“If you lose money for the firm I will be understanding. If you lose reputation, I will be ruthless.”
– Warren Buffet, American business magnate and third richest man in the world
In the beginning of corporate time – about 30 or so years ago – there was always a Data Processing Manager. He was usually a young man who never spoke to anyone and who was always frenetically busy, but nobody quite knew what he was up to. Fast forward a decade or two, and now that Data Processing Manager has become the Chief Information Officer, with a seat on the board. Again many years ago, there was the Personnel Manager, who always knew when we were going on holiday and personally handed out the payslips. Press fast forward again and that person is now the HR Director, also with a place at the boardroom table. However, despite this evolution of roles and the recognition of their importance to corporate success, the communications expert is still usually and noticeably absent from the board. Although communication experts most often have top qualifications, are knowledgeable about strategy and business, and provide excellent counsel on numerous relevant issues, they are still not seen as worth a board seat.
From Steinhoff to Capitec: preventing and containing a company crisis
In light of South Africa’s current climate, where corruption and dodgy dealings are viewed with far more disdain than a few years ago, companies and government need to be much more focused on keeping a watchful eye on their operations and reputation. If more company CEOs and government department heads were to assign as much importance to their communications strategy as they do to audited accounts, and put as much budget towards this aspect of the business, then there would be far more successful companies and government departments in South Africa. There would also be a much happier workforce, to name just one of the many benefits of better communication within an organisation.
It’s a fair assumption that many different questions would have been asked at Steinhoff’s boardroom table if a communications expert had been present. These questions might well have highlighted problems long before the scandal broke and perhaps prompted the directors to take appropriate action in good time. In fact, if a proper communication strategy had been in place initially, the questions that were certainly being raised on the shop floor could have got to the boardroom a lot earlier and therefore could have been dealt with timeously. Importantly, one of the many focus areas of a communications strategy for a listed company is the relationship between the company and different stakeholder groups, such as asset managers. In Steinhoff’s case, many asset managers had been aware of problems for quite some time before the resignation of Markus Jooste. The concerns of this particular group would have been known about well before reading about them in the news.
The manner in which Steinhoff subsequently dealt with its crisis also left much to be desired. As soon as the media published the findings of the Viceroy Research report, shareholders panicked and the company did little to allay those fears with their erratic and sparse communication throughout the scandal.
Steinhoff’s lack of communication was in complete contrast to Capitec Bank when it too was accused of unethical conduct by Viceroy a month or so later. Admittedly, the validity of the claims against the two companies were very different; however, transparent communication in the face of a crisis is a must, and this cannot be achieved without expertise from the top.
Capitec’s response to the allegations, through its Head of Communications, Charl Nel, was immediate and meticulously detailed. Throughout the duration of the scandal, communication from Capitec was consistent, proactive and transparent. This should come as no surprise, however, as this type of approach has always been how Capitec communicates with stakeholders, and it is prioritised in their broader business strategy. Although their head of communications is not a member of the Capitec Board, his counsel is evidently highly esteemed by the directors, and his seniority status is clear.
Many company scandals could have been dealt with before they reached crisis level, were the various stakeholder groups within an organisation to have a good understanding of the situation and therefore be able to take the necessary steps in good time. Many years ago, one of our clients, a leading healthcare company, had an unpleasant crisis situation on their hands. A misunderstanding of some complex medical aid rules by a journalist had resulted in alarmist coverage by numerous media houses. When we were brought in to provide counsel on this crisis, one of the basic pieces of advice we gave was that the company take more time to explain the complexity of the business on a one-on-one basis to a number of their stakeholders, especially media. Although this was a time-consuming task, it made a huge difference to the understanding of the business by a large group of stakeholders, and fewer problems arose because of the knowledge of the intricacies of the business. If a communications director had had that all-important board seat to start with, however, then this situation could have been averted before it reached crisis levels.
Making room for communications at the top
A good communications expert has the ability to put him or herself in the other person’s (i.e. stakeholder’s) shoes and often understands, better than anyone else in the room, the nuances of the situation. In any type of meeting, be it a routine board meeting or in a difficult negotiation, this is a tremendous attribute and often one that is overlooked while the C-suite talks numbers.
Companies that are going to achieve growth in our current climate, while at the same time successfully manage and care for their reputation in the future, will already have a first-class communications and crisis strategy in place, either handled in-house or by an agency, or ideally both. A decent amount of funds in the budget will be allocated to communications and, most importantly, there will be a communications expert sitting at the boardroom table.
Ruda Landman is probably best known for her 19 years as a Carte Blanche co-anchor, but she has also been a non-executive director of Media 24 for over a decade now and puts the case for a communications expert at board level very clearly: “As a board member I have found that my background as a journalist, and therefore my sensitivity to the role of communication, has helped me think of issues from the point of view of the other guy. I always think of how I would answer a journalist’s questions about a decision, or how I would explain it to some of our BEE shareholders. That doesn’t only mean thinking of how I would ‘sell’ the decision. It actually means really considering how it would be perceived by someone who is not part of the inner circle and who may not share the accepted notions of that circle. That often gives me pause.”
So perhaps before the next crisis hits your company, it might be time to look at the board and see if you also need to appoint a communications expert.