of CEOs at Fortune 500 companies

simply do not understand the role of the Internet in managing their

reputation?



It seems unlikely. Asked how the advent of the Web affects a company’s

ability to manage its reputation, it turns out that CEOs at the largest

companies are most likely to recognize the reputation issues that the

Internet raises (see table 8).



Only 27.4% of CEOs thought the Web made it harder while 49.4% thought it

made it easier and 23.2% believe it has no effect. Among the largest

firms, however, it is seen as a potentially damaging agent, with an

above average 45.5% rightly suspecting it’s harder, and a below average

36.4% feeling that it’s easier.





Proactive



As all these factors converge, the evidence of the PRWeek/Burson-

Marsteller CEO Survey suggests that CEOs are taking an increasingly

proactive PR approach. A few years ago, the role of the PR officer was

little understood.



Often left out of the loop, they were regarded as a triviality, and they

were appointed and discarded with casual ease.



But as the survey confirms, the function is no longer left to chance:

85.2% of CEOs like to personally choose the person who runs their head

of corporate communication. And for companies with dollars 5 billion or

more in revenue, that figure rises still further, to 90.9%, with only

9.1% prepared to inherit their predecessor’s appointee.



This suggests a clear belief in the counsel of PR pros. And further

evidence is provided by the question of reputation management (see table

5). Asked who they would turn to if they had a reputation problem, more

than half (56.9%) said they would consult a PR professional.



The survey finds a direct correlation between the size of the company

(and thus the potential damage in dollars and cents) and the credibility

and importance of PR counselors.



In smaller companies, only half the CEOs polled (50.4%) would seek out a

PR pro. Other popular options would be marketing experts (17.7%),

management consultants (15%), ad gurus (10.6%), lawyers/general counsel

(4.4%) and human resource experts are bit players.



As the size of the company goes up, however, the picture changes. At

companies with revenues of dollars 1 to dollars 5 billion, PR counsel

starts to rise in stock (up to 61%), as do marketing (19%) and general

counsel (9%).



Management consultants (11%), on the other hand, diminish in importance

as reputation fixers. Advertising, in companies of this size, is seen as

irrelevant, and so is HR.



When you examine the situation for the very largest firms (with revenues

of dollars 5 billion or more), the value placed in PR counselors becomes

most pronounced: while marketing experts continue to be valued at the

average of 18.2%, 72.7% now turn to PR. In the meantime, management

consultants (9.1%), the much-feared Big Brother figures of public

relations paranoia, have almost completely disappeared off the radar

screen as a source of reputation advice; and the opinion of lawyers and

general counsel is now ignored altogether.





CEO as figurehead



And what of the CEOs themselves? How important is their own public image

to the overall company reputation? It is clearly a major factor, with

62.6% believing it to ’greatly’ contribute to the overall company

reputation, and 23.5% acknowledging that it ’somewhat’ plays a part. In

other words, 86.1% think it greatly or somewhat affects company

reputation, and only 6% overall dismiss it completely as an influence

(see table 1).



The self-perceived importance of the CEO is most pronounced in smaller

companies, with 89.4% considering it greatly or somewhat influential.

But interestingly, it’s once again CEOs at the largest companies (with

revenues in excess of dollars 5 billion) who are most ambivalent: only

45.5% believe it to ’greatly’ influence overall company reputation;

while 36.4% say it influences the company’s reputation somewhat (making

a total of 81.9%) and 18.2% say it matters not a jot.



Perhaps that’s because the larger a company, the more people there are

to shape and influence the reputation, and the more people there are to

be influenced.



But either way, PR has the means to unite these factors. ’It’s the

knowledge age in the new economy,’ says Matthew Gonring, worldwide

managing partner, communications and integrated marketing at Arthur

Andersen. ’Value is in intangible assets - people. People have basic

needs from their employer - they want a leader and plan to follow, they

want to be able to make a difference and grow and to learn. The appetite

for all of these characteristics can be fulfilled from a responsible

organization and a fundamentally strong PR program.’



The PRWeek/Burson-Marsteller CEO Report was conducted in October 1999

by Impulse Research, Los Angeles. It was sent out to 10,000 CEOs, and

from the responses, 269 CEOs were selected for analysis. They

represented companies with revenues of less than dollars 1 billion (164

respondents); dollars 1 billion to dollars 5 billion (48); and in excess

of dollars 5 billion (57). For further information, contact Adam

Leyland, editor-in-chief, at (212) 251-2600.





THE BEST: Which CEO has managed the reputation of his/her company most

skillfully in the last 12 months?



1. Bill Gates Chairman and CEO, Microsoft Corporation



2. Steve Jobs Interim Chief Executive Officer and co-founder, Apple

Computer; Chairman and CEO, Pixar



3. Jack Welch Chairman and Chief Executive Officer, General Electric



4. Carly Fiorina President and Chief Executive Officer,

Hewlett-Packard



5. Jeff Bezos Founder and CEO, Amazon.com





THE WORST: Which CEO has managed the reputation of his/her company least

skillfully in the last 12 months?



1. Bill Gates Chairman and CEO, Microsoft Corporation



2. M. Douglas Ivester Chairman, Board of Directors, and Chief Executive

Officer, Coca-Cola



3. Donald Trump Chairman of the Board, Trump Hotels & Casino Resorts



4. C. Michael Armstrong Chairman of the Board and Chief Executive

Officer, AT&T



5. Michael Eisner Chairman and CEO, Disney.



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