Wal-Mart borrowing more credibility

While on my recent travels (Alaska, Indianapolis, Chicago and LA in the past two weeks) I got the chance to read the September issue of Fast Company. Adam Werbach, the one time wunderkind of the environmental activism industry (youngest president of Sierra Club) was on the front cover. He is now a consultant and Wal-Mart hired him to manage their sustainability employee training program.

Well, as you can well imagine, the environmentalist “true believers” went absolutely ballistic. Adam has had to hire a body guard it has gotten so serious. Long time friends have disassociated and even ones willing to give him some of the benefit of the doubt are scratching their heads at what has happened to him. The title of the article and headlines on the front cover don’t help: “He Sold His Soul to Wal-Mart.”

The obvious reaction is that he has been co-opted and now can no longer be considered a true believer in the environmental cause. In other words, he has lost credibility as an environmental leader and spokesperson. His answer is that Wal-Mart is serious and he can do far more good inside the tent than harping from the outside. What is at stake is the reputation of both Mr. Werbach and Wal-Mart.

I have written extensively in my books and in this blog about the concept of “borrowed credibility.” My advice, based on Aristotle, is whatever you do, don’t do anything to lose credibility. But if you do lose it, you only have one option and that is to borrow the credibility of others. Arthur Andersen tried to do it by getting Paul Volcker in place to run the company, but by then it was too little too late. Wal-Mart has made several high profile attempts at borrowed credibility, most notoriously by hiring Andrew Young. Unfortunately, as I commented earlier on this blog, that effort went sideways when Mr. Young himself made racist comments. It backfired, hurting both Young and Wal-Mart’s efforts. But they clearly are intent in following this strategy now by hiring Mr. Werbach. Will it work? Well, who better to tell the environmental world that he has sat in the offices of the top leaders of the world’s largest company and has determined that they are serious about sustainability than one of the top stars of the environmental world? So, yes, it is working. At the same time, by taking this step, Mr. Webach’s credibility has been harmed so his effectiveness in the “true believer” environmental world has been diminished.

The real hope for both he and the company is in the actions, not the talk or the positioning. Will real, visible action result from the employee training program that Werbach and his team are heading up? Are their substantive and potentially dramatic changes in how Wal-Mart does business that will prove to the skeptics that they are serious? If so, the enviro skeptics will be proven wrong, Werbach will be vindicated and Wal-Mart will have demonstrated that a big company can do good things in big ways and that the strategy of borrowing credibility really works.

Family Guy shows how deep Wal-Mart’s crisis is

As readers of this blog know, I commented to a BusinessWeek reporter about the deep crisis Wal-Mart was in. A primary basis for that assessment was the fact that the company had become a political football, with one party in particular wishing to align itself with the Wal-Mart haters. Now there is another even potentially more ominous sign of the deep crisis. Last night’s episode of Family Guy was all about Wal-Mart. It was called SuperStore USA or some other such title but you could not miss the red vests nor the smiley face symbol. SuperStoreUSA drove all the town’s businesses out of town, hogged all the electricity so that the whole town had to sit in their underwear and sweat. It forced our hero’s daughter to choose between her job and her family and generally showed how awful a big, uncaring company can be until the wierd little pie-shaped baby-man comes in with a tank and totally blows the place up. We all cheer.

Yeah, it’s a crisis when it becomes part of popular culture to cheer when a company is blown up by a wierd character driving a tank.

Another flog controversy–this time Sony creates a fake blog

Authenticity is among the highest values in the blogworld. That’s why the blog world reacts so strongly to the idea of fake blogs or “flogs.” The Wal-Mart flog controversy involving Edelman was hyped in part by the paid critics of Wal-Mart funded by unions, but that does not diminish the outrage of the blog world to the idea of a PR company funding a blog that posed as being an authentic expression of personal opinion and experience.

Now Sony has been outed as running a flog through a viral marketing firm called Zipatoni. The justification for the funded promotional blog was that it was humorous. According to a poster on the blog presumed to be a Zipatoni executive, Sony’s reaction to the proposal to do a promotional blog without identity was: “who cares if people find out? As long as it is funny, we do this stuff all of the time.”

If that is the case, the Sony marketing execs do not understand either the value system of the blog world, nor the rules of ethics of WOMMA. Those ethical standards are based, as I recently heard, on this new definition of ROI:

Honesty in Relationship (that is full disclosure of any relationship to the subject addressed)

Honesty in Opinion (the opinions expressed be authentic and not motivated by other agendas)

Honesty in Identity (disclose truthfully the author)

Now it appears, again something I just heard, that the FTC is getting into the act of making these kinds of ethical standards into regulations.

