Joining me on this week’s episode of Ethical Voices is David Herrick, the Managing Principal of EthicOne, a business that helps leading companies and organizations turn their commitment to culture, values and ethical business practices into market leadership.
This week David discusses how the most ethical companies leverage the power of trust, transparency, ethics and values in communications and public relations. Specifically:
- What are the communication best practices in the world’s most ethical companies?
- The most significant PR ethics challenge on the horizon
- How to avoid ethical greenwashing
- How to determine which societal issues on which to engage
I gave a very high-level overview, but why don’t you start off by telling me a little bit more about yourself, your career and EthicOne.
I’m happy to. As you mentioned, I’m the founder and managing principal of EthicOne. We are a company, think of us as the public relations agency or marketing strategy agency for companies who really care about ethics, trust, and values. I come out of the public relations industry. I’ve been at it for over 20 years. I started in-house with Coinstar, where you’d go in with your big jar of loose change and dump it in this machine and it would count it for you. I started at that company when they were relatively small and got the opportunity to help them do their initial public offering and grow the company. I joined Ruder Finn, then went in-house at a Bristol Myers Squibb, and then went back to the agency world where I was chief operating officer of a company called MWW PR, and then went to a big WPP agency as a US president.
But throughout all of this, I was noticing that how companies acted was becoming more and more important to consumers, to employees who might consider working for those companies, and really the whole notion of transparency and trust and values was really growing into a mega trend in our industry. I decided not only did I want to be part of it, but I wanted to help develop a company that really focused on that entirely.
Could you tell us about the most difficult ethical challenge you ever confronted in your career?
Perhaps I’ve been lucky that I haven’t had a massive ethical challenge. I think for me there have been difficult decisions along the way, but at the core I always had the certainty that we were doing the right thing. I’d say that the toughest decisions almost always involve either humans or money, and then when you bring the two of those together, humans and money in a decision, that gets really tough.
I had a fairly recent situation where an employee clearly violated company policy, and honestly, I thought it was a one-off and I thought it was an otherwise excellent employee who just happened to do the wrong thing in that instance. And it was a really tough decision because this was a lead on one of our clients. We risked losing the client if the employee went away, and then there was a real human cost. This is a breadwinner for the family. At the end of the day, though, I needed to make the decision about, “What are our values, and how can we be true to those?” And in that case, it ended in the termination of that employee. I think it’s what you do when it really hurts that tests your mettle when it comes to ethics and values, and so you have to make some tough calls along the way that that might hurt your self-interest.
How did you work through that?
To say that it’s easy just wouldn’t be accurate. You have to consider the human element of these things. At the same time, you have to consider the long-term message you’re sending about what your values are, what’s the message you’re sending to other employees, what’s the message you’re sending out into the world, to your customers and partners about what behaviors you hold sacrosanct.
In this case, I really had to take that longer term view, saying, “You know, this is not in my own best interest to make this decision in the short-term, but in the long-term it will pay off.” I think having that competence not to compromise on core values is absolutely critical at every level in an organization.
When you’re working through that, you have access to a lot of the data and you make the decision, but your internal stakeholders don’t have access to all that information, particularly because of confidentiality when you’re dealing with employees. So how did you help communicate that and help the business move forward once the decision was made?
That’s a great question, because in almost every company, there’s an HR department who makes sure that on decisions like this, you don’t communicate all the particulars of the situation. So it really puts managers and communicators in a bit of a pickle, because they’ve just made a decision that on the surface looks horribly unpopular to all your colleagues, to your teams, yet you have to do it, and you can’t share full knowledge of the behind the scenes that contributed to that decision. My point of view is, you have to take a little bit longer-term view, and I think that employees and colleagues judge you not on one event, but they look at the full arc of your ethical decision making, your values, what you care about, and they really judge us as managers and leaders based on that full set of experiences that they have with us.
It’s the small things every day, the small guidance you give, the small decisions you make that are the right decisions that give all those around you the confidence to know that, “Hey, I need to trust them on this. I may not have all the information, but I need to trust them on this one because I’ve seen how they act day to day on all the little things.”
I think I was at the Ethisphere conference recently, it was on the panel you were hosting where one of the guests said that being the world’s most ethical company doesn’t mean you always do the right thing, but it means when there’s an issue, you address it ethically and quickly.
That’s absolutely right. I think consumers, I think business partners, employees, they judge you not by the mistakes you make, but by how you handle the mistakes you make, because honestly, if we’re not out there challenging ourselves, making a few mistakes along the way, we’re probably not very good at our jobs. We need to take a few calculated risks, but when we really screw up, when we make the wrong call, it’s what do we do then? Do we cover it up and sweep it under the rug, or do we do we address it, own up to it and try to rectify it so it doesn’t happen again in the future? And that’s how companies are judged as well.
