Imagethief

Month: July 2007

  • China problems create rewards (and disasters) for PR risk takers

    Note: This was originally two posts, published within a few days of each other.

    Part 1: China problems create rewards for PR risk takers (July 30, 2007)

    All PR has an element of risk to it. That’s one of the things that separates it from advertising. Ultimately, much as we might like to be able to control the press, we can’t. Any time we agree to an interview, or put an executive together with a journalist or reach out to a blogger there is a degree of uncertainly. The wrong thing said, a spot of bad luck, or someone simply having a bad day can turn what should have been good coverage bad.

    Risk is part of the PR bargain. We surrender final control over the message in return for the credibility that third party coverage can create and advertising cannot. We’re in the business of getting other people to say nice things about our clients. But other people continue to have minds of their own despite the best efforts of me, my dark brethren and the entire television industry.

    Much of PR is the art of managing communication risk. We look for journalists and publications that offer the right mix of favorable attitude and credibility. We coach executives to give interviews and speak publicly. We prepare briefings and talking points, trying strike the balance between preserving the liveliness that makes a discussion interesting and preparing for the curveballs that can derail a discussion. We develop crisis manuals so that less is left to chance in the heat of a corporate disaster.

    As is true in so many other aspects of life, larger risks are often the price of larger rewards. I can always do a softball interview in a small-circulation industry trade. Or I can try to get something in the Wall Street Journal, with a correspondent who will ask much tougher questions. I risk a less positive article or no article at all for much wider and more credible coverage. Willingness to assume a calculated risk can often be the key to a big payoff.

    I detected such a calculated risk last week when I came across a New York Times article on how the American toy company Mattel quality-controls the products it has manufactured in China. Written by Dave Barboza, who has been omnipresent on this issue, and the US-based Louise Story, the article is based largely upon a visit by Barboza to Mattel’s facilities in Shenzhen.

    The article drags up some bad memories from Mattel’s past in Asia, but it is largely positive. It sets Mattel up as an example of how to manage overseas manufacturing, dwelling at length on what the company has learned from its experiences and what distinguishes it as a leader today:

    [In] 1997, Mattel took a significant step to improve its image and working conditions. The company hired S. Prakash Sethi, a professor at Baruch College, part of the City University of New York, who had an international reputation as a critic of worker mistreatment.

    Mr. Sethi would make unannounced visits to Mattel’s factories and vendors’ plants. He insisted that he would only monitor Mattel if the toy maker let him post his reports publicly and uncensored.

    Mattel agreed.

    Ten years later, Mr. Sethi says Mattel, unlike most companies operating abroad, still gives him 100 percent independence in his reports, which are often critical. “Mattel is the gold standard,” he said.

    Today, industry analysts tend to mention Mattel’s commitment to worker conditions in the same breath as its commitment to product safety.

    “Mattel talks about this with a passion, and it is not just lip service,” said Sean McGowan, managing director and toy industry analyst at Wedbush Morgan Securities.

    That’s a nice boost for Mattel’s reputation in a way that no advertisement will ever buy.

    What makes this article interesting is that the topic of quality control in China was one that many companies wanted to stay away from. In response to a request from a journalist a couple of weeks ago I tried to find a client that would speak about how it ensures quality in Chinese supply chains. No one wanted to go on the record. Even an industry association told me it was too radioactive to touch. Companies didn’t want to remind the public back home that they manufactured in China, even if they were doing so to show how thorough their quality control was. They all judged the risk too high.

    Mattel, however, took the risk, based presumably on confidence in their QC systems and processes. They thought they had a good story to tell and they found a way to tell it to a journalist who was interested. That’s the essence of good PR, and to my eye it has paid off nicely for them. In fact, in the article Barboza and Story take pains to point out the companies that did not cooperate:

    Mattel was one of only two major toy makers that agreed to allow a reporter for The New York Times to visit one of its factories in China — or even to put an executive on the phone to discuss the issue of Chinese product safety. Hasbro, LeapFrog and Zizzle — the maker of Pirates of the Caribbean toys, among others — all declined requests.

    Lego does not manufacture in China, but it declined a request to visit factories elsewhere. Aside from Mattel, only MEGA Brands of Canada said it would permit a visit.

    Those paragraphs make Mattel look like a well-managed company with nothing to hide. By contrast, Mattel’s reticent competitors come off looking insecure by comparison even though they may simply have been being cautious.

    I wonder whether Mattel simply spotted the opportunity when they took a call from theTimes, or if they actively pitched the story. If the latter, they earn an extra measure of respect from me.

