Learning From AdAge

Last year, I was leafing through Ad Age. Four stories grabbed me. There was enough content for me to pontificate on for a whole year. Beside the stories they told, the articles also revealed interesting themes. They all support the idea that our industry is in transition, and that ad agencies, PR agencies, marketing consulting firms and clients need a new way of thinking. I still think these ideas are very relevant today; Let me share with you some of what I wrote.

• Nike CEO William Perez (former CEO of SC Johnson) was fired after only thirteen months on the job. The headline read: "The CEO forgot: Ads Rule at Nike." The subhead explained:"...behind the scenes: Perez viewed ads as expense, and it cost him his job."

Here's my translation of this event...culture is everything. Perez failed to understand that ads had built the aura and the brand which Nike stands for. Phil Knight was not about to allow someone to play with his passion. This wasn't about money savings or efficiencies: At Nike it's about "doing it". Perez underestimated both the nature of the Nike culture and its power when he made his cost-cutting moves. At Nike, management is a team sport, and consensus, buy-in and enrollment are imperative if change is to happen.

The Second Story...

• "Ford Motor Company engaged the consulting firm Accenture to conduct a far reaching media optimization and media measurement program that could greatly influence its ad launches, spending and media mix. The program could potentially affect the type of work Ford's agencies do." (As it happens, I used to be the Director of Worldwide Marketing at Anderson Consulting, Accenture's predecessor).

I can see it now...Ford's ad agency staffers at Y&R, JWT and Ogilvy are probably panicking, running through their hallways shouting, "That isn't fair...we should be doing that work!" The fact is, they are right. Perhaps the ad agencies should get the work. But there's a good reason why they didn't. They just don't provide the same rigor and the same process methodology that a consulting firm does. Agencies should be asking themselves why they aren't getting opportunities like this. WPP's CEO, Martin Sorrell's nightmare, of agencies losing ground to consulting firms, is coming true and picking up momentum. I think it can only get worse for the agencies--unless they rethink what they do, what type of talent they hire and where they add value beyond creating advertising.

Now for the next story...

• "Jim Heekin, newly installed CEO of Grey Advertising, is dismantling Grey's old systems. He's installing critical account planning to be on par with creative and account management. This represents a marked change for Grey." Good for Jim! The article goes on to tell us how Grey's strategy had little clarity, how they would often waste the time of creative teams hunting for a creative strategy insight. Guess who paid for that wasted time?

I have always endorsed the idea that creatives should be focused on creative ideas not on the message or the strategy. Creatives just don't have the training for that; after all, they are art directors, writers and designers, not strategists, analysts or researchers. McDonald's calls it a "Framework for Freedom." They say, let the client management, researchers, and strategists come up with the key messages, target audiences and buyer motivators. Then let the creative teams get on with their job-creating the design, sound and motion around the idea. That way the creative output is more focused and compelling.

I would go one step further. I say that the agency should take the leadership role. Agencies need to become facilitators, working side by side with the client's management, marketing and sales teams, together with the ad agency's team of media, account management, creative, planning and production departments. Everyone should be collaborating, all together at one time at one table. This saves time, ensures buy-in and produces better ideas.

Nice going Jim. Keep stirring up the pot...change in the ad agency world is good. One caveat, one piece of advice...move the culture along with you...don't let it bite you in the rear the way it did Bill Perez at Nike. Win over the clients, and win over the internal agency staff. If you don't believe me just look what happened to your counterpart Ann Fudge at sister WPP agency Young & Rubicam. Internal politics, a strong insular culture, fear of change and being an agency outsider prevented her from being successful in the job.

• The last piece..."Ford is putting the consumer at the center of their rebirthing marketing program with hopes of turning around the company fortunes." Ford had no choice, we're told, but to change to meet the demands of the market rather than the other way around.

This is news? Where have they been for the last twenty years? The Ford Motor Company I knew and worked for from 1981-1991 (when I was a senior ad executive at Y&R) always put the customer first. It was about Quality is Job #1; Lincoln - What a Luxury Car Should Be; and Have You Driven a Ford Lately?Those were consumer insight campaigns. They answered consumer questions and they helped satisfy the buyers' needs and wants with products that they wanted to drive. Remember the Mark VI, the XR4Ti Merkur from Germany and the Mercury Sable and Ford Escort? Wonderful cars, terrific insights and great market successes. I'm glad to hear Ford is finding its way back to the insights that contributed to its most recent glory days. But, as the company has said, Ford must also win over its own people in order to lead the market. Ford's employees need to become educated, motivated, inspired, and enrolled to recognize what the pursuit of a consumer driven strategy can yield in the way of success and market leadership. I hope they get it straight. I want them to succeed.

