Friday, January 23, 2009

Tone Deafness In Financial Advertising

by Stephanie Fierman

If we here at the Garage haven’t said it aloud just yet, it should be a given that financial services advertising is an arena fraught with peril these days. Do you advertise at all? And, if so, what message do you communicate that won't end up sounding like a punch line? Consider for a moment that Lehman Brothers won a Best Advertising Campaign of the Year in 2007 and Bear Stearns’ tagline was “Risk Managed. Value Added.”

You can’t make this stuff up.

Here’s a Bear Stearns stress ball for sale on eBay that carries the line “Little Things. Big Impacts.” (Ha ha ha! Thank youuuu! Please remember to pay your waitresses!)

Unfortunately, Bessemer Trust appears to be playing the dark comedy angle this week.

Henry Phipps founded Bessemer over 100 years ago to manage his family’s proceeds from the sale of Carnegie Steel. Today, the firm’s website states that Bessemer manages in excess of $50B in assets for over 1,900 families, and that its “history of serving wealthy families affords us an understanding of the issues that matter to you.”

It would be safe to assume that some of those “issues” might include the scary guy in the room these days, Economic Meltdown, and his accompanying stooges, Uncertainty, Irresponsibility, Misrepresentation and Anxiety. A financial firm that chooses to advertise in this climate must reflect that it understands these realities.

So imagine my surprise when I saw Bessemer’s ad in The Wall Street Journal: a half-page ad with huge type, saying “We invest your money right along with ours. Needless to say, you benefit from some very careful thinking.”
My reaction: “They’re joking. Bessemer is an honorable and discreet company. Why would they get down in the mud with other companies that followed this same practice and lost their investors billions of dollars?” Investing your own funds is no guarantee of anything – it’s not a guarantee of wealth, intelligence, integrity or the “alignment of interest” touted in Bessemer’s ad. Lots of categories currently in the hot seat invest their own funds: venture capital firms, investment banks, mortgage companiesEnron invested its own funds alongside clients, for Pete's sake!

The ad's small type does actually call out some positive characteristics and benefits of working with Bessemer “as the credit crisis loomed.” Unfortunately, I am fairly certain that no one who saw this ad ever read that far.

Does Bessemer have an executive tuned in to the reputation and trust zeitgeist today? If not, it needs one; if so, we would suggest a bit of retuning. Contact us here at the Garage: we’ll be gentle.

A version of this post was originally published at

Tuesday, January 20, 2009

The Transitivity of Trust (Or Why I Don't Trust Roland Burris)

Paul Allen

I was thinking to myself the other day that I would not trust Roland Burris as far as I could throw him (which btw is a very strange expression when you think about it – right up there with “the proof is in the pudding”).  Now, it is important to note that, up until recently, I had never heard of Roland Burris. And I am probably not alone as far as that goes. And it is likely that my initial take on Burris is not well informed.

 But nonetheless, I do not trust Roland Burris.

Unless you have been living on the same island as the cast of LOST, you know that Roland Burris is the Illinois Attorney General just seated in the US senate filling the post vacated by Barack Obama. Of course the big story around Burris’s appointment is his appointer – Rod Blagojevich (a.k.a. “Blago the Impeached”).  Burris was the net result of Blagojevich’s “pay for preference” scandal in which he sought to personally profit through the appointment of Obama’s senate successor.  “Blago” persisted in his legal right to make this appointment while being pursued for violating the Constitution of the United States in his attempt to make some personal coin off this appointment. Not a good guy at all. And remarkably stubborn in his “wrongness.” Not to mention his poor taste in hairstyles.

The good news is that Blagojevich is being impeached. And will face Federal charges. The bad news is that I still don’t trust Roland Burris. But I think I know why.

It is the “Transitivity of Trust” theory. Which I just made up. But it is based on some fairly sound mathematical principals, much of which we all learned in middle school or perhaps high school.

Do you remember the transitive property? It goes something like this:

In mathematics, a binary relation R over a set X is transitive if whenever an element a is related to an element b, and b is in turn related to an element c, then a is also related to c.

Transitivity is a key property of both partial order relations and equivalence relations.

Or more simply:

Whenever A = B and B = C, then also A = C. 

So in this case, let’s say that I am “A”, and “Blago the Impeached” is “B”. I think I’ve already made the case (as has the entire media community) that Blagojevich is not a trustworthy guy. This is evidenced by his being the first governor to ever be impeached in the state if Illinois. 

So A (me) does not trust B (“Blago”) at all. Who would?

Now, let’s say newly appointed senator Burris is “C”, It seems to me that Roland Burris must feel pretty good about Blagojevich and his decision to nominate him to the senate. After all, despite the controversy around Blagojevich’s rights, wrongs and general bad behavior Burris seems to have no problem accepting the nomination. Burris, in effect, trusts and supports Blagojevich. So to me that means “B=C”. In another words, Blagojevich and Burris appear to be cut from the same cloth – perhaps some kind of self-absorbing fabric.

So, if I (A) don’t trust Blagojevich (B). And (B) trusts Burris (C) (and vice versa). Then according to the “Transitivity of Trust” I (A) do not trust Burris (C). And that’s that.

It’s probably worth noting that Burris’ nomination came with the condition that it was for one term only. So even the government of the United States of America does not fully trust Roland Burris. Because of Rod Blagojevich. This transitivity thing is no joke. 

The big lesson for me in this is how much a perception of trust can be influenced by the company one keeps. Trust (or lack thereof) is a very transferable notion. It can be rubbed on or off by those you choose to associate with.  As a person, or institution becomes serious in it’s mission to become truly trustworthy (which means addressing image, culture, behaviors, values and transactions), the “Transitivity of Trust” becomes a very relevant phenomenon.

