Time Magazine & Lessons of AIG

Time Magazine seems to be following an agenda set by PRBackTalk. After all, Time -- which I may start calling AboutTime -- wrote about the crisis affecting newspapers after we started talking about the crisis here. And Time is looking at AIG and public relations after we first started discussing it here.

Here are two more good articles about AIG to consider:

• Five Lessons from the AIG Bonus Blowup
• Is AIG Spending Too Much on Public Relations?

They may be following our lead, but the articles are worthwhile.

As for PR and AIG, a spokeperson for AIG makes a worthwile point: "He said the outside firms help AIG keep up with the pressing demand for information. 'If we stopped doing what we're doing,'" he said, "'there would be a worse outcry.'"

AIG's PR Crisis: Four Agencies Still Not Making Headway

I know that most blogs and people I talk to on Twitter have written off AIG and its ability to salvage its image.

I wrote Five PR Steps AIG Should Take anyway because the company is not going away yet. I've witnessed two firms -- a small family business and a mid-size law firm -- as they tried to wind down business, and it took years for it to happen. And compared to AIG, they were relatively simple businesses.

Since AIG is going to be around in one form or another, I believe its management will need to engage a PR firm to help it communicate to Congress and taxpayers as well as the usual stakeholders.

Turns out, according to a BreakingNews.com article, Dizzying PR binge, AIG has hired four PR agencies:

• Kekst & Company, handling its asset sales
  
• Sard Verbinnen, handling IR
  
• Hill & Knowlton, focusing on inside the Beltway
  
• Burson-Marsteller, focusing on inside the Beltway

I assume H&K and B-M are focusing on lobbying, but they probably need to do more in communicating with the rest of us.

So, like it or not, AIG is working to improve its image. For more on some of what AIG's PR machine is doing, check out TalkingPointsMemo's AIG's PR Blitz.

It will be interesting to see how effective they are.

NY Times Offers PR Advice to Bank of America

The New York Times published a special "DealBook" section that included an unexpected article: "How to Win the Spin the Win Game: Some Advice for Ken Lewis." Written by Paul Pendergrass, a PR pro, the article lists more than five things Lewis ought to do -- compared to the five actions we suggested for AIG -- but they're pretty good, including:

• Anticipate
• Give 'em a reason to care
• Give 'em a reason to believe
• Go human

Check it out.

As for editors at the NY Times giving free PR advice, I guess turn-about is fair play. After all, this blog often gives advice to newspapers on how to run their business.

Five PR Steps AIG Should Take

There's been some discussions online and on Twitter about whether some companies are beyond the help of PR.

Mostly, the discussion centers on AIG.

If they don't change how they operate, then I agree: AIG is beyond the help of PR.

But I don't think that has to be the case.

Pre-crisis, AIG needed to focus on investor relations, not consumer PR because it does not sell to consumers. That has changed. As taxpayers, we now own 80% of AIG, having contributed more than $170 billion. AIG still needs IR, but it needs to reach out to the rest of us, too.

Here are five PR steps AIG needs to consider:

1. Apologize for mistakes made. Make it sincere, make sure people have a chance to hear it. It better be sincere because the public can tell when it's not. Act as if your jobs depend on it -- because the taxpayers and the country need you to get this right.
   
2. Explain the steps they're taking to get on solid footing. The taxpayers have committed at least $170 billion. Depending on whether you prefer the government cliche -- sooner or later that will add up to real money -- or the advertising spend cliche -- I know I waste 50% of my media buy, I just can't figure out which 50% -- AIG needs to clearly explain how it is using taxpayer money to get on solid footing. JetBlue pubslihed it passenger bill of rights, explaining the steps it would take; AIG needs to publish something similar, something easy to understand. This is complicated stuff, just check out part of the current explanation: "The facility carried a rate of LIBOR (the London Interbank Offered Rate – a widely used benchmark used to set short-term interest rates) plus 8.5%, a commitment fee of 2% on the loan principal and a fee on the undrawn portion of 8.5%." Meanwhile, the document that includes "AIG’s Plans Going Forward" could include some specific bulleted points to make it easy to understand what the company is doing.
3. Recognize that the culture of million-dollar bonuses and life pre-crisis has changed. They need to start by rescinding the bonuses. But they need to go further, and make significant changes to how the company and its employees interact with the public. Goldman Sachs employees now visiting New York City have to stay at Embassy Suites, not the Ritz, both to save money and because it owns Embassy Suites. Employees are grumbling about the change, but it's the right thing to do. In fact, AIG needs to take a hard look at the way it operates, from catered lunches to offsite golf boondogles and ask themselves, "Would I like news of this to be on the front pages of the New York Times?" Or, worse, "Would I like to see this as a segment on the Daily Show?"
   
