Paul Holmes

Two hallowed names in corporate America have made headlines over the past few weeks - and not in a good way.

Two hallowed names in corporate America have made headlines over the past few weeks - and not in a good way.

In the twin fates of General Motors and Morgan Stanley, there is a message for all US corporations and those responsible for managing their reputations.

GM recently announced plans to lay off 25,000 workers - or about one out of every six employees across the US - after a first quarter loss of $1.1 billion that the automaker attributed to increased competition from Japan and skyrocketing healthcare and pension-fund costs. GM needed to cut expenses, and staffers were its greatest expense.

At the same time, the company announced that it was "extending" its traditional employee discount to all its customers. I can't help feeling that if you're a GM employee, this adds insult to injury. GM's claim that this is an employee discount for customers is one spin on its new promotion; another more cynical perspective is that the company simply lowered prices to compete more effectively and eliminated its discount for employees.

Meanwhile, Morgan Stanley CEO Philip Purcell announced plans to step down, following months of pressure from dissident shareholders. Purcell, with the support of perhaps the most sycophantic board of directors in American business today, was able to survive complaints about mediocre financial performance, but not the steady erosion of talent. The defection of nine from the firm's stock-derivatives division appeared to be the final nail in Purcell's coffin.

As The Wall Street Journal observed in an editorial last week, "Once upon a time, in a Wall Street far, far away, an investment bank's capital was largely financial. Nowadays, it's mostly human, which is the main reason Purcell will be leaving his job as the CEO of Morgan Stanley."

Clearly, there is a dramatic difference between GM, where the rank and file, at least, are little more than overhead; and Morgan Stanley, where people are not a cost, but an investment and - pardon the cliche - the company's most valuable asset.

That's not a criticism of GM's management, but simply a reflection of the difference between traditional manufacturing businesses and service companies where knowledge workers are now the most critical source of competitive advantage.

The point is that tomorrow's big and successful companies will look more like Morgan Stanley than GM. In fact, the GM of tomorrow, increasingly dependent on knowledge workers, will look more like Morgan Stanley than the GM of today. And, as the world changes, companies will need to be more cognizant of the influence of staffers and the primary importance of managing their expectations and ensuring their loyalty.

  • Paul Holmes has spent the past 17 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of

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