Whether or not this becomes the law of the land or not is not really the point. The law of the blogland has already been well established and is more effective than anything any federal agency can do. Authenticity is the key. I just hope that the blogworld treats inauthentic critic blogs (such as Wal-martwatch.org) with the same degree of flame as they do the flogs that have received all the attention.

The pot calling the kettle black? More on Wal-Mart and the critics

I’m not sure, but the critics of Wal-Mart who made the loudest noises about the “fake blog” controversy may be more than a tad hypocritical.

Ever since I commented here about the Wal-Mart Across America Blog that turned out was funded by Edelman, I have received several helpful comments (anti-Wal-Mart and ant-Edelman) from someone from the organization behind walmartwatch.com. I checked this website and saw what I assumed to be a typical activist “trash the company” website run by individuals who are sincerely committed to making change in something they believe in.

Imagine my surprise when I read in the latest issue of the Economist that Walmartwatch.com is a union-led organization. Sure enough, I went to the site and the head of it is indeed an union leader. But there is nothing clearly visible on the site to indicate that it is a union front.

So let me get this straight (and again, I may have my facts straight and I’m sure if I have anything wrong I will quickly find out: The Wal-Mart “critics” attack Edelman and the blog it sponsored for not being forthcoming about their vested interest in supporting Wal-Mart. But it is apparently perfectly OK for the critics to not be forthcoming about their vested and very clear financial interests.

Unions, after all, are a business. Their revenue gained is dependent directly on the number of members who have union jobs. The more union members employed, the better they do and the more resources they have to pay their people, hire more and maintain their political action–aimed of course at getting more union jobs. I can very well understand how much union leaders hate Wal-Mart. It not only does not hire union members, it puts enormous pressure on competitors who do hire union members with all the costs and benefits associated.

Just to be clear–I am not defending Wal-Mart’s employee practices. I have commented separately on how I believe they must change. But, if the Economist is correct (and they usually are) it is incredibly hypocritical (in my opinion) of Walmartwatch.com to be so incensed by the fake blog when they themselves are posing as a citizen-based activist (and blog) organization when they have a clear economic vested interest.

An excellent analysis of how blogs put reputations at risk

Here is one of the best articles I’ve seen yet on the subject of reputation risk and the increasingly important role that bloggers play. It’s from Financial Times in Germany.

I especially like this quotation by one of the leaders in thinking about the online environment and what it means for companies, Rob Key CEO of Converseon.(I was fortunate enough to meet Rob by phone the other day):

“It’s frightening for companies to think that their brand reputation is in the hands of third parties but, by definition, it is,” says Rob Key, chief executive of Converseon, a New York-based digital communications company. “The heads of corporate communications in many ways are still dealing with traditional media relations and haven’t embraced this broader social media environment.”

It is interesting that I should hear about this excellent article from Russ Fagaly of walmartwatch.com., one of those very active activist sites that the article discusses. Thanks for the tip Russ.

Could it be a reputation problem leading to Wal-Mart sales woes?

Wal-Mart has a reputation crisis on its hands (see previous posts on this). One question executives have to struggle with is, does it really matter? They tend to only get nervous about critics (especially online critics) when they see an impact on sales. And sales decreases tends to be a lagging indicator of a reputation crisis. Is this why Wal-Mart sales are weak this Christmas? Goodness they have done everything they can to lure in customers with even lower prices. (When businesses only have low prices to lure customers in, sooner or later they find diminishing returns along with diminishing margins).

Clearly, the lustre is gone, and the juggernaut that is/was Wal-Mart has been threatened. Advertising more low prices will not solve this problem. Sooner or later they are going to have to come to grips with the violations of societal values that lies at the heart of their reputation problems. Change, or begin to die.

What’s Wal-Mart’s Problem and What Should They Do?

I’ve commented about Wal-Mart’s blogging issues related to Edelman and also commented (via Business Week) about their overall crisis situation. Consequently, I’ve gotten some email messages from those involved in criticizing the company–including those hosting online critic sites. So I thought I might add to the Wal-Mart debate my own thoughts about their situation. So here in no particular order are a few things I’d say about it.

– I think Edelman is one of the very best PR agencies out there, a true leader in adapting to the online communication environment. I think the “flog” problem was one of not properly communicating ethical standards throughout the entire organization. I may be wrong, but unlike other critics, I don’t think the senior management made that decision to surreptitiously support the Wal-Mart blog.

