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July 29, 2010

Redemption

On Monday, Edelman’s US operations moved onto a new Global Financial System (GFS). Four thousand separate transactions were recorded, from time sheets to expenses. Bills are scheduled to go out early next week to clients. A pretty boring blog post is in store, you might think. Well think again.


In 1998, in my second year as CEO, Edelman was growing quickly and becoming increasingly global. We recruited a new chief financial officer from a division of a Fortune 500 company. She concluded that our home-made financial reporting system based on spread sheets and manually produced bills was antiquated. Since we had PeopleSoft as a client in Silicon Valley we engaged them to install the financial backbone that would carry us into the 21st century. I was content with the salesperson’s pitch, promising immediate access to profitability by client, outstanding receivables by client, productivity of each operating unit. I went back to my day job, counseling clients, managing people, winning new business.


What I failed to recognize was that PeopleSoft hadn’t fully evolved from a human resources package. It needed a partner software vendor to offer a complete financial solution. That partner was a small Midwestern operation called Proamics, which “specialized” in professional services firms in law and accounting. Time and expenses were collected in Proamics, but the accounts payable interface from Peoplesoft to Proamics was so bad, out-of-pocket expenses couldn’t be billed. The Edelman financial team assured me that everything was going well in the test phase, so we shut down the legacy system and moved onto the new platform.


All seemed to be going well, as we sent out our bills to retainer clients. Then the system came up with bizarre bills for hourly clients, which the account teams rightly refused to approve. Within the month, it became obvious that the Proamics and PeopleSoft interface was flawed. We were a ship with a crippled rudder, unable to bill clients correctly and incapable of processing expenses. We could go neither backward to the legacy system nor forward to a dysfunctional new system.


In short order, I concluded that I had a full-blown, company-at-risk crisis at hand. I wrote down a list of action items, from finding a new CFO to bringing in programming assistance from our audit firm to meeting with our accounting staff to tell them we would have to go to manual processing of bills for a period of time to calling our bank to inform them that we would need to tap our credit line to notifying Proamics that they were in breach of contract to calling clients personally to tell them what was happening. I put a time line together and gave myself a deadline for each action.


So in order, I found a new CFO and fired the incumbent. We gave Deloitte sixty days to fix the system by disabling Proamics and enabling manual bill producing functionality. I called our account leaders twice a week to update them. Our internal financial team worked like Trojans to get bills out in consultation with the staff and clients (who were understanding and paid upon presentation of accurate bills). After running our credit line up from zero to several million, we stabilized the ship and paid it back over the course of the next twelve months. Nothing like a near-death experience to prepare you for running a company!


Fast forward a decade, with Edelman’s revenues more than $400 million and our PeopleSoft system now so obsolete that Oracle says it will no longer provide support for the version we have. We began the process of selecting a software vendor and implementing a new system. Hearing the presentations by the sales people, I heard, “This is going to be a piece of cake. It will take only six months to install. We have a full offering now. There will be no customization. Just talk to our customers who are so satisfied.” On and on the palaver was endless. We stayed with PeopleSoft.


This time I was a lot more cautious. We would not go live on the new system without a way to retreat (keep the old system on line just in case). We would test the system in a smaller unit than the massive US division—in Edelman Canada as it turned out. We would hire PWC as outside counsel from the start, with the senior partner reporting to me each month on progress. We would not have a specific budget nor commit to a timeline to complete the installation. The cake would be baked when it was ready, not a minute before.