4. Make sure PR counsel has a seat at the table, and listen to them. If they say a move or decision or event would look bad if made public -- listen to them. Realize you're operating under crisis conditions, and your PR should reflect that. Yes, that can be an expensive way to conduct a PR program, but it may help avoid significant problems. After all, taxpayers who feel wronged are more outspoken than shareholders. Taxpayers will complain, loudly and often, to politicians. And that won't help down the road, when AIG needs more money.
   
5. Continue to provide status updates on the progress AIG is making, be accessible, and engage by offering ways for the public to provide feedback. The image right now is a company run amock. AIG's senior management needs to continue to demonstrate that it is getting its house in order. That means being transparent. That means being accountable. That means making significant changes to "that's the way we always did things." By the way, AIG does have a web page devoted to informing the public; it's called AIG Moving Forward, and it's available from a button off the home page. The last time the page seemed to have been updated was March 2 -- that's more than two weeks ago -- with one link from March 14. It needs to be updated on a daily basis. It needs to have its CEO Ed Liddy regularly provide a video update on its site. And AIG Moving Forward needs to make it easier for people to comment and provide feedback. Overall, the site didn't look very friendly or engaging.
   

There are more specific steps AIG should consider -- namely measure stakeholders' attitudes, establish benchmarks, develop a stakeholder communications strategy. But that would require AIG to want to engage the American people. So far, the company has not sought to engage us. It has taken our money but shown little desire to be accountable or to act as if it finally recognizes that the new normal means the old way of doing business no longer works.

For Bailed-out Companies, PR is More Important Than Ever

After the example the chiefs of GM, Ford & Chrysler flying on separate private jets to attend a Congressional hearing to discuss bailout plans, AIG has raised scorn for paying out millions in bonuses -- including to those in the Financial Products unit responsible for "credit default swaps" -- which generated the huge loses.

It's clear that the Big 3 auto makers and AIG, Merrill Lynch (now part of Bank of America), and other financial services firms receiving billions of taxpayer dollars in bailouts made huge mistakes in running their businesses.

But what's also becoming apparent is that these companies are failing to understand the new operating culture.

It's no longer business as usual for them. For financial services firms, the time has past when they could justify huge bonuses as a way "to keep its talented executives." Where else can these people go? There aren't enough banks or jobs left.

In the new operating culture, bailed-out companies must be more accountable but also must understand how their actions play on Main Street.

On Main St., people don't fly private jets to meetings. They also have plans to present when they're asking for a loan -- something the Big 3 chiefs lacked the first time they met with Congress.

On Main St., people don't get million-dollar bonuses when the performance of their business unit cratered. Those so-called bonuses do not provide an incentive to actually produce positive results.

On Main St., bankrupt companies do not hold multimillion dollar golf retreats just because that's how things were done.

In the new operating culture, bailed-out companies need to think carefully about their public's perception of them. If they don't, you get nasty headlines like, "The real scandal of AIG: We're helpless" in Salon, where you might expect it. But you also get headlines like "Political Heat Sears AIG" or an editorial "The Real AIG Outrage" in the Wall St. Journal, where you wouldn't expect it.

These PR fumbles may be more significant than before because taxpayers are even more cranky than shareholders, and they complain to politicians much more -- much more often and much more loudly. And it's going to be much more difficult for AIG to make a case that it needs to receive more TARP money (now at $70 billion, not including another $100 billion in other government aid it has received). And I have no doubt that AIG will need additional infusions of capital.

Interestingly, a good high-level PR consultant or agency costs far less than what AIG is going to pay in terms of angry politicians, increased and tighter oversight by the government.

There might even be a sub-specialty practice in crisis communications to help these companies get with the new program. They certainly are demonstrating they need the help.