An ill-judged remark has always been potentially devastating for a business, as the jewellery entrepreneur Gerald Ratner famously discovered when a joke about the quality of his products nearly led to the collapse of the company. But what has changed dramatically for business leaders in recent times is the ease with which they can slip on a reputational banana skin.

The rise of social media and round-the-clock reporting mean there is an ever-present, braying audience for bad news and PR gaffs. Paul Drechsler, Chairman and CEO of the building and construction company, Wates Group, says: "It isn't that trust and reputation are more important today than they were before – it is that [business leaders] are more vulnerable in today's world. I say to my colleagues in Wates that my number one concern is that, through their actions and behaviours, a brand and reputation that took 114 years to build up, could be destroyed in an instant.”

It’s all too easy to send the wrong message. The experience of Tony Hayward at BP following the Gulf oil crisis demonstrates how a  mighty corporation can be brought to its knees by an accident and subsequent mishandled communications. Graham Mackay, Chief Executive of drinks company SABMiller, says, "Businesses are much more like open democracies. People expect to be communicated to … and see themselves as part of a democracy where they consent to being led. As well as the need to communicate more with employees, there is increased regulatory scrutiny, the rise of global NGOs and 24/7 media. You have to represent yourself and explain your company and your actions all the time."

In the spotlight

There’s no ‘off switch’ or downtime for the leaders of the UK’s business community. Kevin Murray, Chairman of PR firm Bell Pottinger, says, “Good leaders steer organisations to success by inspiring and motivating followers, by providing a moral compass for employees to set direction and by communicating a compelling vision the future.”

In other words, communication is a key weapon in a modern CEO’s armoury. Sir Stuart Rose, former Executive Chairman of retailer Marks & Spencer and current Non-executive Director of Land Securities Group plc, says that “for a business leader, building reputation and trust IS the day job, which makes communication the day job too”. It’s a point taken up by Jeremy Darroch, Chief Executive of media giant BSkyB: “Organisations that aspire to long-term success have got to have trust as an important part of their agenda. You never trust somebody you don’t know, whose motives you don’t understand. So, as a leader, you have to give people inside and outside the company a sense of who you are, and what you stand for. That’s what will help people decide whether they are willing to trust you.”

High stakes

Companies are expected to communicate well and properly engage with consumers and clients like never before. John Connolly, Former Senior Partner & UK CEO of Big Four firm Deloitte, says, “I believe that we have come to a stage where we have now to imagine a new definition of the purpose of business. What is it for? How does it make a positive contribution? There has to be more of a focus on long-term sustainable success rather than just short-term gain. It is only if you think long-term that you build more value in your business. You cannot sustain your business in an environment, either social or physical, that does not have a future.”

Jeremy adds, “You’ve got to make sure that your mission and values are relevant to a broad range of audiences, and that they understand your endeavours are making a contribution beyond the narrow profit of your business. What is good for you as a business is generally good for others too, whether you are a partner, an employee, or a customer. So you have to be prepared to stand up and explain why your success is good for all of those people.”

If managed correctly, this transparency and openness presents a fantastic opportunity for businesses to get closer to their core markets. Dame Amelia Fawcett, Chair of the Guardian Media Group, says, “Most communications are just not fit for purpose in the Facebook, Twitter, blog and 24/7 news world. News is now being produced by professionals and non-professionals working together – in what we call the mutualisation of news. One correspondent on the Guardian has a following on her blog of 750,000 people; The Guardian has a circulation of 365,000. If you know how to engage with that sort of network it can be very powerful."

For Sir Stuart, CEOs and non-executive directors should be proactive in explaining how trade and commerce are positive forces for society. “I think it is beholden on business leaders to spend time in educational establishments, especially schools, and explain to children that work is not a bad place and that, unless they are unusual, they are going to spend 30 years or more in work. One of the downsides of the financial crisis is that there is now a feeling in schools that the creation of wealth is a bad thing.

“We’ve got an obligation to explain to the community at large that business growth is good, otherwise we wouldn’t have roads, universities, trains, planes, and all the other infrastructure we need. People need to understand that the Government  is spending the money that business makes. This is hugely important and I’ve been quite vociferous about it.”

Jeremy agrees. “There is no use in doing a lot of good and then not communicating it. Business has got to get itself on the front foot. Leaders have got to start laying out the positive case for business and private enterprise in a much more compelling way.”

Silence and a hands-off approach won’t be tolerated any longer. But every communication needs to be carefully weighed-up and balanced as nobody wants to suffer the merciless consequences of ‘doing a Ratner’ in the digital age.

This Update has been inspired by the content of a new book on leadership by Kevin Murray. The book, which is due to be published in November, is entitled ‘The Language of Leaders.’ You can find out more by clicking here (enter ‘Language of Leaders’ into the search facility). A supporting article is also available here.

Please get in touch if you have any comments about the issues raised here.

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