    I suppose this story could back to haunt Mattel if they have a China-based problem in the next few months. But that seems unlikely –or at least an acceptable risk– and in the meantime they’ve earned themselves good coverage out of a situation that many other companies simply hoped would blow over.

    Note: Mattel is not Imagethief’s client. Nor are any of the other companies named.

    Related:
    Dan Harris has also remarked on this article in China Law Blog, from a slightly different perspective.

    Part 2: …And sometimes they blow up in the faces of PR risk takers (August 2, 2007)

    A few days ago I wrote a post [above] about how Mattel appeared to have seized the opportunity to generate some good PR for itself out of the China product situation. I framed it as a PR risk vs. reward equation, and thought that Mattel had done a very good job of bolstering its reputation by taking the risk of inviting journalists to tour its facilities in China.

    The problem with those risks is that they are so darn risky. At the end of my post I wrote:

    I suppose this story could back to haunt Mattel if they have a China-based problem in the next few months. But that seems unlikely –or at least an acceptable risk– and in the meantime they’ve earned themselves good coverage out of a situation that many other companies simply hoped would blow over.

    I was wrong. It was not unlikely. It was, in a perfect illustration of Murphy’s Law (or Sod’s Law if you are anglicized), inevitable. The news broke this morning that Mattel is recalling nearly a million toys for problems with lead-based paint. It was first reported by AP, but one of the two journalists who wrote the story I commented on last week has written it upmore extensively for the New York Times:

    On July 18, Mattel took a reporter for The New York Times on a tour of a factory in Guanyao, China, and of Mattel’s toy safety lab in Shenzhen. At that time, Mattel executives say, it was unclear whether Mattel was facing a widespread lead paint problem, or if the European case was an anomaly.

    Last Thursday, the same day this newspaper ran an article on the subject of preventing safety violations in Chinese factories that focused on Mattel, the company’s executives say they received conclusive data that convinced them to recall the 83 products. Then, the company contacted retailers who stocked the toys.

    “This is a vendor plant with whom we’ve worked for 15 years; this isn’t somebody that just started making toys for us,” Robert Eckert, the chief executive of Mattel, said in an interview. “They understand our regulations, they understand our program, and something went wrong. That hurts.”

    Boy, does it ever.

    What does this mean for Mattel? They seem to be doing a pretty good job of handling the recall, and they have a history of managing this kind of situation fairly well. But the timing is disastrous and the episode will undo the reputational boost they got from the story last week. Furthermore, they now face the extra scrutiny that will come from having showcased (the PR man in me hesitates to use the phrase “boasted about”) their quality control mechanisms in such detail. If you’re so good, why didn’t you catch this?

    One of my regular commenters, a lawyer, pointed out:

    [You] raise a good point about what happens if a problem occurs in the future, e.g. a product liability claim based on their China-made toys.  Having established for broad public view their set of standards, the potential for deviation from those standards could form the basis for negligence issues.

    I wonder whether Mattel had internal communication issues. Last week’s article was apparently in development for about a week, before being published on the 26th. Today’s article notes that Mattel received information of the problems on same day that the report ran. Now that’s bad timing, and, if this was a surprising result from routine testing, perhaps just colossally bad luck. But if anyone in Mattel suspected problems or knew before the article ran –or, especially, before the journalists were invited to tour Mattel’s facilities–  that the results might be problematic, then Mattel had an internal communication breakdown that might have substantially affected their PR decision making. All this is simply speculation on my part, and should be taken as such.

    PR people should take calculated risks, and I still admire Mattel’s decision to work with the Times journalists for last week’s story. I think it was gutsy and had until now yielded good results. But PR people also need to do their own due-diligence on these kinds of risks. What test results do we have pending? Are there any known issues that might break in the next few weeks? What’s my level of confidence? Mattel’s PR squad may well have done this and more, but I’m still happy I’m not the person explaining the decision making to Mattel’s senior management this week.

    I’ll be interested to see how Mattel handles communication around the recall. I also hope that companies don’t take the wrong lesson from this and become even more cautious in communicating about their China QC and sourcing. In general I still think there is a lot to be gained from showing consumers what you do to protect them, even if the systems aren’t perfect.

  • Bullet in the head: Marquee executions and public communication

    As has been widely reported, the Chinese government has got round to making an official example of Zheng Xiaoyu, the disgraced former head of the State Food and Drug Administration who became the poster-boy for China’s rippling food and drug scandals. In their eagerness to send a message, they got round to it quite quickly; from sentencing to execution in about six weeks. American capital punishment supporters can only dream of being able to dispatch ne’er-do-wells with such efficiency. Zheng’s story is nicely recapped in a New York Times article by David Barboza.