– Wal-Mart is in crisis. Deep crisis. Here’s why. In the US the public sentiment is such that communities in various parts of the country have successfully adopted highly specific ordinances aimed at keeping them out–just happened again in my home town. Secondly, the real crisis is that they have become politicized. The public is starting to see those opposed to the company aligned on the Democratic side and those supporting on the Republican side. No company in their right mind wants to be so associated, thereby kissing goodbye approximately half of the market. Especially one who aims to be American’s retailer.

– I am neither for nor against Wal-Mart personally. I go there very infrequently and usually with some sense of guilt–but I don’t refuse to go. I think it is a remarkable success story one that illustrates both the best and worst of the American spirit of free enterprise.

– Their overpowering competitive advantages have hurt countless small business owners, some of whom I know personally. At the same time, their low prices have benefited many more countless families–particularly low income families who have had their meager income stretched by the quite remarkable cost savings offered by Wal-Mart.

– Wal-Mart pays its people way too little. And yet, they employ an awful lot of people who otherwise may not be employable. I am always struck at the Wal-Mart employees who are on the front line of a company that is a world leader in efficient operation because, frankly, many a considerable number of people do not strike me as the most efficient and employable people in the world, let alone our community.

So, what would I do if I was advising Wal-Mart:

1) Take a close look at the harsh criticism and start paying attention to what is real in it. Some examples: Get to be too dominating and mean in your purchasing and you are bound to tick off enough people often enough so that you will be hated. Sure, the suppliers you push around are not the general public. But continue to play a “I win, you lose” game and before long everyone will hate you. No one likes a bully–and Wal-Mart, you are a huge bully. Another: health benefits. You are pushing health care costs onto all the rest of us. The states and hospitals who are forced by regulations to provide charity care for the uninsured are paying for what you refuse to in the name of hyper-efficiency. Well, we are sick of it. Pay your share or face the consequences of our anger.

2) Tell your story better. Once you get past fixing the things you really need to fix, you’ve got a long ways to go to earn our trust and respect. Don’t just tell us your charities. Tell us how what you have learned in becoming a dominant giant can help all of us in business. Tell us the battle you are in with the unions and why it is important that companies have the right to offer employment to non-union employees. Tell us why what you do is good for free enterprise and for protecting the market system. Defend yourself, defend your practices–particularly when they line up with the values we hold precious. You’ve got to engage with your critics, with your supporters and the public. There’s a big conversation going on. We don’t want just the happy face on everything. We’d like to see that you are struggling with these things and dealing with them. We want to know you are listening, and that it matters to you not just that enough people keep buying your deals, but that you respect what is important to us. In other words, engage, listen, respond, change, and convince us that you are good and right for our nation and our communities.

And if you can’t do those things, you run the risk of losing the public franchise, the public license to operate. And you will be in a slow and painful decline that one senses you have already begun.

Wal-Mart “Reputation Crisis” reported in BusinessWeek

Is Wal-Mart in a reputation crisis? I think so, and I expressed that opinion to a reporter working on a story for BusinessWeek. I guess I didn’t expect my judgment about that to appear in the title of the cover story of BusinessWeek online as it is right now. Read the article.

How did I get the opportunity to comment on Wal-Mart’s situation, given how many smart people in crisis and reputation management are either working on this or thinking about it? This blog. I commented on Edelman’s problems relating to the “flog” site “Wal-Marting Across America” and the BusinessWeek reporter, Pallavi Gogoi, who broke the story of Edelman’s sponsorship saw my comments and gave me a call.

I’ve blogged before about the connection between MSM (mainstream media) and the blog world and if this isn’t clear evidence of that connection I don’t know what is.

Of course, you are always a little nervous when a reporter from a publication like BusinessWeek gives you a call. But I was quoted accurately, thank you Ms Gogoi. It’s the gems that got cut you always grieve. Like the fact that what makes this a reputation crisis of significant proportions is that the public license to operate is very much at risk. Wal-Mart’s ability to enter new markets is very much at risk and whenever you have become a political football or pawn, with one party lining up against you and the other one either for you or remaining meekly silent, you have big problems. No company wants its brand to become so politicized, to become a symbol for what a segment of the public most hates about this country. And that is exactly what is happening.

We also discussed union involvement. Is organized labor behind the effort to damage or destroy the Wal-Mart brand? If so, how are they doing it? The connection between organized labor and the increasing opposition from the Democratic party is logical. How much does this play into Wal-Mart’s current distress.

