Effect of Recession on Relationships between Organizations and Stakeholders

The last time I reviewed the tracking data on my website, I found one person had reached it searching this question: What effect has the recession had on relationships between organizations and their stakeholders?

Unfortunately, my site disappointed this web searcher, and I'd like to correct that here.

Though I have theories about this, I don't know the answer. So, I asked the question on Linkedin and got some great responses.

Two themes emerge:

1. The importance of the basic brand and reputation assets
2. The importance of stakeholders

Brand and Reputation Assets

Don Stacks, professor of public relations at University of Miami and my colleague on IPR's Commission on PR Measurement and Evaluation wrote:

Public relations now has the task of establishing CONFIDENCE in an organization ... . The recession showed flaws in advertising and marketing, which operate through paid placement and not the third party endorsement of opinion leaders. Hence, due to the recession, PR has a new tool in its toolbox and a new message strategy that can increase or decrease stakeholder perceptions of an organization's credibility, relationships, reputation, and trust.

Christine Nelson, Communications/PR Consultant at Ingenuity Marketing Group, St. Paul, added:

We've had to remind ourselves that it's not just about how smart we are or how good our products are, but also if our stakeholders trust us and think highly of us. Reputation and integrity will continue to be critical as consumers control the market.

The Importance of Stakeholders

Mark R. Phillips, APR, v

ice president, corporate communications for the USO and another IPR Commission colleague commented:

As our donors' and volunteers' personal and corporate resources got tighter during the recession, we assumed they would appreciate knowing exactly how their contributions were helping. This necessitates increased transparency and clear, ongoing communication, which we have tried to provide.

Christine Nelson wrote along similar lines:

Commercial organizations are paying greater attention to loyal and longtime external stakeholders, because the recession has painfully reminded them of who pays their bills. Competition is coming from organizations larger and smaller, and there is no guarantee of when new business will come in the door.

We have to return to the basics of: increased and prompt communication to ensure customer satisfaction ... .

I'm sure the recession has had many more effects on relationships between organizations and their stakeholders than we see here. So, please feel free to add to the discussion by commenting.

Helping Your Organization Survive the Recession, While You Do the Same

A couple of weeks ago I attended a presentation by Professor Lakshman Krishnamurthi, who is the A. Montgomery Ward Professor of Marketing and chair of the Marketing Department of the Kellogg Graduate School of Management. His presentation was on competing in a down economy. He made a number of provocative points, which I'll go into presently.

Professor Krishnamurthi spoke about managing large organizations, but it struck me that his suggestions work as well for individuals as for corporations. So, as you review what I share below, step back occasionally to think of yourself as the corporation and your bosses, clients and coworkers as your customers and collaborators. Hopefully, you will not only find ideas that will help you add value at work, but also to help you manage your career through the recession and beyond.

Professor Krishnamurthi's Presentation
Dr. Krishnamurthi listed three things an organization can manage to gain advantage during a recession:

• Costs
• Deep customer, collaborator and competitive insight
• Ways to change the rules of the game

I'm not going to review managing costs. We all are aware of what our organizations are doing to manage costs, and we may or may not play a role in that management. However, as communicators and managers, we all can and should be involved in gaining insight.

Comprehensive SWOT
The first kind of research Dr. Krishnamurthi suggested doing is a comprehenive SWOT analysis of your:

• Current product or service lines -- revenue, expenses, projected growth or decline
  
• Your key customers -- their P&Ls and their contribution to yours, your share of their business, forecast growth or decline, forecast effect on your business
• Your top three competitors -- market shares, their share of your customers' sales, financial position, expected behavior during the recession, expected R&D and marketing spending
  

Deep Customer Insight
He then went into developing deep customer insight. This was a central concept in his presentation. He argued the companies that tend to come out of recessions in strong positions are those that stay close to their customers. He suggests you find the answers to:

• How do customers use our products?
• How would they like to use our products?
• How do they learn about our products?
• How would they like to learn about our products?
• How do customers acquire our products?
• How would they like to acquire our products?

