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Building an effective communication strategy
by Randy Ryerson, Pembroke Consulting, Inc.
Executive summary: This article provides a primer on basic public relations and external communications strategy for wholesaler-distributors. We review key elements of an effective communications strategy and discuss best practices that can be used by both large and small distributors. The bottom line: All distributors should have a strategy to preserve investor, supplier, and employee confidence. Publicly traded distributors need to go farther and build a professional corporate communications department to deal with all external and internal stakeholders.
Trying economic times and shaken investor confidence demands wholesale distribution executives communicate effectively to preserve credibility.
Corporate and personal reputations are under siege and the era of the beloved rock-star CEO may have ended. Financial accounting scandals, shareholder lawsuits, and questionable industry practices abound. Sadly, the wholesale distribution industry has not been immune from these stories.
Allegations of channel stuffing, misrepresenting financial performance, and the bankruptcies of dozens of failed roll-ups are just a few stories to grace the headlines in recent months. In some cases, whom you supply or partner with may also drag you kicking and screaming into the limelight. While many allegations have yet to be proven in a court of law, the court of public opinion has reached its final verdict.
The fall-out is affecting private companies, too. A recent Gallup poll found that only 44 percent of all U.S. employees believe their corporate leaders are doing what is best for their employees.
Who’s minding your message?
Effective communications means more than just “spin” you put out to the press. Your corporate communications must reflect genuine actions, practices and commitment to ethics. The old adage of public relations still rings true today: “You can’t polish B.S. It only makes a bigger mess.”
The acts of an organization coupled with the interpretation of those acts by the public forms the opinion of your company. Your communications program is integrally important in helping to shape the opinions of your key audiences and leverage your reputation to advance your corporate objectives and preserve the goodwill toward your brand. All world-class U.S. corporations spend significant time, money and effort in managing their communications. Distributors with sound communications programs tend to be well respected, industry leaders.
Everything from earnings announcements, hires, layoffs, accidents, new accounts, charitable donations, or even the way your truck drivers pass through a school zone is like a stone being tossed into a pond. There are many ripples emanating from the source.
Communications is the process of proactively identifying and managing the ripples that might turn into waves which can hurt your company.
You are minding your message if you can answer “yes” to all of the following questions:
1. We have a communications plan.
2. There is a single individual or department in my company who manages all communications with the media. Key communications personnel have some type of formal training in Communications and Public Relations.
3. We make sure our messages to suppliers, customers, employees, and shareholders are consistent, correct and support our vision, mission and values.
4. Senior executives in my company have been professionally “trained” to work with the media during interviews.
5. We track, analyze and measure all comments about our company in the media and quickly correct misinformation.
6. We are proactive in telling the good news and have a crisis plan to respond during times of bad news.
Unfortunately, we find few distribution companies minding their messages or devoting the time and resources to communications planning. Often, we find communications is misunderstood to mean “marketing” and turned over to a sales executive who lacks the training of a PR professional. In public companies, we find a financial executive does the bare minimum of communicating necessary to meet regulatory requirements. In our consulting work, we have encountered many problems with this approach, such as:
- A negative, but incorrect, trade magazine article is used by a competitor’s sales force to steal a key account.
- A new pricing policy is not communicated professionally to the inside sales force, leading to angry customers and lost revenue.
- A new corporate strategy is rolled out, but executives, employees and suppliers all get different and inconsistent messages.
- A company is unable to attract, retain and recruit top sales people or executives due to misinformation or a lack of awareness in the marketplace.
- Key customers do not call because there was no corporate website explaining the products and services offered by the company.
- A poorly written script for an analyst conference call triggers analysts to downgrade the company’s rating.
- A news article highlights the disparity between a positive quarterly report to shareholders and a more pessimistic 10K filing.
The Internet has made it very easy for the media, competitors, customers, employees, and suppliers to easily find and disseminate potentially damaging information. Companies using unsophisticated or ad hoc means to manage their communications run a very real risk of damaging their credibility, losing sales, lowering share value, and reducing employee productivity.
Well-managed communication with your key audiences such as customers, employees, media, financial community, shareholders, and channel partners are mission critical to your success. Other important audiences to consider include government regulators, community leaders, vendors, suppliers, charities, and local chambers of commerce. All of these groups are valuable to help build consensus around your corporate reputation.
