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Interview

Building private-sector diplomacy

Public-relations expert Richard Edelman explores the new landscape of corporate reputation and trust.

October 2009

In the wake of the financial crisis, many companies are finding that they must rebuild more than just their balance sheets—they must also confront the challenge of rebuilding trust, relationships, and corporate reputations. In this video interview, PR expert Richard Edelman discusses what he calls “private-sector diplomacy”: the range of actions and behavior that companies can use to engage the widening network of consumers, organizations, communities, and governments that make up stakeholder groups. He sees opportunities for improvement along the entire spectrum, from innovative corporate responsibility initiatives to increased use of social media.

His insights come in part from his firm’s ongoing research initiative, the Edelman Trust Barometer, which conducts a study of trust levels among companies and industries across the globe. The most recent results are available at edelman.com/trust/2009. Rik Kirkland, McKinsey’s director of publishing, conducted the interview in June 2009 at the New York office of PR firm Edelman, where Richard Edelman is president and CEO.

Watch the video, or read the transcript below.

Video

Building private-sector diplomacy

Public-relations expert Richard Edelman explores the new landscape of corporate reputation and trust.

I think the new normal is a broader kind of scope for corporate expectation, for behavior. I think that the Milton Friedman model—the best sort of social responsibility for a company is to make money—is only part of it. Shareholder value now has morphed (in a stakeholder world) to only part of the equation. I think companies are now expected to come up with products that are good for the bottom line as well as good for society.

I think that there are two other things business can think about. One is a concept we’re calling “private-sector diplomacy,” where you have business working with NGOs, with communities, with labor unions even, to come forward with appropriate, new regulatory schemes to government.

But, further, I’m really into this idea of mutual social responsibility. I think that people—consumers—are willing to pay a bit more for products that are ethically sourced or that have a good story. But I think, in response, they want to be sure that the companies they’re doing business with have the right supply chain, have the right kind of process for environment. So, it’s the mutuality of it.

If you think about it, private-sector diplomacy bespeaks a different kind of role for business in society: that, in fact, we’re in a kind of diplomatic role in speaking to multiple kinds of stakeholders and that this is an ongoing conversation. It’s not a transaction only; we also have to be much more transparent about how we’re doing and what we’re doing. We are running for office, in a certain way. We don’t have appointment for life.

I also see this great sort of coalescence of brand and corporate reputation. It used to be you could be P&G versus Head & Shoulders or any of the other brands. Well, now you have to have a sync-up between sort of the PepsiCo Corporate versus Frito Lay and some of the operating companies. It has to be a coherent story between that which is the umbrella image and the actions of the various operating companies.

To me, at the essence of what we’re calling public engagement is this marriage of action and communication. You can be a great communicator, but if your actions aren’t appropriate, there’s not a chance in hell that you’re going to be able to sell the proposition.

I want to go to one other thing that I think is important on the communications front, which is I think that this idea of a continuous conversation has three or four legs. One is, we have to go as business to where the conversations are happening. I think that we are accustomed to what I think of as sort of the “talk at.” So, we’ll talk to Fortune magazine. Or we’ll talk to the Wall Street Journal. But the part of the conversation that we have not been participating in is happening on Twitter, on Facebook, and in so doing that means we have to go and inform and say, “Look, what you’re saying in this particular tweet is not quite right. Here’s our view. By the way, we represent, you know, GM.”

Further, I think that we have to have a commitment to every company to become its own media company in a sense—which is to put up your own content and point people to it, and at least have a place where you are hosting conversations and willing to put up the good, the bad, and the ugly. And that’s okay, because at least it says, “We’re in this to have a discussion.”

To go back to that notion of diplomacy, diplomacy is a messy exercise often conducted somehow inside, somehow outside, and ultimately you come to policy. Business hasn’t been quite accustomed to that. It’s been the back rooms and we deal with government and keep it all, but I don’t think that works anymore.

We’re talking about a democratic and decentralized world. And again, this is foreign to companies, generally. But our goal must be to have an informed debate. We can’t say, “Well, we have the knowledge, you don’t, therefore we know better.” Because I don’t think people accept that anymore. Each person who’s had an experience with your product or your company is now a person with a view. So, we have to at least say we value that. Who are the influencers? Who are the amplifiers? Some of them (I think this is really fundamental) are not just the professors from Harvard or Oxford. Those are the traditional influencers.

I know a woman who’s a blogger in California who’s a diabetic. She has 30,000 people reading her blog every day. She’s just talking about her disease, her condition. She’s got all sorts of diabetics talking about their conditions. Well, all of a sudden, she’s a serious person about diabetes. And that’s okay; it’s this dispersion of authority.

We must get to a time when people recognize the dialectic between control and credibility. I’m not saying to move to an entirely open communication, [where] everything in a corporation is open. No. But, you need at least to explain why you’re going where you’re going and what the long-term vision is. And then let people contribute in their own ways to the ultimate decision that you take.

But, it’s fascinating to us that a person has to now hear something or read something five times before [he] achieves belief. That’s up from only twice a couple of years ago. So, in this lack-of-trust environment, you have to hear or see something in multiple places from different people in order to for it to add up. You have to see something on your Twitter feed. You have to see it in Fortune or the Wall Street Journal. You have to hear it from a friend. All this has to add up. And then you say, “Oh, I believe it.”

I grew up at a time with Walter Cronkite, and he’d say, “Well, that’s the way it is.” And that’s the way it was. But, first of all, the evening news has one-third as many viewers. You also have many more influences, many more experiences. My cousin, Linda Stone, talks about the person with continuous partial attention—which would be both of our teenagers. But that’s the world we’re in. It’s just not an authority-driven society, it’s an experience-driven society. In fact, one of our clients is now talking about the move from an information to a collaboration economy, in fact, where people share stuff on social networks because it’s going to benefit the next person.

Reputation recovery

I think fundamental to the recovery of the reputation of the financial sector is—it’s less about the deals, and it’s more about what the deals do for the commonweal. So, example: you’re a ratings agency. It’s not that you rate RMBS1 or any other vehicle, it’s that you enable bridges to be built or roads to be resurfaced or any other of the ways in which you get to benefit.

And I think you also have to say, “Is our constituency only the investment banks on Wall Street?” No. Our constituency is much broader than that. It’s, again, the public. It’s communities. It’s developing countries who have ambitions. So, let’s scope the problem in a in a broader context.

Findings from the Edelman Trust Barometer

I’m optimistic because I think there are some green shoots in this research: the technology industry image was hardly affected in the downturn, we do still have good confidence in Asia-Pacific about business, and certain specific corporations maintained their trust levels, such as J&J.

What is they that they have? Well, they have the credo. They have a set of principles that are quite clear. [It’s] the way that they behave. It’s not just about making the quarter, it’s about how they’re going to interact with society. It’s a really quite clear commitment to a stakeholder model as opposed to just for the shareholder. I’m all for making money, but I think it should be done now in the context of the greater good and that those two cannot be seen as contradictory.