The current economic crisis will impact home and retirement account values for years to come, but where it may have the biggest impact is in corporate reputations, where even the most respected brands in the financial services world have seen trust for their leadership and institutions drop to all time lows.

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Financial +
Professional Services
n e w s l e t t e r
Published by Makovsky + Company Volume 22/Number 7
Strategies
For more information on Makovsky + Company’s
Financial + Professional Services practice, please visit
www.makovsky.com/financial-services/overview.html
The CEO Imperative:
Maintaining Trust in a Mistrustful Economy
The current economic crisis will
impact home and retirement account
values for years to come, but where it
may have the biggest impact is in
corporate reputations, where even
the most respected brands in the
financial services world have seen
trust for their leadership and
institutions drop to all time lows.
Even before we entered the most
turbulent times — marked by the
bankruptcy and fire sales of investment
firms, as well as gargantuan
government bailouts — trust was
already a top issue at financial services
firms. The Gallup Organization
reported in late Summer, 2008 that
trust had dropped by 15 percent in the
financial services and 14 other
categories. And the pollster revealed
that nearly half of consumers had “little
or no trust”in business or institutions.
Eroding reputation value means that
CEOs may need to work harder to earn
trust and credibility both within and
outside the organization. This is a
climate where difficult communications
are more frequent — where business
leaders are addressing investors,
customers, the media, and employees
about stock declines, soured invest-
ments, price increases or staff cutbacks.
It is a climate where corporate
adversaries and activists, seeing
weakness, may feel newly empowered.
And it is a climate where anxious
employees may be receptive to rumor
or resistant to sacrifice.
Given the reputational risk in the market
place, CEOs and other business leaders
must make trust a priority in their
communications programs and go the
extra mile to enhance it. Here are a few
communication principles to follow:
» K.I.S.S. – In today’s climate, a CEO
speech or e-mail may resemble the
child’s game of telephone. The message
he or she intends may be steadily
reinterpreted or misunderstood as it
traverses an unsettled organization. The
lesson: keep it simple ... and direct.
When he was Prime Minister during the
SecondWorldWar,Winston Churchill was
famous for refusing to read any
correspondence from ministers and
subordinates over one page long.
Churchill’sbasic principle appliestoday.In
a climate when people are anticipating
bad news, CEO communication needs to
be clear, succinct and direct.
This does not mean CEOs should cut
back on communication. Rather, they
should be communicating externally
and internally more than ever to remind
audiences that the company’s values are

2. intact and business strategies are still relevant despite market
changes. In fact, despite a negative news climate, constructive
developments can resonate even more strongly. Marriott, for
example, received good press coverage of its recent five-point
plan to reduce the environmental impact of its global
operations. Ford Motor Co., in the midst of this summer’s gas
price escalation, won high marks from consumers and media
commentators for the aggressively promoted announcement
of its plans to scale back SUV production and focus on more
gas-efficient vehicles.
» Act Local – Harvard marketing professor John Quelch
recently observed that, “when hard economic times loom, we
tend to retreat to our village.” He is suggesting, in part, that
unsettled people seek local authorities for insight,
interpretation and inspiration. Within a business organization,
those local authorities are the day-to-day supervisors.
Hard times make it essential that these “local” managers be
empowered with the information necessary to make them
credible, reliable internal spokespeople for their staffs, especially
when layoffs have occurred or are rumored. There is no more
efficient way to stoke employee anxiety and resentment than to
leave their immediate supervisors in the dark.
How can the organization be mobilized in this way?
Leadership councils are one of the best techniques to
transform managers into spokespeople up and down the
organization. The technique typically involves“hub and spoke”
style meetings between supervisors and their immediate
reports, where news and policy decisions are presented,
followed by questions and discussion. These meetings,
replicated at every level of organization, are an outstanding
way to build understanding and support for executive
direction. Ideally, the intelligence garnered here flows back
up the organization as well.
» Highlight Values – This top-to-bottom flowing
communication is a public relations process and ultimately
an expression of the company’s values and culture.
Specifically, organizations that best maintain employee
loyalty and morale in good times and bad are usually
characterized by tight cohesion around a set of corporate
values. Today’s best reputation companies — from Charles
Schwab to New York Life to Southwest Airlines to Whole
Foods — reflect this quality in communications.
While corporate values engage and help fuse global
organizations, they are ultimately the CEO’s domain. Great
CEOs understand that values are not just articulated, but must
be modeled and enforced from the top. Otherwise they ring
hollow. Jack Welch, former CEO of GE and the ultimate
numbers manager, once said that good performing managers
who flouted GE’s values were weeded out, while even
substandard performers who modeled them were given
opportunities to improve.
» Maintain Accountability – A commitment to transparency
has become a widely-emulated corporate value over the past
decade. Yet in hard times, transparency takes more courage.
CEOs face the temptation, in one fashion or another, to hunker
down. This can be an especially dangerous stance in a tough
economy because it often feeds uncertainty, one of the viruses
that most weaken reputation.
Starbucks founder and CEO Howard Schultz provided a
positive example of transparency under fire at the
company’s recent annual meeting. Facing a 50% decline in
stock price, Schultz addressed 6,000 disgruntled
shareholders and told them, “I share your concern and
disappointment with how the company has performed and
how that has affected your investment. And I promise you:
This will not stand.” Schultz proceeded to review a clear,
readily understandable five-point plan to address Starbucks’
problems, and to answer all questions from attendees. The
capacity audience gave him a standing ovation.
The hallmarks of today’s economy — turmoil in the credit
markets, rising energy and food costs and volatile markets —
pose unprecedented challenges to the financial services
sector. One of the major challenges facing CEOs in this
industry is maintaining their organizations’reputation. Leaders
are often tempted, in a climate like this, to lie low and try to
weather the storm. Yet the times require the exact opposite: a
deeper commitment to the communications process,
including a rededication to transparency, leadership visibility
and organizational unity. Each of these is ultimately the
responsibility of the CEO.
About Makovsky + Company
Founded in 1979, Makovsky + Company (www.makovsky.com) is today one of the nation’s
leading independent global public relations and investor relations consultancies. The firm
attributes its success to its original vision: that the Power of SpecializedThinking™ is the best
waytobuildreputation,salesandfairvaluationforaclient. BasedinNewYorkCity,thefirmhas
agency partners in more than 20 countries and in 35 U.S. cities through IPREX, the third largest
worldwide public relations agency partnership, of which Makovsky is a founder.
Learn more about how
Makovsky’s Financial + Professional Services Practice
can make a difference for your company.
Contact Scott Tangney
212.508.9661
stangney@makovsky.com
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