Literal Mayhem » banks

Goldman Sachs About to Ditch its Golden Flack… for a bad PR strategy?

letterhead — Tue, 08 Dec 2009 02:51:48 +0000

No one seems to be dancing to Goldman's tune these days. No matter how hard they crank the 'ole gramophone. But they are trying a new approach, actually publishing dance steps to Goldman's Bonus Hustle… a 14-page presentation on why they make so much damned money.

First though… who's getting the blame for Goldman's missteps? According to Charlie Gasparino it's the highest paid PR guy in the business: Goldman PR chief Lucas Van Praag. (Well… it's hard to say in fact he is the highest paid. Maybe George Sard makes more. But $1 million + probably puts Van Praag close to the top.)

According to the Charlie:

"a much-needed shift in public-relations strategy is in the works, sources close to the firm say"

Hmmm… interesting that this news appeared on the same day that Bulldog Reporter's newsletter (The Daily Dog) reported that Goldman has put out a 14-page slide presentation explaining why its executives deserve to make so much money. And boy is it a dooozy!

DO THE HUSTLE!… THE NEW GOLDMAN DANCE CHART

If this represents the company's "much-needed shift" in PR strategy then it is in big trouble.

The charts and graphs are pretty, if entirely abstruse. Its main point seems to be that Goldman does much better than its peers, which is why its execs get paid more. What it doesn't address are all the issues that people actually have a problem with… like:

– Why does the entire sector suffer from bloated salaries and bonuses?

– Why is your bonus pool so stupendously huge… less than a year after you nearly went bankrupt?

– How did you TRIPLE firm revenues in just three years (2004 – 2007) after five years of relatively flat earnings?

– Could it possibly be that you attached a Hoover to the mortgage and derivatives markets — sucking out tens of billions in earnings and leaving the nation's pockets empty?

THE ZERO-SUM END-GAME

When this game of musical chairs is over, Mr. Van Praag may be without a seat at the Goldman buffet, but my guess would be that Goldman's C-Suite is so hidebound and tin-eared when it comes to reputation risk, that no one could talk sense to them. Even if one dared.

But it does show to go ya, you can bite your tongue in the presence of sr. execs and execute on all their bad ideas to save your job and not rock the boat. But bad ideas are bad ideas and they never work. And the one who ends up executed is you.

The short-term incentive is to shut up and salute. In the long-term it gets you the same place you would have if you'd spoken up and challenged them in the first place.

Kinda makes you think…maybe speaking up and challenging the powerful is worth the risk.

Who knows, you might succeed. At least you can say you tried. And you won't end up the scapegoat for all their bad ideas.

BS of the Month Award: Why I’m Not Fit For GoldmanFlacks

letterhead — Fri, 04 Dec 2009 02:33:51 +0000

Calling the Goldman Sachs $500 million small business initiative "philanthropy" or "lending" is like saying that frosted Pop Tarts are made with "real fruit filling."

Thankfully most media types called it for what it was: BS, BS, and more BS. But it got me thinking about my career in PR… I know two people who work at Goldman in PR. Both of whom are very smart and talented. One of whom actually has a conscience.

After my last in-house gig, I just couldn't take working in financial PR anymore and opted for a poorer but more low-key life of writing. ("Scrivnering" for those who insist on verbifying everything.) And as I was walking home from work one sunny, breezy day in San Francisco, I was cursing my decision.

A place like Goldman was the next step for me. I had even interviewed with the hedge fund arm of Citigroup in its heyday and walked away before the talking really started. (It would have been great money, even if it was a soul killer.)

On that sunny, breezy walk home I imagined that my life would have been much much easier (financially) had I just stepped up that one last rung on the ladder. The people I know at Goldman are probably making $400K a year, maybe even $500K or more. Cushy perks. Great benies. What a life.

But the PR debacle of the "loan" initiative, made me realize that I'm just not cut out for it. And all you PR students and wannabes listen up, because that initiative on its own should capsize any illusions you have about being "the conscience of the corporation" as PRSA ~~blowhard~~ chairman Cherenson put it.

IMAGINE… ALL THE MEETINGS, CLOGGING UP YOUR WORLD…

I imagined sitting in a meeting with senior Goldman executives trying to explain why the $500 million boondoggle wouldn't fool anyone and was just a total waste of 1/8 of the CEO's bonus money…

"We're going to give a million dollars to charity," says one.