So here is what happened. I was told it would take six to eight months to complete the work, then two months to test in Canada. In fact it took over a year and a half to customize the system, then a year of testing in Canada where it became clear that there were system processes that didn’t meet our needs. Here is one example: if one senior person disapproved time of a junior staffer, then the whole time sheet went back to the start, requiring re-approval by each senior person, holding up billing. The software consulting firm recommended by PeopleSoft was disappointing at best, with a constantly changing cast of temper-prone experts. Half way through the project, one of them told me to scrap the whole thing. Over time, we brought more of the expertise in-house. I spoke with account people in the Canadian office, went up to Toronto to see how it was being used and why certain executives just would not enter time. At Christmas, I had to make a decision about whether to delay the implementation four more months to install “bundles” of improvements which PeopleSoft programmers had made to the 9.0 version given customer complaints but enduring the higher consulting costs necessary (I opted for the safety of installing the bundles).


Here are the lessons for all of you considering a comparable voyage across the river into the unknown. Put yourself in a position to make informed decisions, not just to approve recommendations by your CFO or your outside accountant. Go into a test phase that is live production of bills and paychecks, not just a simulation. Take the financial estimates provided and double them—this is just like renovation of your home—it will take twice as long and cost twice as much. Make sure that you have a path out of the forest if the worst happens. Get personally involved with your account people, particularly the squeaky wheels who may overstate their complaints but will offer critical kernels of truth. I want to thank all of those at Edelman who have gone on this adventure for the past three years (Vic, Derek, Barb, John, Kristin, Paul, Anna and Gene) and our consultants at PWC. Dogged persistence and commitment to excellence is the Edelman way. And for me, getting a second chance as CEO to do it right has been a blessing.


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July 20, 2010

Liespotting

Did you know that the average person is lied to 25-200 times per day? One study discovered that lies were detected in 37% of phone calls, 27% of face to face meetings, 21 percent of IM chats and 14% of emails. Liespotting, (on store shelves today) a book by Pam Meyer (disclosure: a friend) gives us a way to fight back.


Research indicates that Americans are particularly gullible because of a “truth bias—as a nation we grew up with the George Washington legend of saying that he never told a lie even though he chopped down the cherry tree.” Ms. Meyer told me that “deception is a cooperative act. A lie does not have power by its utterance, its power lies in someone agreeing to believe it. Self deception is where it starts—you are a lot less likely to be duped if you know yourself well.”


Who lies? Extroverted, unmarried men are the worst offenders. Unmarried people lie 70% more to their partners than married people and men tell eight times more lies than women. I can attest to one whopper. On my second date with my now wife, I proudly showed off my new apartment. I walked into the bedroom and to my horror, discovered that the bed was still not assembled. I lamely tried to explain that the cleaning lady had done this and got the retort, “Don’t ever lie to me.” I have lived in mortal terror of home spun spin ever since.


How to uncover a lie? If you are in person, Ms. Meyer advises the BASIC interview technique: Baseline Behavior (laugh, voice, posture or even looking you in the eye too often—people telling the truth only look you in the eye 60% of the time); Ask Open Ended Questions (if somebody repeats a question in full, this is stalling tactic); Study the Clusters (Non verbal clusters such as grooming gestures where even asymmetrical smiles or shrugs are telltale and verbal clusters such as short clipped answers); Intuit the Gaps (logic or behavior gaps); Confirmation (ask the same fact seeking questions repeatedly but in different ways). If you are not in person, use statement analysis, in particular overly specific or excessively formal language, to detect lies.


Why does this matter? The financial impact of deception is significant – from fraud in the workplace to undermining the firm’s fundamental license to operate during times of crisis, an estimated $994 billion a year cost to business. With the number of platforms used to communicate, the opportunity for lying has expanded geometrically.


Ms. Meyer is a technology entrepreneur and has used many PR firms over the years, including Edelman. She said, “Trust accelerates business while deception gums up the gears.” PR pros need to advance transparency – being committed to openly communicating results, failures and successes alike. We must push for the truth-- to cross check what clients are telling us. We should avoid hype which corrodes belief and hinders ability to recover in tough times.


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July 14, 2010

Mr. Smith Goes to Washington

I am off to Atlanta on Friday to sit with the board of the PR Society of America. On the docket is the proposal tabled by Art Stevens and Bill Doescher, both former PRSA leaders, to eliminate the APR accreditation as a requirement for national office. I was asked to sign the petition early this summer and asked Stevens to get us a face-to-face meeting with present board members.


