CEO Capital: How and Why to Get It
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CEO Capital: How and Why to Get It

Over the past few years, Burson-Marsteller has contributed significantly to the body of public relations knowledge through a series of research studies looking at CEO reputation and its contribution to broader corporate reputation.

Paul Holmes

Over the past few years, Burson-Marsteller has contributed significantly to the body of public relations knowledge through a series of research studies looking at CEO reputation and its contribution to broader corporate reputation. Those studies have found a significant—and growing—correlation between the credibility of the chief executive and reputation of his or her organization.

The principal architect of that research is Leslie Gaines-Ross, B-M’s chief knowledge officer, who joined the firm after serving as director of marketing and communication at Fortune magazine, where she was closely involved in the publication’s Most Admired Corporations research. Now she has written a book, CEO Capital: A Guide to Building CEO Reputation and Company Success, that builds on Burson’s research and lays out a roadmap for CEO’s who understand the increasing importance of both personal and institutional credibility.

CEO reputation, she says, is dependent upon three “C” factors—credibility, code of ethics, and communicating internally—and two “M” factors—attracting and retaining a quality management team and motivating and inspiring employees.

“So important are the CM factors that each one surpassed even wealth creation in importance according to the 2001 Burson-Marsteller study,” she writes. “Of the 16 CEO characteristics included in the 2001 survey… the harder financially driven characteristic of ‘increasing shareholder wealth’ showed up as a less important driver than any of the CM factors…. Evidently, financial performance is important, but simply not enough.”

Gaines-Ross makes a compelling case that building CEO capital is not about ego, but about good, old-fashioned leadership. And she shows that it has payoffs for the organization. According to Gaines-Ross, CEO capital:
· Has a direct positive impact on a company’s reputation and success;
· Produces clear, discernible and valuable payoffs;
· Matters to an unprecedented number of influential constituencies; and
· Affords more time to develop long-term solutions in a fast-paced business climate.

But before embarking on what Gaines-Ross calls “the CEO capital model of building reputation,” the CEO must buy into the importance of building his or her personal credibility.

“The CEO must come to terms with the idea of being the ultimate spokesperson for the organization, the embodiment of the brand, and the official storyteller who knits together the company’s past, present and future. The same goes for the board of directors. Does the board agree that the CEO must spend a fair portion of time building trust, setting standards, and openly communicating to stakeholders and shareholders alike?”

The notion of “CEO capital” is not uncontroversial, she concedes, perhaps because it is too often approached in a superficial manner.

“Some CEOs balk at what they consider a mere makeover. Some claim they do not harbor a big enough ego to recast a company in their image. Others dismiss the notion on the grounds that the board did not hire them to engage in personal image building. Some decline, pointing to particularly visible CEOs in their industry and disparaging these celebrity CEOs as being star struck and shameless.”

Some of these concerns have a little more authority today than they might have a couple of years ago. Many high-profile, celebrity CEOs have fallen to earth in recent months, caught up in corporate scandals that seemed to be largely a product of their own overblown egos. As a result, “the media is abuzz about how the concept of the celebrity CEO is dead,” as Gaines-Ross acknowledges.

“Where the media and pundits go wrong is to confuse the recently much maligned, media-hyped large ‘C’ Celebrity CEO with the small ‘c’ celebrated CEO, who by dint of strong leadership, discriminating vision, force of character and other admirable traits become celebrated by their employees, their industry, their peers, and occasionally even the media for jobs well done.”

Celebrity CEOs, by contrast, are “a fashion statement, going in and out of favor as the winds of popularity blow this way and that, praised when things go right and condemned when things go wrong.”

The most practical section of the book, based upon B-M’s “Seasons of a CEO” research, provides a roadmap for a new CEO seeking to build credibility inside and outside the organization.

That task begins in the countdown period, before he or she takes office. Says Gaines-Ross, “The countdown is a time to cherish—a time when a CEO may quietly plan for the future, contact key shareholders, research the company, and do all those innumerable tasks for which there will be so little time later.” While many CEOs—particularly those who take the reins after an unexpected crisis—don’t get much of countdown, an orderly succession should allow for at least 60 days but no more than 18 months between the announcement and the transition.

That allows the new CEO to accomplish several key goals: getting a transition team on board; letting it be known that an orderly transition plan is in place; addressing the reasons he or she was chosen for the job; describing what will remain the same and what will be changed; drawing up a chart to prioritize stakeholders; and finally, communicating.

The first 100 days of a CEOs tenure are equally critical, and a time when the focus should be inward rather than on external audiences.

“At one time, CEOs seemed almost to forget that their companies had any employees other than their direct report,” says Gaines-Ross. Today, most CEOs recognize that employee communication—building morale, aligning employees behind a single vision—is one of the most critical challenges they will face. A B-M study found 75 percent agreeing that it was extremely important to communicate to employees, compared to just 44 percent who felt the same way about the financial community, and 5 percent who rated the media so highly.

