How the Most Admired Companies Get That Way (1991)
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How the Most Admired Companies Get That Way (1991)

One fact to emerge clearly from a study of corporate reputations is that companies that have stepped up and taken the lead in addressing the issues that face their industries, who have been actively engaged in confrontation, are the ones other PR executiv

Paul Holmes

 

Traditionally, public rela­tions professionals have sought to help their employers avoid controver­sy and confrontation. Yet one fact to emerge clearly from a study of corporate reputations is that those companies that have stepped up and taken the lead in addressing the issues that face their industries, who have been actively engaged in confrontation, are the ones other PR executives most admire.

A swift glance through the most admired firms in America reveals that companies in industry sectors that are inherently controversial today—chemicals, pharmaceuticals, alcohol and tobac­co—are to be found among the best respected in disproportionate numbers, and that the companies in those sectors that have taken a lead­ership position are the most admired.

Of the most admired, Merck and Johnson & Johnson have been proactive in addressing the issues of health costs and marketing ethics facing the pharmaceutical business; Du Pont and Monsanto have been out front in recognizing the envi­ronmental problems of the chemical industry; Anheuser-Busch has been a leader in promoting socially responsible drinking; McDonald's has been embroiled in nutritional and environmental issues; and Philip Morris has been most out­spoken in its defense of smokers' rights.

"Philip Morris made a strategic decision several years ago that it was going to be proactive in defending the rights of smokers to enjoy its products," says Guy Smith, until this month the company's vice-pres­ident of corporate affairs. "We felt it was important to address the issues, not only from a health per­spective but from the perspective of our customers' wishes."

Philip Morris has stood out from the rest of the tobacco industry by vigorously defending the rights of people to consume tobacco if they choose to do so, turning what had previously been a health issue into a first amendment issue also. Through Philip Morris Magazine and a vigorous media relations pro­gram, it has been the most active of all the tobacco companies in defending its franchise.

It is also interesting to note that while RJR Nabisco ran in to trouble for target marketing to minority communities, Philip Morris has earned widespread praise for its continuing support of minority cul­tural events and minority media.

Anheuser-Busch is a company in a similar position to PM, since its principal product is one that many consumer groups and politicians associate with ill health and irre­sponsible behavior. And like Philip Morris, A-B has 'chosen to address those issues head on, sitting down with critics and devising programs that promote the right of people to enjoy its products as well as educat­ing those people to enjoy its prod­ucts responsibly.

"We have always been concerned with the issues that being in the beer business has brought about, from alcohol abuse to underage drinking," says executive vp Michael Roarty. "We have tried to address them in a positive way, to be part of the solution, not part of the prob­lem. We believe the answer lies not in legislation but in education, and that has been the major part of our public relations effort."

Roarty cites a range of pro­grams, directed at consumers—particularly moderation messages built around the Know When to Say When ad campaign—and at alcohol retailers, who are trained to recognize potential problems. "We have put a substantial budget behind our efforts in this area," Roarty says.

The message from all this is that good public relations does not so much involve avoiding controversy as addressing it in a credible man­ner. There will always be some who question whether companies like Anheuser-Busch and Philip Morris are in ethically sound busi­nesses, but both companies have found an ethical basis for their busi­ness strategies and have been pre­pared to explain and defend their positions.

Of course, there are companies in the top tier who have achieved their success through good solid professionalism, companies that have not faced specific crises or major ethical issues but have earned respect through a more general commitment to openness and com­munication: IBM, American Air­lines, Wal-Mart are examples.

These companies cite the role of senior management in assign­ing a priority to public relations as the key to their success, as do most of those identified above.

American Airlines spokesman Marty Heires says: "I think man­agement here has a better than average understanding of what effective public relations can achieve. [American Airlines CEO] Bob Crandall is personally very committed to communication, both internally and externally, and I think that has played a major part in our success. We are very responsive to the media and to the communities in which we operate."

That leadership from the top is evident at virtually every company in our top 20, and in many of the most admired companies predates existing management, having estab­lished itself as an important part of the corporate culture.

Nowhere is that more evident than at Merck, where vice-president of corporate public affairs Albert Angel says that credit for the compa­ny's status as the country's most admired is largely attributable to a manage­ment tradition that emphasizes eth­ical business practices and openness and honesty in dealing with the public.

"There is a very strong corpo­rate culture here," says Angel. "People who join Merck who do not value Merck's reputation as much as they value their own career paths are going to find they are working for the wrong company. Decisions are made with the impact they are going to have on our repu­tation in mind, whether they con­cern marketing or research or cor­porate philanthropy."

Merck has demonstrated its belief in the importance of main­taining a good reputation in numer­ous recent decisions. Responding to the controversy over rising health care costs, the company announced it would not increase drug prices by more than the rate of inflation; it was one of the first to pledge to reduce all environmental emissions by 90%; it has donated several drugs to developing countries, including mectizan, which it believes could eradicate river blind­ness, a disease affecting 18 million people worldwide.