Why am I going? I am not APR. I am not involved with PRSA. Neither are the vast majority of Edelman employees in the US. And therein lies the problem.


PRSA in my father’s era was the counselors’ primary convening place. I spoke to him last night at dinner about his time as chapter chair in Chicago. “It was an important part of my life. I saw my competitors, and we discussed issues ranging from mark-up on expenses to poaching of staff from each other. Edelman people such as Betsy Plank were very involved in the education of future generations, with the PRSSA chapters at universities and with novice practitioners. It was our way of giving back,” Dan Edelman said.


Now the national leadership that represents the broadest swath of public relations practitioners has made itself unrepresentative. Of the 21,000 members of PRSA (I am one), there are only 5,000 accredited. Only 900 have become accredited in the past six years. At the PRSA annual meeting in November, 2009, the Assembly voted to continue to require accreditation for leadership roles, but 70% of those voting on the measure were accredited. In short, the leadership of PRSA has conflated two issues: professional standard and governance.


The intent of the APR is noble; there should be an examination of professional skills. But the current test is a three-hour multiple choice exercise that covers research, ethics, management skills, history of the industry and media relations. Nowhere is there a writing test or an examination of counseling skills. Contrast that with the Institute of Management Consultants which strongly suggests CMC certification as evidence of commitment to the profession. To secure the CMC basic level (they have 3) one needs three years of experience, details from five clients on engagements, an application which requires a written response to a case study, both written and oral exams, and exam on ethics. One needs to be IMC certified to serve on the Board of Directors but some committees are open to non-certified members. The IMC is more relevant as a comparable voluntary association than the legal or accounting professions where one must pass the bar examination to practice.


Now more than ever, the PR industry needs a voice on important issues. We must establish a bright orange line between PR (paid advocates) and journalism, since anyone can publish anything online at a time when the media industry is under siege from economic stresses. Yet the cacophony only grows, with a seeming wave of centrifugal behavior leading to ever more disparate groups claiming to represent the profession’s interests. Why should the PRSA yield its position to the Council of PR Firms when in fact PRSA represents a much broader swath of the business? I opted out of the Council three years ago because it failed to stand up to a controversy that impugned the integrity of the entire industry; PRSA, by contrast, took a very strong stance. We must welcome the profession’s best and brightest to advance PRSA, including new media pioneers (such as Steve Rubel) to help evolve our standards.


So I fly to Atlanta to discuss two items:
1. Open up national leadership roles to any practitioner who will join PRSA.
2. Work along a parallel path to strengthen the accreditation process and make APR relevant.


I would appreciate your views on this matter.


Posted by Edelman at 3:07 PM | Comments (15) | TrackBack (0) | Bookmark and Share

July 8, 2010

Media Strikes Back

At Edelman’s fourth Annual New Media Academic Summit, we convened a superb group of senior media executives who offered insights into the future of the sector. They included Raju Narisetti, managing editor of the Washington Post; Greg Coleman, president of Huffington Post; Gerard Baker, deputy editor in chief of the Wall Street Journal; Jonah Bloom, CEO and editor in chief of Breaking Media; Mark Lukasiewicz, VP of NBC Digital Media; Mike Oreskes, senior managing editor of the Associated Press; David Carey who has just joined Hearst as President of the Magazine Unit; and Jon Miller, CEO of Digital Media at News Corp.

These media leaders are addressing challenges head-on, and are optimistic about their future. Here are a few of the most important insights:

  1. New Readers & Channels—David Carey, Conde Nast group president cited the incremental revenue and readers for its relaunched Gourmet food magazine and Wired’s completely reimaged iPad app. (they sold 95,000 digital copies at $4.99 each in June)., as only the beginning as people are willing to pay for mobility and engagement. Baker described the iPad as a potential game changer, noting that the WSJ has sold many subscriptions at $208 per year for this platform, and the Washington Post charges $1.99 for iPhone application for a year.