Speaking about how companies are judged, EthicOne recently did a study on ethics in marketing and communication. Could share some of the key findings and best practices from that study?
There’s been a lot of talk in the industry and a lot of study of the whole notion of trust. And in fact, Edelman has done a fantastic job with their Trust Barometer and looking at trust in institutions globally. But what we saw missing in the conversation was real practical advice for companies in terms of what policies, practices, and behaviors would we need to implement to actually be an ethical company or to develop more consumer trust? So, we decided to do a deep dive on the world’s most ethical companies, and these are companies who have already been identified by Ethisphere Institute as having the highest ethics and compliance standards, policies, procedures, strong cultures of values and ethics, so they’re the best of the best.
We thought, “If we study these guys, we’ll have a good sense of some of the nuts and bolts things that you need to do to be an ethical company.” I can talk about some of the big findings, but at the very top line, number one is leadership is critical. If you don’t have a CEO and management team at your company who believes in ethics and values, it’s really going to be a long slog at that company, and maybe you ought to be thinking about your next career move. But this is really one area where it’s a top-down game, and management teams have to be on board.
Number two, the most ethical companies make this an enterprise-wide priority at every level of management, so it’s not just 10 people that they expect to uphold the standards and values and communicate those. It’s every level of management, down to the line managers in the company. We also find that CEOs and boards are highly engaged on ethics in these companies, and they’re highly engaged with their communications and marketing leadership on issues of ethics, trust and transparency. If you’re a PR leader, let’s say, and you’re not having regular conversations with your CEO about trust and transparency, or you’re not ever meeting with the company’s board of directors on those issues, then chances are you’re not a world’s most ethical company.
Those are the key findings. There’s a leadership, there’s an engagement between marketing and that leadership, and there are ingrained policies, practices, and expectations throughout every level of the organization.
When it came to that marketing engagement with the CEO and the board level, were there specific actions? How frequently were they engaging? What were some of the things they were using to broker those conversations? Can you delve a little bit more into that point?
What we found is in our study, and we did a deep dive in particular on eight companies, and then we also looked at the 135 world’s most ethical companies from 2018. In all these cases, we found that there was strong interaction between the senior marketing leader and the senior communications leader with their board and CEO. To give you a sense, when it came to PR corporate communications leaders, we had about 75% of those had regular interaction with their company’s board of directors.
I remember years ago going to an Arthur Page society event and Jack Welch was there, and one of the head communications guys of a company stood up and asked Jack, “Hey, should the top communications person be interacting with the board of directors?” And Jack said, “Nope, the board of directors is the CEO’s sandbox. That’s my sandbox and I’m the one who’s going to play in it.”
Obviously, Jack Welch had a lot of wisdom to share that day, but that was one area where I really questioned, “Is that the right way to go?” And in fact, what we found was with these world’s most ethical companies, the majority actually had that kind of interaction with the board of directors and exposure to the board on issues of ethics, trust and transparency, and similar case with marketing leaders. In fact, they even had a little bit more interaction with the board on these issues of ethics, trust and transparency.
Were there any specific issues that you saw companies grappling with across the board when it came to trust and transparency?
Well, we looked at, “How do you measure trust?” And first of all, “Do you measure and have a current view of whether your consumers trust your company or not? Every company measures trust in some way, and most of them have a real-time view of it, which they use a compilation of sources, everything from proprietary research that they do to monitoring social media to find out, “Hey, what’s our current view that consumers have of our corporation and whether or not we’re trusted?” The issues range across all of these companies. You know, if you’re a financial institution, it may be some lending decision you made. If you’re a manufacturing company, it might be, “Should you really put a plant there near that wetland?” So, every company has different issues, but by and large, these most ethical companies are monitoring trust and they’re also reporting that up all the way to the board of directors to say, “Hey, here’s our current reputation position. It’s going up, down or sideways, and then here’s what we’re going to do about it.”
Boards aren’t just talking about, “What’s our net income this quarter?” They’re talking about, “How are we doing with the reputation of our company in the world with our customers, with our regulators, with our investors, with other key stakeholders? It’s that engagement in the conversation that’s really critical and really different at these companies.
What do you personally see as some of the key ethics challenges, communications ethic challenges for today and tomorrow?
We are in a transition in our industry, and this is something that has been talked about for 10 or 15 years. It is the growing importance of communications when it comes to business decision making, and transitioning from communicators of business decisions to contributors to business decisions. We’re in that transition. I think any progressive communications leader at a company or at an agency believes that their role is to contribute to sound business decision making that is grounded in economics, that is grounded in values and the building of long-term relationships and reputation.