"Brilliant idea," says another. "But better make it $5 million. Sounds more generous."

"I have it!" shouts another. "$500 million!! It will knock their socks off. Take all the heat off us. Make us look like we care. We've got to give til it hurts to show them that we're serious. We need to make it serious money!"

Eyes are popping. Hands are shaking. Smiles are beaming all around the room. I'd probably be sitting there with my head in my hands.

"Gentlemen, let me play devil's advocate here for a minute. $500 million isn't squat. From a PR perspective, it's dangerous. It's cynical. It looks like a payoff on the cheap. Especially since after the tax benefit it will only cost us $150 million. You might as well hunker down and keep all the bonus money because that piddling amount will NOT get you the absolution you're looking for. It will just engender more resentment."

Angry glares.

"Well, snot nose… how much should we give?"

I'd say: "All of it."

"ALL OF IT!?!?!?!"

"Yes all of it… The whole $20 billion… At the very least… half of it."

"HALF OF IT!?!?!?!! But that's OUR money!"

"Again… I say this as a devil's advocate gentlemen… not at all as a Goldman communications officer (though some might say they are the same thing)…

"Aren't you people rich enough already? Can't you forgo your bonus for ONE year??? Especially as MILLIONS of people and businesses are on the brink of financial extinction? Can't your… excuse me… OUR… exorbitant base-pay suffice for just ONE year? Just ONE year. That's all I am suggesting.

"Next year we can all go back to business as usual making (and keeping) trillions of dollars and say we've done our part. And the money will buy you, literally, DECADES of goodwill, not to mention the Secretary of the Treasury slot for all of eternity."

Imagine all the open-mouth stares.

"Gentlemen… seriously. This is a bad idea. If a wholesale change in perception is what you're looking for, it will only come from a wholesale departure from business as usual. This is not change. If anything it reinforces the perception of Goldman a bunch of greedy, manipulative shysters.

"Plus, you are ensuring that the next Secretary of the Treasury will come from… … a community bank… or worse… … ACADEMIA!"

AND THE AWARD GOES TO…

I wouldn't last 5 minutes at Goldman Sachs. I barely lasted the 20 years I did spend in PR, and I have very little of my tongue left… from biting on it all the time.

The Goldman initiative is pure, unadulterated bullshit. But what's most galling about it is that they really thought (or why else would they have done it), that it would buy them some goodwill. And my smart, talented friend in Goldman's PR department (the one with a conscience), probably just sat there… with a bleeding tongue. The one without a conscience probably thought it would be a good career move to champion the idea, no matter how bad it was, because the senior executives wanted it.

And you know what… in reality, championing a rotten idea because the C-Suite wants it is often the best career move in PR. Sad but true.

But it still doesn't make a rotten idea into a good one.

And so Goldman Sachs… for your corporate arrogance, your cynicism, your anachronistic faith in propaganda, and your outright shamelessness, we grant you the BS of the Month Award, for November 2009.

Use it liberally. Use it often. But just remember that it won't fool anybody, because it still…

Flashback: P.R. Pros on the Financial Meltdown… Impotent and Wrong

letterhead — Wed, 14 Oct 2009 04:50:05 +0000

Flashback!

We are now just a week or so past the one-year anniversary of the financial bailout. And as I was sorting through some old files over the weekend, I came across an issue of O’Dwyer’s from October 1, 2008… the week of the TARP vote, which was held on Oct 3, 2008.

In that issue, there was an article titled Wall Street Meltdown Rattles PR. In it, several p.r. heavy-weights discussed the affect of the crisis on clients. They also offered thoughts on how the financial services industry would react.

The titan who was most wrong in his prognostications was Manning Selvage & Lee CEO Mark Hass, who said that, “The economic crisis… will accelerate the trend we’ve been seeing among companies to be more authentic, and that’s a good thing.”

Hmmm… ‘authentic’ you say? Looking back on the past year, can anyone say that they have seen a single industry be more consistently and disastrously tone-deaf to public outrage than financial services in 2009?

From outrageous sales junkets, to executive pay, to bonus madness, to lack of financial transparency, to their opposition to consumer protections, to exorbitant fee hikes, to their cavalier return to business as usual in the derivatives market, to spending taxpayer money lobbying Congress to thwart regulatory reform, to a dozen other thumb-in-the-eye fiascos… the industry has been Exhibit A in bad corporate behavior.