Aspiring Trustmeisters (folks who are committed to helping themselves and their organizations establish an trust-based operating approach) must put this phenomenon into real practice. Choose your colleagues and associates carefully. Assess their real and perceived trustworthiness. And don’t work with anyone who uses Rod Blagojevich as a reference.

Copyright 2009 by the Reputation Garage and Allen & Gerritsen

Monday, January 19, 2009

Quotes That Tell the Story of Our Times

Jarvis Cromwell

Here entirely in quotes is the story of the lowest trust age in a century.  (I've paraphrased in a couple of minor instances, but you get the idea.)

Trust is like the air we breathe. When it’s present, nobody really notices. But when it’s absent, everybody notices.”      -Warren Buffett

"Not so long ago companies assumed the purpose of a business is to make money.  But that has proved as vacuous as saying the purpose of life is to eat…

  1. The purpose of a business is to create and keep a customer
  2. To do that you have to produce and deliver goods and services that people want and value
  3. To continue to do that a company must produce revenues in excess of costs in quantities and with enough regularity to attract and hold investors
  4. No enterprise can do this by accident or instinct, it must clarify its purposes, strategies and plans
  5. There must be a system of rewards, audits and controls to make sure what’s intended gets properly done, and when not, quickly rectified." -Theodore Levitt

“ABN AMRO has set itself one governing objective — maximizing value for shareholders. Setting one objective allows an organization to develop a common language and standards for decision-making and ensures that all energies are focused on reaching the objective."  
-ABN AMRO, 2003

"Royal Bank of Scotland on Monday announced it expects to suffer a loss of up to £28bn last year. The RBS loss will be the biggest in British corporate history...Almost all their losses are in subprime mortgages in America and related to the acquisition of ABN Amro... "These are irresponsible risks taken by the bank with people’s money in the UK,” Mr. Brown said, adding that the decision to buy ABN ”was wrong”.         -
Excerpted from Two Reports in the Financial Times, Jan 19, 2009

“The roots of mistrust in organizations are 1) the misalignment of measurements and rewards, 2) incompetence, 3) lack of appreciation for a system, 4) untrustworthy information and 5) integrity failure." 
-John O. Whitney

“The theory of capitalism, going back to Adam Smith over 200 years ago, sees an alignment of interest between consumers and businesses… This theory assumes that consumers are rational in their choices, and to a large extent they are. 
 -Robert Shiller

“This is the worst showing for Corporate America in 30 years...
  It is unprecedented, in fact, to see this many people with an unfavorable opinion of big business.” -Roper ASW, July 23 2002

Monday, January 12, 2009

Trust Recovery Path: The Leadership Challenge (Jarvis Cromwell)

Back in 2007 we quoted renowned free-marketeer Milton Friedman on the pages of this blog as follows:

“There is one and only one social responsibility of business," Friedman wrote back in 1970, and that is to “engage in activities designed to increase profits.”

Friedman’s viewpoint ultimately became the guiding principal of an era: profitable self-interest would be viewed as the only reliable endgame by most businesses. 

And the Friedman playbook worked for a time. The rise of the activist shareholder movement, deregulation, the tearing down of the Berlin Wall, the creation of the Jack Welch rules of management, financial engineering and an expanded investor tool set as applied by the hedge fund industry were all celebrated as triumphs of the free-market. 

Unfortunately, as we all now know things haven't ended so well.  Along the way Friedman's proscription morphed (somewhat hideously) from its original intent of pursuing activities to increase profits to the idea that profits must be pursued at all cost. 

The costs were higher than anyone imagined. We read today that there is increasing consensus that there will be a 15-25% drop in the standard of living around the world  (more in some especially beleaguered regions)  as a result of the current crisis. Wow.  And some corners are now arguing that 2008 was to capitalism what 1989 was to communism. Is this the demise of free market capitalism as we know it?  Or is there a way out of this place?

The optimistic view is that our current sorry state of affairs will herald a new era of free market capitalism that fellow trustmiester Dr. Sri Raghavan has termed "True Metric" capitalism. In other words, we will begin to measure what truly matters for the health of the system.  To achieve that, organizations will need to look towards metrics beyond short-term profit to measure the health of our markets and businesses. 

The pessimistic view is that business leaders won't lead us in this direction.  Over a year ago the futurist Andrew Zolli wrote a piece in Fast Company where he declared that the oblivious capitalist’s days are numbered. In this case Zolli cast his eye to the future and concluded that a host of global forces will force a remake of the playbook for business success.   Business will profit by driving a wider social agenda and “the clinical, value-neutral capitalism of old” will fall by the wayside. 

Let's face it, whichever way you slice it companies have much work to do.  That work includes reducing costs and preparing financially for a long winter. But beyond the very real financial contstaints, this is a time of customer scarcity and increasing fear.  Building  trust must now become a central means through which companies will drive customer sales, loyalty and retention, employee engagement, productivity and, ultimately, long-term shareholder value.  It is an essential metric to the survival of capitalism as we know it.  Warren Buffett compared trust and confidence to the air we breath.  We take it for granted until it's gone.  Hopefully management teams around the world are realizing just how essential it is to our survival.

What do you think?  Are the days numbered for the oblivious capitalist -- or will leadership rise to the challenge and institute a new set of performance measures to bring us back from the brink?  Which companies will get it, which won't?  We would like to know your views.

Copyright 2009 by The Reputation Garage

Thursday, January 08, 2009

Fall of GM - A Visual Guide

Jarvis Cromwell

In this chart depicting both the internal and external factors responsible for the Fall of GM, 75% of the management-related factors have trust-related issues.

Unfortunately, this comes as a surprise to nobody other than GM management.