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Actions speak louder than words

Financial crisis puts executives' behavior under the microscope

By Amy Trang

Lavish parties. Private planes. Golf tournaments.

In normal times, Americans wouldn't bat an eye at corporate indulgences. But these are not normal times, particularly for firms that have received federal bailout money, seen their stock price plummet or are threatening layoffs.

  Daniel Diermeier
  Photo © Evanston Photographic Studios

"People pay attention in a crisis. Things that would be under the radar are tremendously highlighted. Symbols are critical in communication by leaders, especially in critical times and when you have multiple constituencies."
— Professor Daniel Diermeier


"In a crisis, verbal and nonverbal communication is critical," says Daniel Diermeier, the IBM Professor of Regulation and Competitive Practice and director of the Ford Motor Company Center for Global Citizenship. "People pay attention in a crisis. Things that would be under the radar are tremendously highlighted. Symbols are critical in communication by leaders, especially in critical times and when you have multiple constituencies."

Case in point: the appeal by the heads of the Big Three Detroit automakers for federal bailout money in November. The executives' testimony to Congress was overshadowed by their mode of transport to Washington D.C. The private jets in which they traveled belied their message of economic need.

Trust can be rebuilt after such events, Diermeier says, but a company must tread carefully to heal its image and avoid new mistakes. The Big Three returned to Congress in December with that in mind, taking a road trip back to Washington in fuel-efficient vehicles. Diermeier says companies can overcome such missteps by conveying a strong message to their stakeholders.

Professor Diermeier offers other messages that company executives should try to express during a crisis:

Transparency: Convey to your audience that you aren't hiding anything relevant and that you are telling them everything you know about a situation. In a plane accident, that means that the airline company should be clear with customers about what they know and don't know, and note that they will convey more information as it becomes available.

Empathy: Companies want to establish a relationship that communicates to stakeholders that they care about their well-being, not just the bottom line. For instance, a toy company with malfunctioning toys needs to reach out to injured customers and offer assistance, rather than ignore the problem, Diermeier says.

Expertise: Customers expect that companies will have the knowledge and capability to solve the crisis. And if the company doesn't have that capability on staff, it needs to bring people in who can resolve the issue. For instance, nonprofits are sometimes viewed as lacking business expertise, but they often bring in board members or other experts in the business arena to build confidence among the nonprofit's stakeholders that the organization will be able to handle the crisis, Diermeier says.

Commitment: Crises require messages of strong commitment from senior management that they are taking initiative in solving the problem. That could entail a chief executive showing up at a crash site or making direct statements on behalf of the company, instead of relaying messages through a company spokesman. Those cues give stakeholders a sense of reassurance, demonstrating that there is nothing more important in the CEO's life than this problem, Diermeier says.

Authenticity: Especially during times of layoffs, it's important for companies to be authentic and genuine when dealing with employees and customers. But this value can't be fabricated during bad times. "A crisis is not the time to come up with a set of values in the company," Diermeier says. "Companies who have a stronger culture and clear set of values come off well in a crisis. This authenticity needs to be grounded in something that lives inside the organization."

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