OK YOU GOT ME ON THE VALUES THING

Where Hass was actually right, though unintentionally, was in his comment that, “The financial crisis will lead many companies to re-examine their own core values and further align those values with their business practices.”

In fact, they did. They brought their values down into the gutter where their business practices have long resided.

I leave it to the esteemed reader to evaluate Hass’s claim that in times of crisis, “… great brands and companies fall back on the values that defined them and made them great.”

Perhaps these are the values that made them great…

NAIVETE? OR AN INTENTIONAL FOG OF OPTIMISM

Michael Robinson, of Levick Strategic Communications, claimed that clients effort to “fine tune their messaging” will come “once the initial political uproar over the Bush Administration’s to bail out Wall Street subsides.” He attributed the uproar to the “blame game due to the political campaign season.”

He was assuming, of course, that the uproar would subside… assuming that the industry itself would not keep sticking its big swingin’ you-know-what into the hornet’s nest of public outrage.

Dave Senay, of Fleishman Hillard, was equally upbeat. And about as counter-intuitively correct as Hass:

“Smart companies know this is a transitory period and are using it to develop or extend a competitive advantage. [FH] is spending a lot of time helping clients seize the opportunity for greater separation. This is an era that rewards initiative. Rewards fall to the bold.”

Transitory? Here we are a year later and from an image stand point things have never been worse, except maybe in 1932.

And to the “bold?” Given the industry’s antics over the past year, “ballsy” would be a more appropriate word.

THE IMPORTANCE OF P.R. TO MOST CORPORATE EXECUTIVES

We hear a lot of noise in the p.r. profession these days about “authenticity” and “transparency” and “ethics” and “values” and a whole lot of other uplifting whimsy. We hear how these things are the driving force of the profession and that p.r. pros are the anointed speakers of truth to power within the corporation.

Back around October 2008… as the financial services business was imploding, and taking the entire world economy down with it… PRSA chair-elect Cherenson was quoted in O’Dwyers saying that the p.r. pro is “the antenna, conscience, and voice of an organization.” He said that p.r. pros are “keepers of the corporate DNA” and that we have to “fight to own a part of the corporation” because we are “trust-builders whose role is to forge collaborations.”

Yeah… that’s oh so clearly the role that p.r. pros have been playing at banks, brokerages, and investment houses for much of the past year. All their assumed entreaties to authenticity, transparency and ethics have had exactly ZERO impact. (If this were a “green” competition, such a zero-impact lifestyle would win them top honors.)

And if Cherenson is, in fact, counter-intuitively correct, and p.r. pros are the keepers of the corporate DNA, then the profession’s failure to influence corporate behavior one iota speaks volumes about p.r. pros’ impotence. Stubborn, tone-deaf, rapacious self-preservation has won out, as it so often does; it’s the defining strand of corporate DNA and in most instances p.r. pros are powerless to change it.

Most of the time all our happy talk doesn’t amount to a hill of beans.

It may initially make for tasty sound bites, but when mixed with corporate bile, it’s decidedly less flavorful on the repeat.

Hair on Fire: Banks Fight Consumer Protections (Again)

letterhead — Mon, 12 Oct 2009 01:35:15 +0000

Way back in the mists of time… somewhere around the end of the 20th Century… America’s banks were up in arms about pending consumer protection regulations. The issue was ATM safety. And how they handled the issue should be of interest to consumers, legislators, p.r. pros, and banking industry execs alike.

A headline in EFT Report, an industry newsletter, blared… “Beware of ATM Security Legislation: You May Be Next” (12/9/91). And indeed, ATM safety legislation soon sprouted from coast to coast, in cities big and small.

One might wonder what horrifically onerous demands were being made on behalf of customers.

Well, the most horrific and onerous demands were being made in New York City, the epicenter of the ATM safty movement. NYC was about to destroy the fabric of the American banking system by mandating “expensive safety features” at ATM terminals. Features like “surveillance cameras”… “adequate lighting”… “mirrors and reflective surfaces”… and “locking devices” that only allow cardholders to enter.

All of these safety precautions we take for granted today. And in no way have they dented the banks’ ability to profit from their ATM networks. In fact, ATMs are a robust profit center: according to bankrate.com, banks haul in more than $2 billion annually from ATM charges.