I think that’s today’s challenge, but it also feeds into tomorrow’s challenge. Tomorrow’s challenge, is the communications industry needs to get a whole lot better about being very active in the conversation about data security, privacy, and the deployment of artificial intelligence. This isn’t an issue just for the Googles and Facebooks and Apples and Amazons of the world. This is an issue for every company out there, because artificial intelligence will start to drive lending decisions at banks. It’s going to start to drive decisions about whether or not someone gets insurance. It’s going to drive what interest rate you pay for that car at the dealership and how much we should cut the price for you to sell that car to you today because of what we think we’ll make off of you in the future.
It’s going to contribute to every company in very meaningful ways, and right now I don’t see the communications industry stepping up enough to say, “Hey, we want to be a big part of the decision making about how this is deployed, and the reason we need to be there and in the room and active in the decisions is that this is ultimately going to potentially affect the reputations and success of the companies that we work for.” That’s an area that I think at every level needs smart people who understand the connection between stakeholders and the enterprise to get involved in those decisions.
How do you use this new data and insights ethically?
I think back to when I was getting my MBA at the University of Washington. This was in the early 90s, and I had an IT professor at the time, and he was talking about junk mail and how he would vigorously try to get himself off of mailing lists because he happened to be someone who really cared about privacy. At the time I thought, “He’s going a little bit overboard in my mind. I mean, we’re just talking about junk mail that clogs your mailbox, but you can recycle it.” You know?
I look back on his fears then, and I think of where we are today and how willing people are to either give up their information, or how little knowledge they have of how much information they’re giving up. I mean, we see stories about how on the black-market people can figure out your exact location using cell phone data that emanates from your actual cell phone provider. That’s crazy. The idea of being tracked to the block by people you don’t know. Well, that’s the world that we’re living in now and we’ve let it go for a while, but I think at some point we might see some major backlash, and communicators need to be in the room. They need to be thinking about, “Well, what’s the right thing to do? I mean, this is all possible via technology, but what’s the right thing to do, and how can we steer companies and how can we shape business models that actually respect people’s privacy and make money?”
How are you keeping up with all of these changes, or where do you turn to get that information to educate yourself about these issues?
I’m not in the business of being a policy expert on EU data security and privacy, but I am in the business of finding out what the world’s most ethical companies do when it comes to marketing and communications. So, I have seen how great companies handle these things.
I’ll give you an example. US Bank, which is the fifth largest commercial bank in the country, understands that artificial intelligence is going to be a very big issue in their industry and many others. And they have been one of the leaders who’s assembled an internal team to really examine, “What’s the impact, and how do we ethically roll this out? And where do we draw lines and make decisions not to use AI? And how do we protect privacy along the way?”
I’m really interested in seeing how companies like them can give us, in essence, the best practices that we ought to take to all companies, because they are in the minority right now. There aren’t too many companies who have a sophisticated operation looking at the impact of AI in their company.
Are there other companies that you think are doing a really good job?
We haven’t asked that particular question of all 135 yet, and we intend to, so this was just based on a sampling of eight companies that we studied in-depth, and US Bank was by far the leader among them on that particular issue. Anecdotally, I haven’t seen much out there. The technology companies you read about all the time, they seem to be tripping all over themselves when it comes to this issue, so I don’t know how much leadership we’re going to get out of many of those players. I think it’s going to be perhaps the heartland companies who look at the impact of this on their business, who actually step up and show the way.
Are you seeing any other challenges as companies are looking at an increasingly global market and global environment with ethics challenges operating in other areas of the world?
Well, the largest companies, and we’ve studied companies the size of 3M, which I think they operate in 120 countries around the world if I’m not mistaken, give or take. You can imagine the languages that they support, the cultures that they cross, the geographies. Yet they are a company committed to ethics and values, and I’d say they have a very firm compass on how they want to do business, but what they’ve found is really they need to communicate their core message and their values in a way that resonates with local audiences. They’ve even found certain terms don’t necessarily work in other cultures.
For instance, in Minneapolis, you go to their headquarters and they’ll talk a lot about the fact that they have a “speak-up culture” when it comes to doing the right thing. Meaning, “We expect all of our employees to speak up, and when they see something that they don’t like, they don’t think fits with the company’s values, they should make their voices heard.” Well, you translate that idea to Korea or Japan, and it doesn’t work so well. A “speak-up culture” will get you fired, perhaps, and certainly it might impact your next promotion. You just don’t challenge authority in the same way. So they have had to try to figure out, “Okay, how do we translate this into language and behaviors that allow people to be true to our values?” And it may not be speaking up. In fact, it may be using an anonymous hotline to report that kind of behavior. That might be more culturally appropriate.
Those are the major differences. What I would say is we’re seeing a unifying values across geographies and cultures, but we’re seeing much more customization in how those values are communicated.
