wallydownundy

In the midst of a bad new year, global insurance group AIG has made news by adding another public relations agency to its roster. It seems unusual that an announcement of this type has been made - perhaps it was to make it easier for journalists to contact the right firm for assistance?

It backfired spectacularly as one commentator tries to come to grips with a taxpayer-funded company hiring public relations agencies. Rachel Maddow then lists all the clients that have hired the same agency - and says, “…evil has PR on speed dial.”

It will be interesting to see how the firm handles its own crisis.

Great communications achieves cut-through. You hear a phrase that you immediately understand and remember - and it epitomises the issue at hand.

Warren Buffett - the Oracle of Omaha - has a wonderful way with words. He’s been tested in his most recent shareholder letter when trying to explain the devastation wrought by the global financial collapse. Buffett says of 2008:

By year end investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.

No confusing that imagery. And yes, I feel much like a battered sparrow. Who doesn’t? 

But what chills the blood is Buffett’s description of the government’s response:

In poker terms, the Treasury and the Fed have gone ‘all in’.

That doesn’t leave any room for maneourvre, does it?

In Australia the government has kept a few spare chips in reserve. The Reserve Bank of Australia chose not to lower interest rates at today’s meeting. That means there’s a little more flexibility for future changes. And Prime Minister Kevin Rudd has rushed AU$42 billion in aid out. But that’s billion with a “b” and not like the $1 trillion now being laid out in America. (Cut to Dr Evil in Austin Powers who exits a time machine and decides, in the 1990’s, to blackmail the world for $1 million. What comes after trillion? Gazillion?)

But back to bloodied birds. If you’re trying to make sense of the global financial collapse then look no further than Warren Buffett’s letter to shareholders. It’s plain, understandable and damn sobering.

After the Detroit CEOs flew private jets to Washington DC, caps in hand, crying poor mouth, the beleaguered corporate jet industry can’t get a break. Cessna has launched a series of advertisements - “We think it’s time to tell the other side of the story”. And oddly I have to concur - to a degree.

Most companies use corporate jets for rapid point-to-point service for mid-level managers. The interiors have more in common with no frills airlines than luxury jets. They fly routinely from headquarters to distant plants in cities no longer serviced by direct flights. Ford had one such workhorse that went from Detroit to Memphis then Kansas City in a routine circle twice a day. There was no on-board catering or movies. It was traveled by engineers and product designers working on day-to-day tasks.

At times like this, the corporate jet is the workhorse of the sky.

But let me tell you about the show ponies. Ford Credit had one CEO particularly enamoured of private jets and Ford had a fleet of them. Each jet was kitted out with an interior evocative of each major brand. My staff were instructed to get the Aston-Martin jet every time. This long-range aircraft was first ordered ostensibly to fly to Asia non-stop from Detroit. Problem was the marble and leather interior weighed so much the plane needed to refuel mid-way through long haul flights. But it was nice inside.

The private jet terminal was small and comfortable and dedicated to Ford management. As soon as all passengers arrived the jet was boarded and cleared for take-off. When’s the last time your flight left five minutes after you got the airport?

In some instances the jet still made sense. Eight executives huddled together to plan the day’s activities then conducted long-distance business with stop-watch precision. But like any smart option the corporate jet was prone to abuse. Like the time an in-flight meeting was called on a direct flight to Orlando with the CEO’s family a few days prior to Christmas. Once the leader and his encourage were off the plane - and the hold was emptied of gifts - the meeting was cancelled and the plane flew back to Detroit.

Today sales of corporate jets have fallen off a cliff. Second-hand jets are available with “make an offer” listed on their web ad. I’d encourage you to gather some friends and bid as a consortium. A plane that commanded $48 million in boom times can now be had for $30 million. Imagine - where else in your life can you make an $18 million saving? At these prices why not buy two? It sure beats flying commercial…

One of Australia’s most contentious CEOs is leaving at the end of June. Sol Trujillo has been in charge of Telstra for the past four years. (Telstra is the former government monopoly telecommunications giant that now must face a competitive world post-privatisation.)

Australians love to hate Telstra - it’s part of the national identity. Yet additional venom has been reserved for CEO Sol Trujillo. In turn he’s alientated government, the media, the public, customers, unions and shareholders. You have to admit he’s been quite thorough.

Before he even took the job or started as CEO Trujillo had several factors working against him. Telstra has offered decades of shoddy service at exorbitant prices. When I first moved to Australia in 1990 it was common to have one call to the USA costing over $100. Today a $100 phone card can keep you in touch for two or three years! Repairs were slow and new installations were slower. Hence - we love to hate Telstra!

Second factor working against Trujillo? Sin of all sins - he’s American. And Americans are universally idolised and despised in Australia (or is it just me?). We’re loud, brash, know-it-alls. We wear sneakers with khakis and shout when talking would do. We’re ignorant of the world and its customs (”Look at the funny Australian money!”). And when we succeed we don’t fade into the wallpaper and share the credit - we thump our chests and say, “Damn right!” Ain’t that awful?