  2. New Revenue Options—Bloom believes Media will integrate eCommerce directly into content so “media will sell stuff directly.” So, right beside a book review will be the option to buy the book. Access to the archives, conferences and direct access to journalists via email are also being considered viable premium paid options.

  3. The Pay Wall—Narisetti offered a strong defense of the Washington Post policy on free access to content. “Subscription revenue has always been a tiny part of the newspaper business model. We have 30 million unique visitors each month to our site.” Baker went the other direction describing the Wall Street Journal pay model, “In the beginning of the web, there was optimism that we could focus advertising so ad revenues would suffice. Now it is clear that we need other revenue streams.” News Corporation is bringing in paywalls for its British newspapers and Miller emphasized that will keep investing in quality content to get people to pay.

  4. Trust in Content—Baker noted that the decline in trust in establishment institutions (business, government) extends to mainstream media. “We often fail to properly represent the views of the majority of our readers.” He quoted Oscar Wilde, “The parts that were original were not true and that which was true was not original.” Jonah Bloom noted that “there is not enough originality in stories being tackled.” Lukasiewicz said that “transparency is the new objectivity. We will have a point of view in stories.” Oreskes took a strong position on “Journalism being distinguished by its higher standards for quality, not by ownership of the printing press.”

  5. Narrow-casting—Narisetti wants to get away from the single “front page approach” so that a reader can focus only on specific more narrow interest (politics or sports). “We need multiple front doors to the house, such as PostLocal.com, PostSports.com, PostPolitics.com.” He said that “we link to other sites on stories they break (Politico as example)—we need to offer everything that is relevant.”

  6. Value from Conversation—Coleman said that the Huffington Post gets three million comments from its users each month. “Our content model envisages 1/3 from each of bloggers, original reporting and aggregation.” Narisetti added, “Comments may reflect the market’s view but those who comment represent a narrow slice of readers—but we keep comments as open as possible because these are the most engaged readers.”

  7. New Measurement for Reporters—Narisetti said, “Newsrooms have never wanted to measure how they are performing—specifically how many readers look at each article. We now do a daily report to 120 editors, with page views, time spent, unique visitors, which photos are preferred—metrics that are key to the business.” He said that his reporters must use meta-data to be sure they use words that “help readers to find your story…people search for Republican Party, not GOP, so use that term in stories.” Bloom added that reporters must be able to market their stories via Twitter and Facebook.

  8. Power of Visuals—Oreskes noted that while the AP may have 50 reporters on the coverage of the oil spill in the Gulf of Mexico, the most powerful content has been visual. “People remember the pelican photo or the AP photographer donning scuba gear to get unique video.” He quoted Walter Lippmann, media pundit, “The world outside, the pictures in our head.” At our dinner, key note speaker, Tom Cibrowski, Good Morning America Executive Producer, ABC, also mentioned they are rapidly adopted new hi-def video cameras to reporters to report more quickly and cheaply with video.

  9. Importance of Local Market Dominance—The Washington Post reaches 45% of Washington area households. You need 30 ads on local TV or 60 ads on cable TV to achieve the same reach as one ad in the Washington Post. Of the 18-34 year olds in the area, 62% use the Washington Post on-line. This is group most easily monetized in advertising. Note that 86% of the Washington Post web traffic comes from outside of the DC area.


Those of us in PR would be wise to adapt our business model to reflect the new demands of immediacy, visualization, conversation and localization.

You can watch the discussion by going here.


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June 30, 2010

Dan at 90

I intend to read this tonight at my father's 90th birthday party in Chicago.

Dear Dad,

How can I possibly capture a life of incredible achievement? I do it by repeating the principles that you have passed on to your family and to the 3,400 people of Edelman.