Are there other areas beyond the AI and privacy that you’re concerned or you see as challenges facing businesses moving forward?
Companies don’t fully understand how powerful trust, transparency, ethics and values are. So I’d say one of the challenges we have for our industry is to catch up on this as a major lever that they can pull when it comes to marketing and building the reputation of their company. If you’re in a technology company, you intuitively know that if you make the fastest, best, most user friendly product, you’ve got a good chance in the market and you want to go tell that story. If you’re an auto company, you know if you do the best looking car at a great price, that’s fast and fun to drive, you got a shot at making a market for that.
But increasingly, and this is where we need to give some credit to the Millennial generation, they are really expecting corporations to play a much bigger role in society, actually solving community and societal challenges that go way beyond profit motive and the products they sell. So they expect these corporate entities, in essence, to be big contributors to society, and they’re judging companies on that.
As communicators, we need to be thinking about, “How do we actually sell values? How do we sell the trust and transparency that we build here? How do we sell our commitment to ethical business conduct so that we can attract the best employees, so that we have something to talk about beyond our mere products with our customers, and so that we have a reason for people do engage and connect with us?”
The leaders are getting this because their market research is coming back and saying, “Wow, when we talk about ethics, customers are much more likely to engage with us.” For others, they need to catch up. And that’s part of what I look at as my mission in life, is I’m looking for the industry that I love and care about, the marketing, communications, public relations industry, I want them to understand and see the value that they have sitting right under their noses. That goes back to corporate integrity and accountability, trust and transparency.
Do you think we’re going to be coming to the point soon though, as more businesses do that where people become more skeptical (i.e. greenwashing)? Are people putting that same skeptical eye towards some of the trust and ethical issues that companies are advocating?
Well, they are putting an appropriately skeptical eye toward it, and it’s a great question, because we’ve actually had a company that we’ve worked closely with, one of our clients, and they found through their market research that, “If we just go out and talk about ethics and our values with no proof points, we harm ourselves with our customers. They actually trust us less when we do that.” That’s the ethics version of greenwashing there, because when you have no evidence and you go out and try to tell the story.
Now, what they found is when they backed it up with true data points and true facts about how they operated, how they behave, how they received honors and designations when it came to their ethical business conduct, then it became a powerful incentive for customers and employees to engage with them. This is all about behaviors, and facts, and having a track record. Yeah. The first stop is not to go talk about how ethical you are. The first stop is to get your policies, procedures, practices in place so you can actually deliver on ethics and trust. And then we’ll talk about whether you have a story to tell or not.
Now, are you finding businesses being asked to take a stand on a broad variety of issues, or do you think businesses should primarily focus on issues that impact their business?
Well, it’s a mixed bag, honestly. And I would say that this is one of the struggles we found in our research, is that a little over half of the companies we looked at engage in issues that are outside of their day to day business and product offerings. So if you’re a healthcare company, that might mean, “Yeah, we’re engaged in our community to help low income people afford health insurance.” Or, “We’re engaged in our community to get more sidewalks built so people can exercise.” The other not quite half of the companies we studied were not doing those things yet, but they were all to a company actively engaged in the conversation about, “How should we engage with our communities? How should we engage with issues of importance to our company?”
I think over the coming years, this will be a major focus in boardrooms across the country, and this is another area where communications leaders need to be part of those conversations. Figuring out, “Where do we engage on an issue? How do we engage? Is it true to our core? Is it true to our values? If so, let’s do it. If not, maybe this is someone else’s issue to carry.” But that decision-making process has to be had, because consumers, and especially younger ones, will not excuse corporate absenteeism. If you’re absent on issues that they expect you to be involved with, you may get punished in the marketplace.
What is the best piece of ethics advice you were ever given?
Well, I’ll tell you what. I came from the Seattle area. My Dad was a blue-collar construction worker, and he made this clear to me as a kid. “If you say you’re going to do something, then you follow through. You do the right thing, even if it’s painful. A handshake is a handshake, a promise is a promise, and your word is your bond.” And at the end of the day and through a 25-year career in this business, I’ve never gotten better advice on how to handle issues of ethics than I have from my own Dad. For me, it’s pretty simple. You know, it comes down to, “What do you stand for?” And don’t be afraid to stand up for what you stand for.
Check out the full episode, with bonus content here:
- This Week in PR Ethics (8/13/20): NRA, McDonald’s, and Ethics Lessons from the First Female CCO - August 13, 2020
- The ethical trap of enabling toxic, abusive high-performers: Lisa Gralnek - August 10, 2020
- This Week in PR Ethics (8/6/20) – Virtual People, Pay-for-Play in Sports Reporting and the Metaverse - August 6, 2020