Source: The Economist: Schumpeter
In the social-media age, bosses’ careers are more vulnerable than ever
THE New Yorker magazine ran a cartoon last year of three monkeys in a row: one with a microphone (labelled “hear all evil”), one with a television camera (“see all evil”) and one with a laptop (“post all evil”). Today’s bosses still need to worry about the unwise monkeys of the press. But as big a threat to their careers these days is the risk of being pecked by Twitter’s swarm of angry birds. Thanks to the digital revolution, chief executives now live in glass houses. An ill-judged remark can be broadcast to the world in an instant. An unwise “reply all” can provide sensitive information to a competitor. An exasperated complaint in the midst of a crisis can seal your doom. Tony Hayward, who was boss of BP during the oil spill in the Gulf of Mexico, never recovered from his plea that “I want my life back”.
The digital revolution has dramatically shifted the balance of power from companies to their critics. Although big firms deploy armies of PR flacks, anyone with a smartphone and a socialmedia account now has the same power to reach a global audience. Whistleblowers once had to photocopy documents and smuggle them out in their underpants. Now they can be shared with the world in a trice, by e-mail or instant messaging.
Anti-corporate campaigners have taken to the digital world like ducks to water. NGOs are good at finding bad news about companies and telling the world about it on social media. Opportunists have also joined the ducks in the water: there is money to be made by “shorting” a stock (that is, betting that its price will go down) and then unleashing a value-destroying digital storm.
By contrast, companies have failed to adapt. The biggest of businesses with the slickest of publicity operations, from McDonald’s to JPMorgan Chase, British Gas to Qantas, have found that when they tried engaging with tweeters on their home turf, they were drowned in a sea of sarcasm. British Gas’s attempt at an online discussion about its price rises was met with a barrage of tweets mentioning “death” and “greed”. Presumably they will get better eventually. But in “Glass Jaw: A Manifesto for Defending Fragile Reputations in an Age of Instant Scandal”, Eric Dezenhall, an American crisis-management consultant, points to two big reasons why companies are condemned to play catch-up.
The first is the nature of the internet. It is a beast that feeds on scandal and particularly delights in the flesh of the powerful and privileged. The media world used to be policed by editors who demanded proof in the form of two sources. Now amateurs can post anything they want online (though they may eventually face prosecution) and editors are subject to the tyranny of the click: the more the stories they publish are clicked on by readers, the longer they are likely to survive in their jobs. Jonah Berger and Katherine Milkman of the University of Pennsylvania’s Wharton business school conducted a systematic study of 7,000 articles published in the New York Times over three months. They discovered that “highly arousing” content—such as stories that evoke anger or anxiety—was more likely to make the “most e-mailed” list. Stories about evil CEOs make perfect click-bait.
The second is the nature of companies. They are designed to stay in business rather than to be good at defending their bosses from scandal. No matter what PR resources they throw at killing a story, NGOs and prosecutors will always have more stamina. In America no sensible firm will risk gambling on a jury trial when a negative verdict could bar them from doing business with the government. (Eliot Spitzer, a former New York attorney-general, exploited this logic to extract billions from corporate giants such as Samsung, Goldman Sachs and JPMorgan before being consumed by scandal himself.) No sensible company will go to the mat to protect an embattled boss when there are plenty of replacements waiting in the wings. Look at how BP let go of an earlier boss, John Browne, in 2007, and Hewlett-Packard said goodbye to Mark Hurd in 2010. Both were seen as competent managers of their firms, but they were cast adrift essentially because of fears about the dirty linen of their private lives being aired in public.
Business leaders are waking up to the threat. A 2013 survey of 300 executives about the risks facing their companies by Deloitte, a consulting firm, put reputational ones at the top. “Reputations built up over decades can be challenged in an instant,” said Jennifer Evans of ANZ bank, a participant. The stockmarket is more sensitive to reputational disasters than ever before. In the two weeks after the 1989 Exxon Valdez oil spill in Prince William Sound, in Alaska, Exxon’s shares dropped 3.9% but quickly rebounded. In the two months after the Gulf of Mexico spill in 2010 BP’s shares fell by half (and have still to recover fully). But business leaders are much less sure about what to do about it.
Walls have ears, smartphones have eyes
Mr Dezenhall has lots of practical advice. He tells CEOs to restrict the view into their glass houses: to cover the cameras on their phones and computers with masking tape; avoid the “reply all” function on their e-mail; think twice before sending any strongly worded message. He dismisses the idea that corporate social responsibility (CSR) bestows on firms the PR equivalent of a stock of political capital: digital vigilantes will always assume businesses are guilty and can add the charge of hypocrisy to CSR-obsessed ones, as they did to BP after its spill. He warns against one-size-fits-all approaches to crises: the common prescription to come clean quickly and fully sometimes stokes the fire, he notes.
Mr Dezenhall argues that the best defence in this age of instant global scandal is to be brilliant at your job. He notes that, a couple of years after the crisis that almost destroyed his career, Tiger Woods was chosen for a Nike advertising campaign with the slogan, “Winning takes care of everything”. Unfortunately, for CEOs it may not: if you are an ace golfer mired in personal scandal you can redeem yourself on the greens. But a boss brought down by a baying social-media mob does not always get a second chance.