Crisisblogger readers, please weigh in. I’d love to know what you think about Wal-Mart’s problems, potential solutions, and the reporting it is currently receiving.

Edelman’s blogging woes

Business Week is carrying a big story about the Edelman/Wal-Mart blogging situation posted October 17.

Comments on this blog vary considerably about how Edelman is handling it but it is pretty clear that Edelman (whom I respect very much) is in some serious doodoo over this issue. Has Richard Edelman apologized enough and appropriately? Clearly, the irony of helping right the rules which were most severely violated by his own organization is a difficult situation to deal with.

I agree more with James Bruni here who believes Mr. Edelman has apologized appropriately. The only thing I would say is that some additional explanation as to how this happened would be helpful. Did Mr Edelman himself approve the funding of the blog? If so, did he understand exactly the intention and purpose? Did a lower level person approve it? This is a big firm with a lot of things happening. I suspect some decisions were made at lower levels that have come back to bite them and anything that the Chairman would do to explain it would look like buck passing. That is laudable but I think a common mistake in dealing with these crisis events is not to be more forthcoming with the details. People who are interested want to know. Inquiring minds, you know. That’s why the explanation of the Wal-marting blog was helpful and useful–and authentic.

Wal-Mart, Edelman and WOMMA’s Code of Ethics

I’m just beginning to learn about this situation myself, but for bloggers and for those dealing with blogwars, this is of great interest. Here is Constantin Basturea’s posts and resources about this issue. The final post from the “fake” blog Wal-Marting Across America is here and it is important to read because it gives an explanation from the bloggers view as to how the whole situation started. In short, a couple decided to travel across America staying in an RV in Wal-Mart parking lots. A brother of one of the couple works for the Edelman PR firm who represents Wal-Mart, and Edelman ended up sponsoring the trip with money for gas, food, etc. While the name of the Edelman campaign was listed on the blog the couple wrote, there was no disclosure within the blog itself of the financial arrangement between the couple and Edelman. This violates the Word of Mouth Marketing Association’s Code of Ethics.

In the meantime there is another storm brewing on the topic of blogwars. And that is the pending ruling by wikipedia founder Jimmy “Jimbo” Wales regarding whether contributors who are paid by a subject company or organization will be allowed to contribute to wikipedia.

Both of these controversies have profound implications for the culture of the internet as well as the ability of organizations to respond to reputation-damaging online attacks. The value of “free” is very strong among the people who are now setting the rules for the internet and are keepers of the internet cultural values. Free as in open source software, free as in free exchange of ideas, free as in aggressively non-profit. Conversely, there seems to be the idea that money of any and all kinds, and particularly the exchange of it, corrupts. Corrupts ideas, people, interactions, etc. There is much truth in this. But there is also much danger in this new dogma, for that is what it is. Dogma of almost all kinds pushed to its extremes is the basis of fundamentalism and I see a fundamentalist strand emerging in these discussions about what is right and true and should be allowed on the internet and in blogs and in wikipedia.

No doubt some contributors to blogs and wikipedia whose opinions are determined by the dollars they received from paymasters are “corrupted” in the sense that their allegiance to those dollars is greater than their allegiance to truth and authenticity. But the very same accusation can be laid against those who subscribe to a strong political position, or who have motives of their own to attack and destroy others. There is no inherent rightness in those who do not receive pay as there is no inherent wrongness in those who do.

I think it is time to get past this discussion. The blogworld and internet content sites should be open to any and all. I thought that was an underlying credo of the internet. Whether someone is paid or not paid says nothing about their basic honesty, integrity or truth of what they are saying. One need not be any more skeptical of the money motive than they ought to be of political motives or personal vendettas. For the sake of real transparency, the motives of all writers ought to be demanded. Are you intent on seeing our president’s reputation dashed (further)? Then declare it. Are you motivated by a past wrong that a company or person has inflicted on you and now you are using the internet to take your revenge? Then disclose it. Are you taking money from someone who has something to gain by what you are saying? Then disclose it.

Those who demand full disclosure for money but not for other equally powerful motives are displaying not the purity of protecting the value of “freeness” on the internet, but rather are beginning to display a fundamentalist tendency toward selective evils. Let’s protect the true sense of freeness on the internet and allow the free exchange of ideas without demanding motive disclosures. Let’s evaluate what people say rather than making assumptions about motives and how it affects the truth or validity of what they say.