Los Angeles Business Journal

Business Missing Message on Communication

OP-ED By David Silver Monday, January 13, 2014

It was Ken Chenault, chief executive of American Express, who might have summed it up best: “We have to remember that reputations are won or lost in a crisis.” CEOs and senior management who were once lionized as being the engines of growth and jobs, especially in Los Angeles and Southern California, are now discredited and seen as bumbling their company’s reputations in this last Great Recession.

As the financial and business markets started to swoon and crash, company executives failed to grasp the importance of one of its audiences: the court of public opinion. Additionally, the democratization of finance and technology had allowed financial systems around the world to become interconnected in such a manner that when the collapse started it created a tsunami effect that still resonates today. Corporate executives ignored the public and media at their peril and the subsequent scenario was that groupthink set in as companies formed bunker mentality strategies of “no comment.”

It was 40 years ago that Yale sociologist Irving L. Janis wrote the book “Groupthink” and talked about how a group of highly intelligent people working together to solve a problem can sometimes come to the worst possible result.

We have seen over and over again that the smartest people in the room can still get it wrong when dealing with a communications crisis under a media microscope. Who is to blame when these highly educated and brilliant business executives and lawyers in all other facets of the business and financial worlds fail to understand that a company’s reputation is its No. 1 asset? I indict the business and law schools.

Professor Paul Argenti, a leading business scholar of corporate communications from Dartmouth University’s Tuck School of Business, agrees that business schools don’t take communications as seriously as finance, accounting and management.

“The problem is that corporate communications only becomes extremely important when there is a crisis that will affect a corporation’s reputation,” he said,” but because this subject is not taken seriously, CEOs and senior management fail in this regard.”

Countrywide Financial in Calabasas is a perfect example of this communications groupthink mentality. Founded in 1969 by Angelo Mozilo, the company became the largest mortgage lender in the country and Mozilo became very wealthy. His company also became the largest corrupt subprime lender in the country, selling toxic mortgages to unqualified applicants. When the housing market collapsed, so did Countrywide.

Crisis mode

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