Last year Sol was found to be less trustworthy than…the Wiggles. For real!

But the king pin reason for the “I Hate Sol”club is his approach to government relations and business. He rallied against restrictive government policies that would have forced Telstra to provide competitors discounted access to trunk lines. He fought to retain market share. And he made it difficult for government to take Telstra for granted.

But (and this is a BIG but) Sol did so in a very public manner. He and his team aired their grievances in the media, on-line and in public. It was reminiscent of Karl Rove where “divide to conquer” approaches split red states from blue states, brother from brother. The “in your face” style of issues management was very out of place in Australia and very controversial.

So farewell Sol. And as for the replacement CEO? Get ready. Because you’re replacing Sol people will love you - but only a little. After all, you’re at Telstra. (That is unless you’re a Wiggle!)

Last Monday companies in America announced 70,000 job cuts. That was one day alone. In the USA unemployment tops 10% in numerous states and the national average is inching up daily (especially on Mondays, right?). Nearly every company worldwide is looking to make cost cuts - and most times that involves letting people go. Yet too often it’s handled poorly leading to longer-term problems. Remaining employees are demotivated, restless and scared - “survivor’s guilt” mixed with “am I next” pangs.

So if you’re preparing to shed jobs, here are a few rules to consider:

1. Be Prepared
   Works as the official motto of the Boy Scouts - so it might work for you. Spend time planning the TOTAL cutbacks and then go to your employees. There is nothing worse than “death by a thousand cuts”. Do what you have to do and be done with it. But don’t re-start the sackings a month later. It’s bad planning and even worse management.Also remember all the audiences these employees deal with on a daily basis. Will you have the resources to contact key clients? What about supplier relationships? What critical knowledge needs to be transferred - and how will you manage all your external relationships with a pared-back workforce?
2. Tell It Like It Is
   We’re all adults (mostly). We can handle the bad news. (”Your puppy ran away” may have worked when you were a kid but if the dog is dead tell us the dog is dead.) Explain why the cutbacks are necessary and what it means for the remaining employees. Some will see an increase in workload. Try to motivate the remaining employees to help keep the company viable. McKinsey points out that employees can accept bad news better when they understand the underlying business strategy. Treat us like grown-ups and explain why this is necessary.
3. Treat Everyone With Dignity and Respect
   Fired employees are people, too. Just because they’re superfluous to your business doesn’t mean they’re worthless. People will be in shock when you break the news. Make sure you keep the messages simple - and have on paper all your key points. Most questions centre on the mundane - entitlement pay-outs, long service leave, company car access, etc. But being prepared with these details will eliminate the majority of the trauma. And manage their emotions. They are likely to be in shock (followed by anger).Try to avoid patronising language (”I know how hard this is for you” sounds hollow if you get to keep your job). This is not about you or the company. When you’re talking to people who are losing their job keep the focus on them, their needs, their next steps, etc.
4. Tell It Again (And Again)
   Saying it once is just the start. People need messages to be repeated again and again. We’re currently managing communications for a company under Voluntary Administration. Yet despite letters, web updates, emails, meetings and the like every day someone calls trying to understand the basics. Why are they closed? What’s this mean to me? I reckon people begin to understand the third or fourth time they’ve heard a message - that’s why advertising is effective when repeated. Don’t “launch and leave” - make sure you tell it again and again.
5. Be Prepared for the Unexpected
   No matter how much advance planning, there’s always a surprise. When letting go 300 stockbrokers in Hong Kong for a client, the people who were to be told first in an 8:00 am meeting found their computer access cut off the morning they showed up for work. HR told IT and all PCs were cut off. Those arriving for the 8:00 am meeting were already aware - and angry. A healthcare company in New Jersey I had as a client was working to close a plant. Employees learned the day prior when electricity to certain areas of the plant was cut. Again, a supervisor took remedial action to cut costs.

None of these lessons is foolproof. There will still be slip-ups and surprises. However doing the hard planning in advance and preparing your materials will save a lot of pain and embarrassment - for you, your employees and your former employees.

Heard over breakfast that a friend’s husband was retrenched last month along with 60 other workers in a Sydney finance company. Seems on his daytime walks along Bondi Beach he sees quite a few people he knows - most fellow finance professionals, now out of work.

The global economic crisis is biting hard.

According to The Sydney Morning Herald the finance sector has been hit hardest:

All up, the FSU [Finance Sector Union] estimates there have been almost 5000 jobs lost in the finance industry since the start of the year, most of them in Sydney. Surprisingly, it appears even this may be an understatement. The chief economist at JPMorgan, Stephen Walters, puts the losses at closer to 19,000, based on company briefings to analysts and media reports.