“Even if a CEO has spent time and effort reaching out to employees before assuming leadership, more communication, especially of the bi-directional type—talking instead of listening—is needed once in office…. The best CEOs listen carefully… and above all, make a point of not shooting the messenger.”

She points to Raymond Gilmartin who—when he took over as CEO of Merck & Co.—asked employees point blank: “If you had my job, what would you do?” Carly Fiorina at Hewlett-Packard, meanwhile, suggested that employees make a list of the “10 stupidest things” that HP was doing and e-mail it to her. Fred Hassan at Pharmacia took a more personal approach, flying to Stockholm, Milan, London and Kalamazoo shortly after taking office and making notes as he chatted with employees.

“Most CEOs are surprised to learn how much time, effort and resources must be spent communicating internally,” Gaines-Ross says. “The importance of external communications seems obvious to most. The Wall Street Journal, analysts’ calls, and trade publications all require attention. However, internal communications, directed toward the organizations managers and employees, demand far more of a CEO’s time than do high-visibility contacts with outside audiences.”

Indeed, B-M’s research finds that senior executives recommend a CEO should allocate no less than 53 percent of his or her time to internal communication.

Other priorities in the first hundred days include reconstituting the senior team; setting an agenda; tending to the board; and declaring what matters. “The new chief executive must come up with a few clear ideals of themes that guide the organization during the first hundred days,” says the author. “Detailing how one’s theme is to be put into practice is not yet necessary. What is required is a definite, articulate expression of values. The thematic stamp sets before employees a roadmap of desirable actions and attitudes.”

The media should be low on the list of priorities for a new CEO during the first 100 days, says Gaines-Ross. “Media exposure without full opportunity to gain a thorough understanding of corporate workings is an invitation to disaster.”

As the first year progresses, the focus slowly shifts. “The CEO must establish a unique corporate persona in which the CEO’s every action and deed reflects in some ay the corporate values the CEO wishes to advance and the vision the CEO wishes to instill.”

The first step is to engage in what Gaines-Ross calls “intense learning,” from customers, from analysts, from alumni, from employees. Then, she says, CEOs can cultivate a persona, establishing those values that will drive the company, articulating a code of ethics.

“Being high-profile and larger than life is not by itself an inherent good,” she warns. “A good CEO persona develops meaning only if it attains worth, not by winning mere media attention, but by standing for something that is believable and knowable and that embodies a company’s values, beliefs, and operating tenets. The CEO persona must grow from within and be sustainable.”

The second year of a CEO’s tenure can be even more challenging because, as Fiorina says, “this is when the change really gets binding.” It’s also when stakeholders, including the board of directors, start to expect real, measurable results. The CEO needs to demonstrate the company’s new strategic vision, put stakeholders at ease—show them both financial results and a unified management team—and start to plan for the future.

The CEO also needs to demonstrate what Gaines-Ross calls thought leadership, something that “distinguishes can differentiates a company from its competitors…. Thought leadership often breaks with business or industry convention, astonishes if not startles. Thought leadership reflects on the company and builds CEO capital.”

One example is Fiorina’s World e-Inclusion program, which involves selling or donating HP products to governments, development agencies, and nonprofits in developing countries. Another is the acknowledgement, by BP’s John Browne, of the oil industry’s role in global warming.

(This is one of several sections that makes this book a good companion piece of Jeffrey Garten’s The Mind of the CEO, which examines many of the critical issues keeping modern chief executives awake at night.)

Gaines-Ross ends the book with two appeals. The first is for a longer CEO timetable. B-M’s research has shown that all stakeholders expect more of CEOs, and faster. But “the trend toward increasingly shorter CEO tenures is undermining business productivity and focus,” says Gaines-Ross. “Fewer CEOs seems to make it past the five-quarter mark and even fewer beyond their three-year anniversary. Such instability irrevocably and adversely affects a company’s reputation and destiny. Chief executive departures have substantially adverse consequences, affecting too many employees, customers, partners, and investors.”

The second appeal is related, a call for a longer-term view.

“As spectators,” she says, “we must not judge CEOs solely by their most recent failure but by both their conquests and their collapses… Not to do so is to discourage risk-taking and creativity…. CEOs should be allowed to take reasonable risks, to be allowed to make mistakes that do not have significant implications for the company.”

In CEO Capital, Gaines-Ross has provided a primer on reputation building targeted squarely at CEOs, and built a formidable case that particularly in the post-Enron world, CEOs need to invest in their own reputations in order to build those of their organizations. This is substantial addition to the literature of our profession, a manifesto supported by compelling original research and informed by intelligent, sympathetic analysis. It is also a rare book about public relations that preaches not to the choir but to the choirmasters.

CEO Capital, by Leslie Gaines-Ross, is published by Wiley.

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