BANKS’ PR STRATEGY: PULL OUT YOUR HAIR, DOWNPLAY THE PROBLEM, AND ACT LIKE A VICTIM
The idea of questioning the need for ATM safety precautions may seem like a fool’s errand today. But at the time, the industry was running around like its hair was on fire… like it was the end of the world. According to the industry publication, ATM & Debit News: “a black cloud continues to loom over ATM deployers.” (9/12/93)

A mushroom cloud no doubt.

John Byrne, who at the time was senior counsel to the American Bankers Association (ABA), tried to wiggle out of the issue by blaming the media and downplaying the significance of ATM crime: “The national statistics suggest that the incidence of ATM-related crime is very low, but if you read the papers you’d think exactly the opposite is true.”

The same article in the American Banker had this to say: “To place the statistics in an anecdotal context, one banker compared ATM crime to airplane crashes. Both are attention-getting, he said, but not particularly common.”

Wow. Somebody was really off his talking points that day. What do you suppose would happen to an airline that tried to fight passenger safety regulations with a claim that crashes are too rare to be worth the effort?

RAISE FOOT… POINT GUN… PULL TRIGGER

What’s most instructive about the banks’ approach to messaging is not how lame it was… it’s the fact that it was entirely self destructive. It was, of all people, an industry consultant who hit the proverbial nail on the head with this insight:

“It is as important for customers to feel safe as it is for them to be safe. You can throw around all the numbers you want, but studies show that threats to safety — whether real or imagined — can curtail transaction volume.” (American Banker, 12/7/92)

So there you have it. If people don’t feel safe using your product, then they won’t.

Banks were faced (as they are today) with a classic perception problem: one of their own making that couldn’t be solved except by embracing an enlightened approach to doing business. Unfortunately (and with futility) they stuck to their guns and refused to see how doing business differently might actually HELP them.

Instead, they chose simply to deploy lame p.r. messages to defend the status quo.

It didn’t work then and it won’t work now.

EVENTUALLY BANKS LEARNED (AND PROMPTLY FORGOT) A VALUABLE LESSON

Several years into the ATM safety movement, the banks finally started to figure it out.

In Chicago, the local ATM network operator worked directly with the City Council to head off mandates. In Florida, the president of the southern AMT network (HONOR) actually lobbied in favor of statewide rules — he was afraid of a patchwork of local rules that truly would would make compliance difficult and costly. In Georgia the same lobbying trategy was implemented, successfully.

In New England, then-president of the YANKEE-24 ATM network, Richard Yanak, said: “It makes sense to be proactive to the extent that we can take responsible steps to put in place a framework that protects the consumer and is not overly burdensome.” Despite the mangled syntax, it’s a nice thought.

And John Bannion, then president of the HONOR network admitted that while most areas of [ATM] operations should not be regulated, “It makes sense for ATM safety.”

Lessons: sometimes the critics are right; some things that look purely like perception issues are revealing fundamental flaws in your business; sometimes fixing them (as opposed to fighting them) can actually create new opportunities and improve your business.

DEFENDING THE STATUS QUO: THE BIGGEST MENTAL BLOCK OF ALL?

As Washington debates new consumer protections, the financial services industry has forgotten some key lessons of the past…

Take the credit reporting agencies for example: they fought transparency tooth and nail, claiming that they owned all rights to consumers’ credit histories. Yet, after a bruising p.r. battle that lasted more than a decade, they lost. And guess what: now they make oodles of money selling consumers credit reports, identity protection products, and other types of services that would never been possible if they had not lost that war.

The same can be said of the ATM safety movement. ATMs are now more profitable and plentiful than ever.

The US auto industry successfully fought fuel efficiency and other regulation for decades; it ended up entombed by its own negligence and poor strategy.

Right now, banks and other financial services companies are in a similar mess. Their reputations are in tatters, and deservedly so. They are getting pummeled in the press, and deservedly so. They are being hit from every angle to provide consumers more help, and take a breather from fleecing them for every possible nickel and dime — e.g., having to roll back overdraft fees.

They are losing the war. But if they were smart, they’d admit the limits of “messaging” and address the weaknesses in their business model. They’d also take a lesson from the past and see that “threats” to their way of doing business might actually be opportunities in disguise.

The odds of that happening are pretty slim. But one can always hope…