So what's the common thread to these stories?? What key messages can we learn from them? I see many lessons here.

Sharing Strategic Marketing Responsibilities. The ad industry (and some clients) still doesn't recognize that marketing should not be centered just on the creative product. Focus should be the shared collective responsibility of the client, the agency, the sales channel and the customers. Together they can create products, marketing strategies and award winning advertising that will meet the needs and wants of the market and present the right message and image. No one group should abdicate its role to the other. This work needs to be done together.

Rigor, Process and Methodology. In a world of investment bankers, strategy consultants, and greater value accountability to shareholders, agencies have to step up to the plate and incorporate new rigor, methodology and process into their planning and accept their responsibility for results. The old way just doesn't work, and neither will moaning about the loss of consulting assignments and revenue. Agencies must go way beyond planning the new ad campaign and refashion themselves to gain deep analytical understanding of their client's business operations and challenges. They need to get themselves invited to the board room table out of respect for their strategic insights and counsel and the confidence they convey, not just to get approval for their new ad campaign.

Culture. Everyone involved in marketing has to recognize the power of culture and the power of the employees when it comes to embracing a new strategy or marketing initiative. Company culture does matter. Respect it, and make it work in your favor by helping the internal constituencies become educated and informed. Help them become motivated and inspired and--eventually--enrolled and engaged. This will take time, patience and process, and the knowledge to do it right. Don't leave this important task to chance. Deploy change management experts who have methodologies and processes that can help.

Abundant Mentality. Marketing people on both sides of the table need to embrace the notion that a great idea can come from anywhere. What's more, when everyone adds to an idea, it can only get better, brighter, more compelling. Every great idea is a shared responsibility based on an abundant mentality about solving consumer problems with compelling solutions that grab people's imagination and attention.

Leadership. Current advertising models fashioned back in the sixties and seventies are not relevant today. The marketing industry needs fresh ideas, new approaches and leadership to recognize that. The industry needs leadership that recognizes a need for new, outside-the-box business models. Marketing people need to rethink old management structures--incorporate new media, the internet, buzz marketing and 1to1 marketing--and establish new metrics and accountabilities so clients will value what they do. Leadership should come from both the clients and their agencies, both immersed in freshness and innovation, not stuck on a single idea. Leadership needs to re-examine everything: compensation, accountability, media optimization, market research methods and integrated strategies and costs.

So. What I garnered from reading my four Ad Age articles can be summed up this way: Our business is changing. We can react and let it change us, or we can take the lead and we can change it.

What do you think?

Happy Halloween!

-Allan

Save a Seat for Marketing at the Table: Avoid a Merger and Acquisition Blind Spot

Over the Summer, I read a wonderful article in The Wall Street Journal, in the "Business Insight Journal Report." I was excited after reading the piece because it validated many of the tenets upon which I founded our firm nearly nine years ago. The article was entitled, "M&A Blind Spot. When negotiating a merger, leave a seat at the table for a marketing expert." Unfortunately, this rarely happens.

The article talked about the integral role of marketing in securing and consummating a deal through internal acceptance by the organization. It reminded me of a statistic I heard nine years ago to explain M&A failures. Dr. Michael Hammer said "that 80% of mergers and acquisitions fail and that 50% of the reasons that they fail are due to personality and culture clashes between the companies and their leadership." This is just as true today as it was a decade ago.

In my opinion, marketing and branding are lynchpins of a successful merger and acquisition. All too often, however, marketing is just an afterthought. Bankers, lawyers, and accountants have a place at the M&A table to ensure that the deal lives up to its potential in regards to risk minimization, asset evaluation, and legal due diligence. But where are the marketing experts? They should be at the table as well to ensure that the organization embraces the merger, positioning it with positive benefits inside and outside the company. Effective communications and messaging can win over all the critical stakeholders and ensure success.

Ensure success with marketing and branding

Find me a lawyer, accountant, or banker who can manage all this:

1. Vision and direction

• The company must have a clear sense of direction and vision after the M&A plan is laid out. The vision should be in simple language (with examples) so employees can relate to it and understand the benefits for themselves and their company. Marketing departments and their leadership are trained and experienced at creating this kind of messaging.
• Creating a new, combined vision is clearly the role of marketing. Imposing one company's vision on two merged entities often alienates half of the people the instant the merger is launched.

