Effective Financial Communications During the Economic Crisis

Measuring Financial Communications

 

Lessons Learned from 13 Financial Communicators

This is one of a series of articles adapted from papers presented at the 12th Annual International Public Relations Research Conference. To learn more about this year's IPRRC, which was held in early March in Miami, see this article in The Measurement Standard, and this post on Katie Paine's Measurement Blog. To learn more about the IPRRC in general, see this page on the IPR website.

by Marcia W. DiStaso, Ph.D., Assistant Professor, Pennsylvania State University

Financial communicators are experiencing the most trying and turbulent period since the Great Depression. During these times of uncertainty and instability in the world's financial markets, trust has been undermined, and the accuracy, clarity, and transparency of an organization's communications has become the lifeline for a number of constituencies, including employees, investors, analysts, customers, and vendors. Essentially, the current financial meltdown has placed financial communicators in the center of a crisis of trust.

Given the current economic environment, it can be difficult for public relations communicators to be proactive, especially with news breaking daily. Timeliness is critical and being reactive is a current fact of life. Ultimately, communicators must find a balance between being responsive and allowing the time necessary to properly construct appropriate fact-based messages. Plus, financial communicators have the challenge of balancing transparency without increasing a sense of urgency or emergency. To maintain credibility, companies need to communicate where the company is going, and this must include the good along with the bad news so a fair assessment can be made.

This article is an analysis of lessons learned from a focus group with 13 financial communicators on November 6, 2008. Each participant was responsible for financial communication for banking and financial institutions in the United States. The group discussion was focused on how to most effectively communicate during the current volatile market conditions.

Participants in this study said that they feel like they are being asked to "fix the world." This constant need to "get something out" is a big challenge for them. Everyone needs to be kept informed, but financial communicators have to be careful not to be overly focused on the "rumor of the day." To meet these needs, they are seeing a shift in the use of communication tools and even though this is not a traditional crisis, standard communication plans are being used concurrently with crisis plans. Then, as necessary, communication pieces are escalated. As one participant commented, "previous tools are being put on steroids," with the desired result of substantially more communication.

External Communications

The following are ways some of the financial communicators are working to meet external challenges:

1. Since some big, old companies have recently gone down, participants said that they can no longer just say things like, "We are a very old bank, as solid as can be." They now have to say more than that they are old; instead, they need to utilize things such as third-party endorsers (e.g., independent auditors and customers), quality studies (e.g., Voice of the Customer surveys), and ratings from ratings agencies (e.g., Standard & Poor's and Moody's) to back up their longevity and financial strength. One participant said that his company has started saying, "We didn't lay anyone off during the Great Depression, so why would we do that today," but he too found that it is not enough.
2. Web sites are being used more to talk to customers directly, and letters from CEOs are distributed and posted online talking about the company and the economy.
3. When it comes to media relations, financial communicators are not in this alone; most of the participants were working closely with their CFO (Chief Financial Officer), CEO (Chief Executive Officer), CIO (Chief Information Officer), and/or their chief economists to be responsive to media inquiries because they can help provide a clear perspective on what is going on.
4. Non-economic related communication is still possible, but because it is not what reporters are interested in, communicators must be creative. One participant stated that she angles pitches about non-financial topics such as products, services, events, community work, white papers, and customer testimonials to tie into the economic meltdown to help gain reporter interest.
5. While financial reporters have been so focused on the meltdown, some of the participants said that they are using this time to build relationships with local beat reporters.
6. Most of the participants anticipated changes in their annual reports. One stated that, "Considering that perception is reality, in this frugal economy, companies are going to want to be perceived as frugal, so less money will be spent on the bells and whistles." Another participant expects that readers will pay more attention to the chairman letter than in past years, since shareholders want to hear from the top and because there is more to talk about this year both company specific and industry wide.

Internal Communications

The following are ways some of the financial communicators are working to meet internal challenges:

1. Rumors have the potential to run wild right now. To try to stay out front of internal rumors, participants said that they are closely following their communication plans by sending out good, consistent communications and having informed leadership teams.
2. Talking face-to-face with employees is critical. Participants indicated that they are having more officer and employee meetings where executives such as senior economists, market presidents, CEOs, and business heads talk about issues that concern employees – specifically, the stability of the company, what is going on in the economy, and what everything means to employee 401Ks.
3. Given the state of concern, periodic communication is even more important now. Through the use of cascading communications (where executives communicate to their managers who then communicate the same messages to their team of front-line employees), executives and financial communicators are explaining what they are doing and why. They also provide employees avenues for questions both from themselves and their customers. One way this is done is through the use of electronic idea exchanges for associate discussions.
4. Participants indicated they are using more crisis communications pieces such as quarterly business reviews, cross business department teams, breakfast briefings with the chairman, brown-bag lunches, electronic chairman's letters, daily employee updates, and e-mail alerts.
5. Although companies can't monitor every conversation, one company has found a unique way to keep a finger on the pulse of their employees by offering free breakfast, lunch, and dinner in the onsite cafeteria. With everyone mixing and mingling in one place (including the CEO) they are able to pick up on some of the hot topics.
6. Two-way interactive communication at all levels can help to reassure employees. As one participant indicated, "It doesn't have to be the CEO or the officers of a company to reassure employees, but when a company is up front and transparent, any employee from the mailroom to frontline staff can carry the message, resulting in higher credibility." The example she shared was a story about a woman in her cafeteria talking about the stability of the company with a new employee.
7. One participant indicated that he expects to see some changes in the shareholder meetings this cycle, with executive compensation playing a strong role. Most participants are planning for an increase in attendance.

Finally, the financial meltdown has placed financial communicators in the center of a crisis of trust. For many investors, employees, and customers, trust has been undermined, but it can be rebuilt. Each communication must be timely, transparent and should explain what happened, what the company is doing to fix it, and why such actions will help. By making sure that the facts are accurate, financial communicators can work toward rebuilding trust.

Marcia W. DiStaso is an assistant professor of public relations in the College of Communications at Penn State. Her research focuses on investor relations, the use of research in public relations, and new media. She is on the advisory board for the International Public Relations Research Conference and an executive member of the Financial Division of PRSA.

© Marcia W. DiStaso

Comments

[natural gas]

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[Michelle Boudreau]

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[Vince Musumba]

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