We’ve all seen the stories about corporate malfeasance lately—Starbucks paying zero taxes in the U.K., or Microsoft handing encrypted messages to the U.S. National Security Agency. So much for the old bromide that there’s no such thing as bad publicity. Public trust in corporations is at an all-time low: Fewer than one in five respondents to the 2013 Edelman Trust Barometer said they believed a business leader would tell the truth when confronted with a difficult issue. The conclusion of Interaction Associates’ 2012 Building Trust report was that “trust in business [had fallen] off a cliff.”
And what is the response to this? Rather than getting the message and behaving better, tone-deaf companies are investing record sums to create and maintain brand identities. The management consultancy Accenture paid a staggering $100 million to Landor Associates for its logo in 2000. The firm that redesigned Pepsi’s logo in 2009 justified the expense by citing, among other things, the Mona Lisa, the Parthenon, the Earth’s Geodynamo, and claiming the new design’s “energy fields are in balance.” Mission statements now seem unintentionally humorous—like Enron’s motto of “respect, integrity, communication, and excellence.”
This is the very definition of missing the point. Marketing gurus and branding consultants have misled corporations into believing that such efforts will result in a brand that attracts new business, keeps existing customers loyal, and creates a consistent identity. Then they pour money into massive advertising campaigns—McDonald’s spent $1.3 billion on ads in 2012.
This approach is misguided and sometimes unethical. And the public won’t be fooled by advertising designed to conceal bad behavior or flawed products. Bank of America’s attempt to position itself as “The Bank of Opportunity,” for example, did not prevent consumers from repeatedly voting it the worst company in the United States for its predatory practices and its role in the 2008 financial crisis. Brand integrity is no substitute for real integrity.
Yet companies remain obsessed with branding. According to the annual CMO Survey by Duke University, the size of businesses’ marketing budgets in 2014 grew to 11% of the total budget, up from 8% just three years earlier, and the number of marketing employees grew to 6.3% of total employees from 4.2% over the same period. These departments often become more concerned with protecting their own empires than acting in a company’s best interests, and they breed Kafkaesque “brand guardians” who seem to believe their only job is to prevent others from doing anything new, creative, or productive.
These corporate bureaucracies beget the worst kind of conformity. While we embrace open societies, corporations remain highly undemocratic, creating systems that constrain talent and block innovation. When employees are told to “believe in the brand or else,” they are pushed away or, even worse, fall victim to their own PR. The result is an echo chamber of low-level ideas rather than a breeding ground for diversity and creativity. What is the point of hiring top people and paying them well if they have no intellectual freedom or the ability to question dogma?
These factors can also create an “play now, pay later” ethos, in which employers start to believe they can behave badly today then make it up, or cover it up, with some future combination of PR and CSR. In 2007, even as JP Morgan was selling toxic mortgage-backed securities to investors, the firm launched JP Morgan Social Finance, to generate “positive impact alongside financial return.” And Apple’s awareness that it is a stylish firm with cultish appeal may help its executives justify tax avoidance on a massive scale.
What should companies do instead? First, they should start placing behavior before brand. Good behavior creates a good brand and company. It also attracts talent.
The truth will win out. The best brand in the world cannot cover up a bad product or service, and no lack of PR can kill a good and continually improving one. And customers care more about how a thing is than how it seems.
Getting there won’t be easy. The first step must be to limit the power of PR and communications departments. Executives in these realms have come to sit too close to CEOs and boards, edging out those with more productive functions or challenging insights. Conversely, fashionable but impotent CSR departments need to become more powerful. Today’s corporate social responsibility executives are almost always devoid of any real power to change company behavior. But the way a company behaves is 99% of its social responsibility.
Similarly, marketing departments, especially those with client-facing roles, should be empowered to shape a company’s brand. Employees who interact with customers daily are in a far better position to direct a company than a room of “experts” testing focus groups.
Governments should also be more proactive about shaping the way corporations behave. A tax on advertising whose revenues pay for mandatory consumer-information reports on corporate products or public-interest advertising will directly affect branding strategies. The idea is to create disincentives for misleading or cheating customers. Taxing advertising would also go some ways towards allowing small, service-oriented companies to avoid being overwhelmed by larger rivals.
Finally, business schools and executive education can begin to teach students never to put branding before all else or compromise their intellectual honesty. One suggestion: If a company truly stands for something, every employee working there should be able to tell you what it is. If it takes a highly paid MBA 20 minutes to explain just what a company’s values are, chances are they are mostly for show.
The first wave of changes will have to happen in the face of institutional inertia and vested interests trying to protect themselves. But companies are always talking about leadership—and leadership is nothing if not taking the lead.
By putting checks and balances in place to guard against brand overreach, companies will be in a position to make difficult decisions about substantive issues regarding their business—which is the hallmark of a good brand.