He recommended completely rethinking the contract your organization has with customers and asking:

• If we are to start from scratch with these products [to create the most value for our clients and the most profitable business model for our organization], what will we do?
• If we are to start from scratch with our customer relationships, how will they be different [what do our customers need and want from us, and how can we better provide it]?

As you ask these questions keep in mind that the business environment is such that your customers, partners and collaborators are hurting. So also ask how can you help them survive and thrive.

Marketing Spend
Another key point Dr. Krishnamurthi made is that while it is easy to cut marketing spending, because it is discretionary, this generally is not a good idea. He cites research from McGraw Hill that indicates B2B firms that maintained or increased their advertising spending during the 1981-1982 recession averaged higher growth during the recession and for the following three years compared to those that eliminated or decreased their advertising. He notes that maintaining your marketing signals to your customers you are a strong player and will outlast the recession. He also argues it is easier and cheaper to attain a given share of voice in a recession, because prices tend to be lower and competitors are cutting back.

Changing the Rules of the Game
Moving to changing the rules of the game, Dr. Krishnamurthi suggested thinking about:

• Will there be a permanent change in the price-value equation for your products and services?
• Will consumption habits change?
• Do you need to rethink your business model to be able to compete?

And I suggest asking:

• What technological, regulatory, social and environmental trends could affect your business model and how?
  

Based on the earlier question about how, if you were to start your business completely anew, would you set it up to provide in three to five years the most value to your customers and the most profit to your organization ...

• What is keeping you from making these changes?
  
• Will the issues inhibiting you inhibit your competitors?
  
• Are your competitors making these changes?
• Are there organizations that might enter your business with a new model if and when they figure it out?
• What are you going to do about all of this?

And Now To Cheer You Up
Dr. Krishnamurthi closed with a list of powerhouse companies that began during tough times. These include:

• P&G founded during the panic of 1837
• GE during the next panic of 1873
• IBM during the depression of 1873-1896 (formed from three companies that merged in 1911)
• Motorola in 1928 (as Galvin Manufacturing Company renamed in 1930)
• Geophysical Services in 1930 (later renamed Texas Instruments)
  
• United Technologies during the great depression
• DuPont and HP during the 1930s
• FedEx during the oil crisis of 1973
  
• And more

Something for Your Organizations ... and You
I apologize that this article is a bit "listy," but I hope you find the information from the presentation as useful as I did. The ideas regarding how we can help our organizations succeed in this challenging environment provide opportunities for us to be of more value to these organizations and in doing so be more secure ourselves. Moreover, thinking of ourselves as our own individual corporations and our network of colleagues as our customers and collaborators provides strategies we can apply to our own personal corporations to ensure we, too, survive the recession and come out stronger than ever.

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Thanks very much for reading. If you have questions you'd like me to address, or other topics you'd like me to write about, please let me know. And if you know anyone who might be interested, please pass this e-Zine along.

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I work with organizations going through a change in strategic direction (merger, acquisition, building program, new product launch, change program, etc.) and that are concerned about what will happen with their relationships with key stakeholders (customers, employees, investors) if they send out the wrong, or confusing, messages. After working with me, my clients have a clear understanding of what their messages should be. I also provide them recommendations on other actions they can take to enhance their relationships with stakeholders.

I also work as a PR and communications research director for hire for agencies and other organizations.

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*The Institute for Public Relations, (IPR) is dedicated to the "science beneath the art" of PR. It focuses on PR research and education. If you are interested in the topics I write about, you will almost certainly be interested in IPR. You can find it at http://www.instituteforpr.org/. While you're there, check out the Essential Knowledge Project at http://www.instituteforpr.org/essential_knowledge/.

Best wishes,

Forrest

Forrest W. Anderson
Founding Member
Institute for Public Relations
Commission on PR Measurement and Evaluation