Unemployment hits hard especially when you’re the primary breadwinner. There’s a shame that comes from losing an important element of your identity. I remember the first time someone asked me what I did after being retrenched a few years ago. I replied, “Nothing.” It was more of a surprise to actually say that!

So the advice? Seek out others and talk. Raise your fears, concerns, anger - and strategies for re-employment. Bottling up rage and shame is a mistake. If you don’t become a miserable SOB immediately within months you’ll be clinically depressed.

And enjoy yourself when you walk the beach. Because you will be employed again and you’ll not have the daytime to enjoy the sand between your toes.

It’s hard adjusting to the new world order. Citigroup owes its future to a US$300 billion rescue package from the government. Detroit is crying calamity if they don’t get money - US$25 billion is a start.

Consumers are about to get angry.

The bail-out fall-out is going to be surprisingly nasty. In the aftermath of Enron and Worldcom we consumers sat back in shock. Now with direct government support the levels of participation and demands will ratchet up.

Minimum requirements going forward will be transparency in use of government funds. More likely will be calls for active, hands-on governance as vested parties. The American public will feel entitled as owners of Citigroup and possibly General Motors to be involved in the decision-making.

For other companies, you can expect greater scrutiny on financial solvency and demands for the greatest level of transparency possible.

The bail-out fall-out is you’re going to have to share enormous amounts of information now and forever.

We’re experiencing once in a lifetime structural change to our economy. Last week the CEOs of the major car firms boarded their private jets and flew to DC begging for financial relief. Today Citigroup is seeking a bail-out. The brands we knew that dominated global finance are shrinking rapidly.

In the aftermath of losers will come winners. It’s anyone’s guess who will remain in finance. Auto companies may be unrecognisable - especially if GM is broken into three, as some suggest. By the time this is over - say another two years - we’ll have a new portfolio of companies in key industries.

Don’t look for GM, Citibank, AIG or Yahoo! Do expect HSBC, Toyota, Allianz and Google in their place.

We have a lot more pain in the coming two years. And when it’s over we’ll be scarred and bruised and cynical as hell. And the companies that remain will have to earn every cent of our business.

In “Cabaret” Liza Minelli plays down-on-her-luck Sally. Plucky, determined, forthright and ultimately a loser sent packing all alone.

It’s hard not to imagine Sarah Palin humming “Maybe This Time” on her flight back to Alaska. The night of the long knives is underway. Something’s flowing and it sure ain’t praise:

• Alaskan “hillbillies” is how a McCain staffer described her family.
• Palin shopped the hardest - expected to buy a few outfits it morphed into “Wasilla hillbillies looting Neiman Marcus from coast to coast”.
• Fox News reporter David Cameron says Palin didn’t know Africa was a continent - she thought it was a country. (Fair enough because Australia is a country - and a continent.)
• She arrived in Phoenix with a concession speech in hand - and was surprised McCain didn’t expect her to speak on the night.

What do you do when you’re cornered and it’s coming at you from all angles?

Palin has strengths including mass public appeal. She needs to return to Alaska and govern, then appoint herself as Stevens’ replacement (Senator indicted for felonies but not sentenced yet may narrowly win his Senate re-election; once a convicted felon he cannot serve and Alaska’s governor Palin gets to name his replacement). She need to forge her reputation in the Senate and help rebuild the Republican Party.

Today’s insults and barbs do not merit responses. It’s time to lie low and re-emerge stronger, cleaner and smarter.

Then perhaps she and her fellow Republicans can sing another “Cabaret” classic - “Tomorrow belongs to me.”

In Tasmania a proposed pulp mill to be built by Gunns squeaked through the approval process late last year. Environmentalists decry a plant that turns forests into woodchips. Locals are split with some wanting jobs and others wanting forests. Outside Tasmania public opinion is solidly against the mill.

Spot the Difference

While government approval was granted, the mill has yet to start construction. Why? Consumer activism has made funding the deal a hot potato for banks.

The Three Gorges Dam is the best example of how financial backing can turn into a corporate reputation minefield. This controversial project has been decried for the massive relocation required - some 1.2 million people and 1,500 industries were displaced. Worse environmental and cultural heritage sites are being flooded. Even China now acknowledges there are problems:

Wang Xiaofeng, the head of the Three Gorges Dam Project of the State Council declared: “We cannot win passing economic prosperity at the cost of the environment.”

For bank funding the dam there are similar corporate reputation issues, leading to numerous shareholder resolutions to block damaging transactions:

“…but an outstanding example is the resolutions with Morgan Stanley Dean Witter, Citigroup, and Merrill Lynch concerning their involvement in financing the construction of the Three Gorges Dam.”
Source: Social Funds: The largest personal finance site devoted to socially responsible investing

Now it’s the turn of the Australian banks to feel the heat - today Gunns announced a $300 million non-underwritten rights issue led by Credit Suisse, JP Morgan and Macquarie Capital Advisers.

Gunns may yet build their mill yet the company and its financial advisers will feel the sting of public outcry for some years to come.