  1. Compete Every Minute of Every Day - Don't become self-satisfied because somebody else is ready to take your place. Mourn your losses but learn from them. Celebrate your victories but be quick about it so you can get back to the game. If you get knocked down, get right back up; nobody is going to pity you.

  2. Modesty in Manner and Possessions - Never refer to "I", always to "We", when speaking about the company or the family. Buy new suits only when the old ones get shiny. Drive your car until repair costs require you to make a change. Do not take on debt, either personally or professionally. Grow your business from retained earnings-don't pay yourself much salary and don't indulge yourself with boats, planes or dividends.

  3. Be Well-Informed - Read the New York Times every morning….and the Wall Street Journal, Chicago Tribune, Chicago Sun Times, Financial Times and USA Today. Tear out good stories and send them to your employees or children-they probably missed the important articles.

  4. Stay Healthy - Work out at least four days a week but always in a competitive context (why ride the exercise bike when you can fight it out on the tennis court?). Who else at age 84 would proudly display the twenty stitches on his forehead from crashing into the wall in pursuit of the bouncing racket ball? Or would go back onto the court two weeks later with a hockey helmet, paddle in hand, ready to whip the opponent?

  5. Strive for Perfection - You got just one 'B' in your entire college career-in science, of course. When I came home beaming after scoring a 770 out of 800 possible on a college entrance exam, you asked me what I got wrong.

  6. Become a Citizen of the World-You saw the global potential of PR by the mid 60s when we opened in the UK. You travelled to Asia three weeks every year from the age of 70 until your last trip at age 87. You had the confidence to invest in China in the early 90s and have made it a special point to nurture our operation there.

  7. Give Back - There are three legs to the stool - family, work and community. You serve on countless boards of directors for non-profits, from the Lyric Opera to the Weitzmann Institute to the Art Institute to Save the Children. You made a generous donation to Columbia Journalism School to fund a patio for students to engage in outdoor discussions. You have encouraged our firm to do pro-bono work for important causes such as Reverend Jesse Jackson's Operation PUSH.

  8. Ethics - Internalize the Mark Twain comment, "Always do right. This will gratify some people and astonish the rest." You were once approached by a consultant for a country tourism board who requested a "commission" for delivering the business to Edelman. Your immediate reaction was to throw him out of your office. You were the first and only one to speak out when one of our competitors took on the Church of Scientology-you said that PR is not the law and that not every client deserved representation.

  9. We're All Entrepreneurs - Take chances. You meet a woman from newly united Berlin, and boom, we have a new office. You rely on your instincts (but you know the numbers like the back of your hand). You give your people lots of leeway-there is no one path to success. You encouraged generations of Edelman executives with your Dan-o-Grams, that describe in pain-staking detail every comment in a meeting (woe to the young person who fails to take notes-sure to prompt a "never do that again" comment). So many have been developed into outstanding PR people, from Tom Harris to Pam Talbot, working alongside the master.

  10. Cherish Clients- Every Edelman person is an account executive and required to roll up their sleeves and do the work. You went to every Kentucky Fried Chicken franchisee meeting for thirty years. You ran the California Wines Commission account with a monthly trip to San Francisco (persuading Zsa Zsa Gabor to say that she was "weaned on wine" on Johnny Carson). You knew the CEOs but had strong ties to the heads of PR.
I have had the privilege of working beside you for thirty two years. It has not always been easy-you would never want it that way. I strove to beat you in my first twenty four years (remember all of those tennis games when I would get so frustrated by your combination of guile and blarney that I would lose to you and toss my racquet over the fence in disgust). As we have worked side by side to build the family business, I have come to revere you as a father, businessman, grandfather and friend. As former U.S. President Theodore Roosevelt said, "Far and away the best prize that life offers is the chance to work hard at work worth doing."

Congratulations on a life well lived. Happy birthday and many more!

Here is a clip of Dan from the Today Show discussing PR and the Toni Twins.









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