2. Overcoming uncertainty through employee engagement

• Without doubt, uncertainty is the number one issue after announcing a merger or acquisition. Overcome it by enrolling the staff through relevant messages and experiential communications programs.
• Marketing professionals understand consumer insights and motivations that translate into actionable tactics and communications. With knowledge and understanding, employees gain motivation. After internalizing the merger value proposition, they finally gain inspiration. They will be engaged and enrolled.

3. Understanding where your employees stand on issues

• Companies should segment their employee audience the same way they segment and analyze their external audiences to measure their acceptance of change and learn the best ways to communicate with them.
• These are the types of questions that marketing will answer:
  - What motivates employees?
  - What inspires them?
  - What are their opinions of management and the corporation?
  - How do employees relate to management and management communications?
  - What forms of communication do the employees prefer?
  
• Marketing professionals are analytical. They are in constant search of insights and buyer values that can be deployed toward an internal employee audience as well as an external one.

4. Experiential communications

• Particularly in an M&A situation, old forms of internal communications are no longer relevant or successful alone. New and more creative methods, with involving and entertaining communications, are more appropriate for adult learning.
• Media should vary by audience: video games, gadgets, viral campaigns, role playing, one-on-one meetings with senior folks, skits, outings, company-wide challenges, events, internal trade shows, a staff radio station, a webcast-whatever draws them in. The key idea is to engage the employees to participate in the exchange and learning.

5. Developing the message

• Like any other marketing campaign, internal branding starts by understanding the change readiness of the organization, followed by developing messages that are relevant and meaningful at all levels-corporate, team and department, and individual. The company needs a clear positioning and sense of what it aspires to be.
• The messages should be presented by the leaders of the organization who know their business and the marketplace best.

6. Establishing brand ambassadors

• Seek out the critical internal stakeholders and opinion leaders for their support and help first, then build consensus within the organization.
• Involve the full spectrum of employees. Ask for their input into the program-they know the customers and the business from all angles.

7. Project management, not ad hoc effort

• Treat the plan like a program-management launch. Assign a great program manager and allocate the proper monetary and HR resources for the effort to succeed.
• Reinforcement is critical. Your employees need to see the message all the time, in lots of different media via different channels. You can emblazon it on a lapel pin, a parking-lot sign, a redesigned uniform, or a lunchroom banner. Or anywhere else that it makes sense to remind people.

8. Measurement and Feedback

• Take measurements and make adjustments. The campaign will need fine tuning as it gains momentum. Gauge how the organization's culture is receiving the message and reacting to it. Then modify your emphasis as needed.
• Budget for post-campaign analysis and an audit of effectiveness. Conduct before-and-after employee surveys to measure business literacy, brand awareness, and awareness of M&A messages and corporate initiatives.

In the end, what matters is an educated and aligned workforce motivated to get behind the sale, acquisition, or merger. You want your people to be inspired to work for your firm. They should be proud of what it stands for and what they do. If they care about being part of the process, they will spread the word to your clients and to each other. By enrolling your employees, you will accelerate the changes you have planned and get down to business faster, with fewer internal squabbles, and with a steady stream of re-energizing successes that will sustain itself over time.

Is your company facing a merger or acquisition, or just going through major changes such as ERP implementation or re-engineering? Don't forget to reserve a place at the table for professional marketing counsel. With marketing present as an equal partner with the lawyers, bankers, and accountants, you will ensure success of the merger and win over your employees, who are ultimately responsible for making it all happen.

Give us a call and let us describe how we help companies as they face acquisition or sale.

PS, Click here to enjoy the WSJ piece the way I did.

Happy Reading,

-Allan

Effective Communications: A Leading Indicator of Financial Performance 2005/2006 Communication RIO Study

As the Summer winds down and we enter the Fall season, many companies begin to examine their financial results in anticipation of those December year end result reports. This is a good time to examine your communications programs in an effort to help increase financial performance. Effective communications is the lifeblood of any successful organization. This statement is a mantra in companies of all sizes. They use it to explain their improved financial results.

Now we have solid proof that it's true. Watson Wyatt, a major and respected HR consulting firm, recently conducted a revealing study that links effective communications to financial performance. The results of their analysis are staggering, a must-see; and critical information for every CEO and CFO.

Companies that communicate effectively have a 19.4 percent higher market premium than companies that don't.

At Inward Strategic Consulting, we have always believed that effective communications, through internal branding and change communications campaigns, creates more educated and motivated employees. They embrace change and adopt new behaviors to support it. The findings of this 2006 study substantiate our claim: they amplify the call for internal branding efforts, employee communications and the use of staff to create team alignment and awareness.

