</strong>Providian rebuilds by taking action - not talking

Providian Financial has been successful in communicating to stakeholders that it has recovered from its rough period while repositioning itself in its industry through actions, not words.

Providian Financial has been successful in communicating to stakeholders that it has recovered from its rough period while repositioning itself in its industry through actions, not words.

It's been a long road from the brink of insolvency to ringing the opening bell on Wall Street earlier this year. But communications has played a vital role in helping Providian Financial weather the perfect storm that slammed the company in late 2001.

The credit-card company's customers were largely higher-risk individuals who didn't have the best credit histories. Thus, they were more susceptible to the recession. As the company's losses were spiraling downward, it was so close to insolvency that it looked as if federal regulators might have to step in.

Not exactly the kind of news that boosts employee morale or wins much confidence from investors. So when the company brought on new management, with plans to alter the business strategy, close facilities, and lay off employees as part of the company's survival and rebirth, SVP of corporate communications Alan Elias knew that at the outset, less was going to be more.

"I had our new CEO do a series of media interviews when he first started," says Elias. "Then, I didn't have him do any more for a year. It was important for him to focus on the healing process and turning the company around.

"My job, from a media relations perspective, was to keep us out of the media," he adds. "We needed to stay under the radar and let the IR people do what they needed to do."

Action, not talk, is what the company needed to show groups of stakeholders that the company was moving in the right direction. Providian brought in Abernathy MacGregor to assist with financial communications, which it continues to do today.

Investors wanted as much information as possible to understand the depth of the problem and the solutions the new management team was proposing. Employees, caught off-guard by the company's woes, wanted to know about the company's future and whether there was a future for them. And the media, smelling blood in the water, were ready to write Providian's obituary.

"Demonstrating action is the number one rule of crisis communications," says Elias, adding that his team works closely with IR, which provides proof of the company's resurgence.

What Providian had going for it was a weak consumer brand. Elias admits that it was a blessing, and a curse, that the company did not have a strong identity in the marketplace. So while it had millions of customers to serve in the midst of the chaos, those customers were largely unaware of Providian's problems. That presented the company with an opportunity to rebuild the brand in the eyes of the media and investors, while presenting it to many customers for the first time.

CEO Joseph Saunders came in and immediately sold various customer portfolios that were either too high-risk or were a drag on the company. That helped reduce the company's credit loss, reduce operating expenses, and stabilize the company's financial condition. Instead of focusing on higher-risk customers, Providian was now focused on mainstream America - a safer bet, but also a more competitive market.

That initially satisfied many audiences watching the company. BusinessWeek dubbed Saunders the company's "makeover artist," and pointed out several of his accomplishments to date - a lower credit-loss rate, rising revenue, and a higher stock price.

"Without question, they've done a good job of turning things around," says Chris Brendler, an analyst with financial services firm Legg Mason. "They've done a good job of finding areas where they could grow."

Communicating with staff

But for the business to improve, stakeholders needed to be on board, particularly employees, who heard directly from Saunders via voice-mail updates and other means.

Most of 2002 and 2003 was focused on salvaging the company and moving it in the right direction. While much of the communications activity, such as introducing a new management team and its ideas, was mostly for the benefit of Wall Street, the communications team was also cognizant of communicating these changes to employees.

But sometimes that meant delivering bad news, as well as good. The San Francisco-based company severely cut its staff, from 13,000 in 2001 to 3,400 today. Elias' team had to balance the bad news of layoffs and office closures with the fact that this was being done to ensure that Providian would once again be a financially stable company with a plan and vision for the future.

Layoffs and office closures were cast as just part of the company's efforts to decrease operating costs and increase efficiency. Providian understood staff concerns, but reminded employees, as well as the media and investors, that it was doing everything it could to provide the best possible products and pricing.

Just as important was making sure the remaining employees had confidence in the company's new direction. "We just started setting clear company goals so that everyone understands that we are one company, moving in the same direction," explains Dan Shore, director of employee communications. "And we wanted them to know that they were a part of that."

Providian also implemented several programs to reach employees, including monthly newsletters, town-hall meetings between employees and executives, voice-mails from executives, weekly e-mail newsletters, monthly conference calls, and a quarterly employee awards program.

"When our employees saw our company in the news, we wanted them to feel pride," says Elias, adding that the multiple channels were used to convey consistent messages at all levels so that employees would not just understand what was happening in the company, but also recognize that they were crucial to making that change a reality.

"When you get into a situation where the stock drops and the CEO leaves, employee morale is a top priority," says Ellen Richey, vice-chairwoman of enterprise risk management. "Our new CEO recognized that. You can't have a turnaround without addressing that."

Providian also enhanced its philanthropic programs, developing more opportunities for employees to work together toward the community, says Loren Brown, manager of community affairs. To help boost morale and the company's reputation, it was important to demonstrate that Providian was still a member of the communities where its employees worked.

"We wanted to provide opportunities for employees to get together with co-workers, friends, and family, and support them in their passion to give back to the community." Providian's involvement ranges from donations to facilitating company teams to work directly with local nonprofit organizations.

Branding challenges

After the painful changes - from shedding business units to layoffs - was the equally challenging task of introducing the new brand. And this was crucial, as Providian now finds itself in a much more crowded market. A new suite of products, along with a new logo, tagline, and brand promise, were all introduced last year with the assistance of GolinHarris, which continues to provide product PR. And communications has been essential to introducing and sustaining the new Providian, as it doesn't have the ad budget of larger rivals, such as Capital One and MBNA.

"Compared to those 800-pound gorillas, we have to be much more savvy," says Susan Ehrlich, SVP of planning and development in the marketing department. "So we're looking to make the things we do newsworthy. We're the only credit-card company that offers free access to [credit] scores. People understand what is on their report. And we're able to talk about how we help people manage their credit better."

The company briefs the media on the strides it is making fiscally and on products that help customers understand and manage their credit better, which are cornerstones of the new brand promise. The credit-card battle is won and lost at the mailbox, says Elias. Whether people open or ignore the offer envelope sent to them has a lot to do with their familiarity with the brand.

And that is the challenge Providian now faces, says Rick Shane, an MD with investment bank Jefferies.

"The credit-card industry is mature and saturated," he says. "Everyone is fighting for a piece of the pie that isn't growing that much. They've improved in the eyes of Wall Street. But it's one thing to turn a business around; it's another to make it thrive and grow."

PR contacts

SVP of corporate comms Alan Elias

Director of employee comms Dan Shore

Manager of community affairs Loren Brown

Project manager Jennifer Haapala

PR agencies Abernathy MacGregor, GolinHarris

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