Stress Test and Lessons for CEOs [by Richard Edelman]


I have just read former Treasury Secretary Timothy Geithner’s new book, Stress Test: Reflections on Financial Crises. It is a compelling tale of his government service, from the president of the Federal Reserve Bank of New York to the Treasury Department. But most important to me as a communicator is his “cri de coeur” about his failure to explain his policies. “I wish I had done a better job of explaining our strategy, so that more Americans would have understood that we were working on their behalf and wouldn’t have lost so much faith in their government.”

So what can we learn from Geithner’s experience to guide our CEO clients:

  1. Get them off on the right foot – Go public when you are ready, not before. Geithner was pressured to go out three weeks into the Obama Administration to outline the financial stability program. The problem was that there was only a general framework in place, based on the novel concept of a stress test for banks (did they have enough capital to withstand further shocks). President Obama promoted the speech as “Geithner’s moment in the sun.” By his own admission, “the speech sucked. I swayed back and forth… kept peering around the teleprompter… I looked like a shoplifter. My voice wavered… I had spent so much time devising our strategy and fighting over its substance that I had spent virtually no time on getting the explanation right. I had neglected the theater.” So Geithner unnecessarily absorbed punishing blows such as those from Reuters: “This plan is seen as convoluted, obfuscating and clouded.”        
  2. Put CEOs into situations in which they can flourish – Geithner’s staff arranged for him to sit with homeowners whose mortgages exceeded home value. “I inundated them with the constraints we faced instead of listening patiently to their stories and feeling their pain.” His aide’s response, “Let them have their moment to explain.” You have to know your client. Some, such as Rick Goings of Tupperware (disclosure: Edelman client), are unbelievably talented with groups of his salespeople. In other situations, the COO or CMO can be deputized and charged with managing outreach to stakeholders.
  3. Provide a narrative that guides coverage of the institution or the company – Geithner acknowledges that “the narrative of good versus evil was irresistible… we were saving irresponsible bankers while they continued to pay themselves huge bonuses. The conventional wisdom hardened quickly… the media rarely tried to explain the situation was not so black and white… but I wasn’t a natural communicator… and I wasn’t very eloquent and rescuing banks from failure was always going to be hard to explain.” I don’t accept any client saying he or she can’t communicate; it is simply a necessary part of a leader’s job. You have to work on a story that makes sense; in particular to explain controversial decisions such as assuring creditors of financial institutions that their loans will be repaid as a means of reducing uncertainty in the markets. You go quiet and you allow legends to develop – such as Goldman Sachs – as the vampire squid getting bailed out by the U.S. Government’s infusion of capital for AIG. It is the job of the PR person to work patiently with the client to develop his or her narrative. This may not happen in first week or month. It may evolve. That is fine. But it is something to be worked on every day until it is set. Then repeated until it is part of the client’s repertoire because it takes repetitive use of a theme to get an audience to believe it.
  4. Tell us the inconvenient truth while the crisis is at its peak – In Geithner’s case, he adopted the Colin Powell Doctrine; once war is unavoidable, “commit to overwhelming force… plan for a long war. The more you commit to do, the less you’ll have to do. If you take the extreme risk out of the market, you’ll assume less risk of extreme losses and you’ll attract more private capital… you should err on the side of doing too much rather than too little.” But that was more an implicit than an explicit approach during the financial crisis… the numbers just kept getting bigger without a governing principle. I knew about the “bazooka” analogy used by his predecessor Hank Paulson but Geithner never gave me something to guide my understanding. The PR person needs to invent a popular phrase that simplifies the complexity. This does not mean to trivialize but actually instead to explain in a shareable and clear manner. Because of short attention spans, you must capture the essence of the action in a few words, while providing the option of deeper analysis for those who want to engage.
  5. Let the public perceive you as a person, not as a robotic bureaucrat or unfeeling CEO – Geithner writes, “I don’t think the public ever really got to know me… The broader misperception that I was a Wall Street lifer on loan to the government was damaging not just to me but to the President and at times the country… these myths served to undermine people’s faith in my motives and intentions and cast a shadow over everything we did.” So let them know your background as a kid who lived in six countries or who struggled to make the high school basketball team. Tell stories that can be repeated. Bill McDermott, CEO of SAP (a former client), told me that when he was a low level manager at Xerox, one of his salesmen was struggling to close a deal before Christmas. McDermott went with him to visit the prospect, but asked to be dropped off a half hour away. He trudged through the snow and freezing cold, shivering when he got inside. He told the prospect that his car had broken down but that he so wanted to make the deal to improve the client’s business, that he came anyway. You know the punch line; deal signed in five minutes, scotch begins to flow, career moves on.

We are in a period of discontinuous change, with low levels of trust in institutions and their leaders. There will always be leaders such as Geithner who asked simply to be judged on results. But in order to achieve those results, you have to bring your publics along, to keep them briefed on progress against specific objectives, to reassure them that their emotional concerns are being valued and addressed. Communications is not an optional activity, it is fundamental to the success of the leader.

Richard Edelman is president and CEO of Edelman Public Relations.

Editor’s Note: This piece written by President and CEO, Edelman, Richard Edelman was first published on May 28th on Richard’s 6 A.M. blog. With his firm’s permission, we republish it here as a contributory, industry supportive piece.

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