"At Philip Morris, the commit­ment to public relations goes back to the '50s and CEO Joseph Coll­man," says Guy Smith. "I think all our CEOs since then have believed that public relations was an impor­tant function, one that can advance the goals of the corporation. That's how we are judged: not on how many packs of cigarettes we can sell, but on what we can do to enhance the environment in which those cigarettes are sold. There's a more sophisticated understanding of PR here than there is in many places, it's not just something that supports marketing."

Having a high-profile CEO alone, however, is not enough to guarantee a company's good reputation. Chrysler, whose leader Lee Iacocca has been hailed as a great communi­cator, was ranked little better than average, perhaps because the com­pany's image is too strongly inter­twined with that of a single individ­ual, rather than the individual per­sonifying a strong, deep corporate culture: the question at Chrysler is what happens to the corporate image after Iacocca departs.

While the way in which the suc­cess of public relations is measured varies from company to company, it is clear that companies that employ public relations most effectively do not measure success exclusively in terms of media coverage (although most of our top 20 have widely admired media relations operations) but see it in a broader context.

Whatever the senior manage­ment commitment to communica­tion, however, the public relations department does not achieve the respect of that management auto­matically, and for most corporate PR executives convincing the CEO that public relations has a role to play in corporate success is an uphill struggle.

Jack Malloy, senior vp of exter­nal affairs at E.I. Du Pont de Nemours, explains how the func­tion earned respect within Du Pont: "We try to make business managers understand how we add value to what they are trying to do. It's easy to do when you help them achieve their business goals."

Malloy says it is important to be proactive rather than reactive, and when public relations contributes to business objectives by helping to create an environment in which marketing goals can be more easily achieved. This echoes Guy Smith's claim that at Philip Morris, public relations success is not measured by any numerically defined objective, but by the contribution it makes to the overall business plan.

This means that public relations is viewed by most of our most admired companies not as a primar­ily media-oriented discipline, but rather as a business-oriented disci­pline, designed to assist the compa­ny in achieving its goals by influ­encing a range of audiences: con­sumers, investors, communities and legislators.

It is not surprising, therefore, that at most of these companies the public relations function is central­ized: communication with all audiences (and in many cases via several disciplines, including advertising) being coordinated through one department.

"We are probably set up slightly differently from most companies," says Jack Malloy. "We have an inte­grated communications group that handles public affairs, public rela­tions, government affairs, investor relations and corporate advertising under one umbrella. That means that when we look at public issues we look at them with all the disci­plines in mind, and we can coordi­nate our response."

Anheuser-Busch is in a similar position. Although it handles almost all of its public relations efforts through St Louis agency Fleish­man-Hillard—a relationship that has lasted for more than 40 years—rather than through an in-house corporate department, all commu­nications there are centrally coordi­nated.

"We have 15 different compa­nies, ranging from recycling alu­minum cans to theme parks to beer to the St Louis Cardinal baseball team," says Michael Roarty. "But the public relations effort is central­

ized. We adopt the same kinds of open, proactive communications for each company, and we are always aware that the reputations of the individual units impact on one another and on the reputation of Anheuser-Busch."

The antithesis of this approach is that traditionally adopted by Proc­ter & Gamble, which has always encouraged its various brands to operate independently from a pub­lic relations standpoint. It is inter­esting to note that P&G did not perform impressively in our survey, not even making the list of the top 100 companies.

Finally, it is interesting to note that at almost all the top ten com­panies, public relations is treated as a senior management function, reporting to the president or ceo, or if not having a seat on the compa­ny's decision-making council.

At Du Pont, Jack Malloy sits on the 23-person operating board of the company and reports directly to the chairman; at Merck, Albert Angel is one of a 25-person man­agement council; at Philip Morris the vp of corporate affairs reports directly to the CEO; even at Anheuser-Busch, with its reliance on outside counsel, it is clear that Fleishman-Hillard has the ear of senior management.

And in all of these cases, it is clear that the ear of senior man­agement has been heard by public relations people who relate what they do to the business and mar­keting objectives of the company. These then are the keys to public relations success, as defined by the public relations professionals at the most admired companies:

  • the ability and confidence to confront the issues that affect cor­porate reputation head-on;
  • the recognition that public relations success ultimately can best be measured only in terms of how it impacts an organization's ability to achieve its business objectives, and not in terms of media impressions;
  • the ability of the senior public relations professional to convince management that the function can make a contribution to business success;
  • and the commitment and involvement of senior management. 

While none of these factors will come as a surprise to the public rela­tions professionals at our most admired corporations, the extent to which they were confirmed by our study should provide a guide to those compa­nies who were not r a n k e d among the communication leaders in their industry and who are searching for the keys to implementing a successful public relations business strategy.

 

 

 

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