Best practices in communications
In working with distribution executives, we have identified the following best practices in PR and Communications:
Influence. The senior communications person has ready access to the senior managers with greatest power in the organization. Ultimately, corporate reputation and image is the responsibility of the CEO. A communications officer supports these efforts by working with the media to develop positive relations, watch your back, and promote the company.
A recent survey by Chief Executive Magazine found that 77 percent of CEOs see themselves as primarily responsible for corporate reputation, while only 3 percent believe this responsibility can be delegated to a chief communications officer.
Integration. All public relations and communications functions are integrated into a single department or are closely coordinated in their actions. Public Relations should not be splintered into a supporting tool for other departments such as marketing, human resources, law, or finance.
Distribution executives should consider organizationally structuring their departments in collaborative groups that have high public visibility and frequently communicate with a great impact on the organization. For example, consider grouping your PR/Communication, Investor Relations, Marketing/Advertising, Government Relations, Human Resources, and Legal teams together in a way that promotes an integrated cross-functional communications process. Low barriers and great teamwork are essential for presenting a cohesive public image and consistent messages over time.
Professionalism. A communications department or executive should be educated in public relations, active in professional associations, and up-to-date on professional literature in communications. The success of your communications efforts will depend greatly on having the right people in place.
Ideally, you should have at least some person at the executive level whose primary responsibility is communication that also has specific training and education in the field of public relations. You can supplement your communications staff with either inside staff or outsource to a PR agency.
Planning. Once you have the right staff in place, your communications team should develop a comprehensive communication plan supporting your business plan, and marketing objectives.
Any successful communications plan starts with research and seeks ongoing feedback from its various audiences. This plan documents the responsibilities, flow of information, and scheduled routine news events such as major new accounts, supplier relations, annual reports, major company meetings, speeches, etc.
Make sure your communications plan builds in components of research, measurement and ongoing evaluation for maximum effectiveness. A separate crisis communication plan should also be developed to ensure the company’s executives know what to do and how to properly respond when bad news hits. Responding inappropriately during a crisis can cause irreparable damage to your reputation and credibility.
Additional challenges for publicly traded distributors
Investors and the Security and Exchange Commission are calling for more frequent and deeper communication. President Bush recently signed the Sarbanes-Oxley Act of 2002 into law and dramatically changed the duties surrounding investor relations’ practices. In August, the NYSE Board of Directors approved new standards in the corporate governance and practices. The trend and importance for well-managed communication and disclosure continues to pick up momentum. Wall Street and Main Street are taking note.
William Blair & Company analyst Jeffrey S. Germanotta, who covers a number of wholesale distribution, industrial products and logistics companies, made the following comment recently:
“I believe CEOs and CFOs who make themselves available to the Street, are forthright in their communication, and have established a reputation for integrity, do their companies and their shareholders a positive service. In addition to the required SEC filings and press releases, it is beneficial to thoughtfully and consistently provide an explanation of the key metrics influencing a firm’s past and potential future performance to ensure investors understand the key dynamics of their investment. Business leaders need to be clear in delivering the message regarding past performance and future expectations, as miscommunications may cause confusion and adversely influence valuations. Given numerous recent lapses in judgment, which have destroyed shareholder wealth, it is extremely important to disseminate information consistently and ensure the data provided is of high reliability.”
A recent study by Standard & Poor’s found the amount of information companies provide in their annual reports can be directly correlated with their market risk and also found companies providing more voluntary disclosure in their annual reports commanded a higher stock price. The era for the bare minimum of communication and disclosure has just about ended. You need to be prepared to communicate strategically or it soon will be forced upon you.
Taking action
There are many excellent resources available online to help you get informed and to start thinking strategically about your communications program. I would highly recommend checking out the following organizations for information about getting your communications program started and hiring the right people to help you get the job done.
Public Relations Society of America
www.prsa.org
National Investor Relations Institute
www.niri.org
International Association of Business Communicators
www.iabc.com
Council of Public Relations Firms
www.prfirms.org
As a CEO or President, sound ethics supported with a good communications program are critical to ensuring your own credibility and are increasingly important components of maximizing your company’s value. Credibility and reputation are assets no corporation should risk. Examine your communications strategy and practices closely and take swift actions to remedy trouble spots. The reputation you save could be your own.
About the Author
© 2003 Pembroke Consulting, Inc. Randy Ryerson is director of marketing and public relations for Pembroke Consulting, a management consulting firm assisting senior executives from wholesale distribution, manufacturing and B2B technology companies. He can be reached at 215-523-5700 or at rryerson@PembrokeConsulting.com.
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