We have taken the liberty of summarizing some key findings to share with you. If you would like a complete 20-page PDF of the Watson Wyatt Report (a $45.00 value - sold online), just write me back and I will be happy to send you a copy for free.

Three amazing conclusions:

• Companies that communicate well have a 19.4 percent market premium over companies that do not.
• Communications effectiveness is a leading indicator of financial performance.
• Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement than firms that communicate less effectively.

Study Highlights: What characteristics define effective communications?

• Helping employees understand your business
• Educating employees about your culture and value
• Sharing financial information and objectives
• Exhibiting strong management leadership during organizational change
• Alignment of employee practices with customer needs
• Explaining and promoting new programs and policies, i.e., employee integration.

What the study found:

Link to shareholder value: Companies with more effective communications experienced a 57% higher total return to shareholders over a five-year period than those with less effective programs.

Increase in market premium: Communications effectiveness is associated with a 19.4% overall increase in market premium.

Effective communications is a leading indicator of financial performance: If a company invests in communications and implements or improves its communication practices, it can expect up to 20% higher financial returns.

Reduction in reported turnover: Companies with high levels of communications effectiveness are 20% more likely to report low turnover rates than their competitors. Lower turnover translates to improved continuity, better understanding of the business and less need to train and re-educate staff.

Practices at highly effective companies:

• Communications programs are in place and ready to support organizational change efforts when needed
• Documented internal communications strategy in place
• Open communications with employees about events that affect them and the reasons for major decisions
• Sharing business plans and goals with employees
• Linking communication objectives to business objectives
• Linking pay and benefit programs to achievement of the business strategy
• Treatment of managers as a key audience, and sharing advance information with them
• Regular transmission of communications counsel and insight to the CEO and senior management team
• Eliciting the support of senior managers, and engaging them in the communications process
• Effective coordination of internal and external communications

What areas could you improve?

Every organization always has room for improvement. More and more organizations are starting to improve their communication processes, but look at these trends:

• Less than 50% of high effectiveness companies (only 25% of low effectiveness companies) do any proactive communications planning. Some companies are reluctant to plan far ahead given the current pace of change. But where no plan is in place, firms typically lose sight of the big picture.
• Less than 1/3 of companies actually give employees the ability to add their insight and input to decisions. Companies must educate their employees on how to communicate effectively and develop channels for two-way communications.
• Over 60% of companies have an intranet enterprise portal, yet companies need to document their electronic communications strategy. Use emerging technologies such as blogs and wiki's to get the message across.
• Global communications is still North America centric! While 60% of companies surveyed in this study have international operations, the study found that few companies really communicate effectively with employees and business units around the world. You can improve this area by integrating the global communications plan into the company's overall communications strategy. Form a global advisory group to identify local needs, customize messages and secure international buy-in at the micro level.

Conclusion: The elements of effective communications

The study identified characteristics of organizations with successful communications programs, using a comparative index of successful communications policies, programs and behaviors from various organizations.

If you're interested in improving your communications, consider the following characteristics of the high performers:

• A comprehensive communications program is an essential part of the organization's business strategy.
• Senior management bases its communication efforts on a clear, well-defined communications strategy.
• Communications programs are developed proactively rather than reactively.
• The organization has a well-defined, two-way communications philosophy.
• Employees are kept in the loop about how their firm is doing at meeting its goals.
• Employee communications programs focus on helping employees understand the business.
• Employee communications programs focus on providing information and feedback to motivate and improve job performance.
• Managers at all levels are rewarded for communicating effectively.

The essential message of the 2005/6 Communication ROI Study is clear: financial success does not lag far behind when senior management takes the time to plan, identify and reward effective communications, Thoughtful strategic planning and development of internal communications initiatives correlates directly with financial success.

Please don't hesitate to contact me if you would like to discuss how an effective communications plan can help improve your organization's financial performace. I'd be happy to share some insight, tips and best practices on how we have helped many companies improve their bottom line.

About the study:

The 2005 Watson Wyatt Communications ROI Study visits the relationship between an organization's communication practices and its business performance. The study's goal was to identify where communications practices have the highest returns.

Its 335 participants came from large companies across North America. (The average participating company has revenues of $3.9 billion and 13,000 employees.) Survey questionnaires included questions about employee engagement, global communications, and the relationship of the communications function to senior management and emerging technologies.

The study was broken out into two separate parts, each with its own findings. The first shows, basically, that companies with effective communication practices can earn a significantly higher market premium over their competitors. The second part concludes that effective communications practices can earn a market premium for the organization and can identify the key metrics for instituting an effective communications program.

Here's to a profitable Fall season!

-Allan