    Everyone who comes to China or learns Chinese rapidly becomes acquainted with one of China’s entry-level proverbs, “killing a chicken to scare the monkeys”, meaning to make an example of someone. It’s a phrase that has been thrown around a lot with regard to this case. To Imagethief’s mind, China has probably killed the wrong chicken.

    Executions have a long tradition as public communication. That’s why, historically, executions have either been public or very well publicized. Look what we do to murderers/ robbers/ adulterers/ royalists/ deserters/ partisans/ corrupt mandarins/ spin doctors, etc. It could happen to you, so stay in line. Whether or not executions are effective as a deterrent is debatable (and widely debated). But that they are used as communication is indisputable.

    Imagethief is not a fan of the death penalty. I feel that it is often applied in my own country more as vengeance and social catharsis than justice, with substantial class and racial biases. I am also not convinced of its value as a deterrent. You can always tell which governments are really serious about using death as a tool of policy because they are the ones that skip the public communication element and simply disappear people. Word of mouth does the rest. If you really want to keep the public on its toes, that seems to be the way to do it.

    However I must concede that the public communication value of executions extends beyond deterrence. For example, a death penalty can be employed as a demonstration of government resolve or as proof of piety. Looked at that way, you might reword the hoary Chinese idiom into “killing a chicken to demonstrate institutional resolve to the monkeys,” but that doesn’t reduce elegantly to four characters.

    So was Zheng Xiaoyu’s execution supposed to be a deterrent or a demonstration of resolve? Looking at the (somewhat spotty) English translation of the People’s Daily editorial hailing the execution, perhaps a little of both:

    Death penalty handed to Zheng Xiaoyu has fully proven the will and desire of the people across China, eloquently showed the spirit of the fairness and justice of legal sanction as well as the firm resolve of the Party and the state. For corrupt officials, no matter whoever he is, what a high position he occupies and how deep he has hid himself, probes into the cases he is involved will be carried out resolutely and thoroughly, but no indulgence or soft hand will be granted to him.

    Death penalty handed to Zheng Xiaoyu indicates that laws are stipulated in explicit terms, penalty is meted out in strict compliance with his crimes, and punishments commensurate with his duty.

    ***

    As part of the effort to cope with corruption, no “extraordinary and special” Party members are allowed to stay aloof the laws and no corrupted elements permitted to have any place to hide themselves. Whoever daring to commit outrages and run amuck in defiance of state laws will be subjected to severe punishment of the Party disciplines and the state laws.

    Imagethief also particularly likes one throwback line in which conjures up the best of Maoist-style righteous, nationalist rhetoric:

    A few individual Party officials, prompted by interests and money, nevertheless, have gone crazy to the defiance of laws, and Zheng and his ilk belong to such jackals from the same lair.

    “Jackals from the same lair” is a slightly more advanced Chinese saying meaning roughly, “cut from the same nasty cloth”, and has been used before in Chinese government communication to describe people such as Richard Nixon and Hubert Humphrey, Indian reactionaries and British imperialists, and, as a variation on the same idea but with a shuffling of enemies, Soviet revisionists and US imperialists. It’s nice to see the People’s Daily reaching for some trusty, old tools.

    The question then remains, was Zheng’s execution effective as public communication? This depends who the audience was. If the audience was other senior cadres, possibly, but with qualifications. If the audience was the public, I think not.

    The problem with using punishment as a deterrent, besides having to communicate it, is that the threat needs to be credible and proximate. People need to believe that it if they transgress, punishment is likely to befall them. I’m not a criminologist or lawyer, I’m a communication expert, so I’ll stick to looking at this in terms of the beliefs that might exist and the messages that might be communicated and received around such situations.

    What makes the threat of punishment real to someone? I would suggest that a potential criminal has to believe three things: That the likelihood of being caught is high enough to factor into their calculations; that if caught the punishment will be enforced; and that the punishment itself will hurt.

    A lot of legislation and police work is bound with communication campaigns to ensure that the right people are convinced of these three things. For example, my own state of California produced the memorably titled and widely publicized “Three Strikes and You’re Out” law, whereby a third felony conviction is an automatic life sentence. (It was widely applied, too, and helped to clog up our jails to the delight of the California prison lobby.)

    Assuming a rational and intelligent actor (an immense assumption, I realize — after all, the world is rife with crimes of passion and moronic criminals) these three risk factors will be weighed against potential rewards in a decision as to whether or not to misbehave. So an authority that wants to encourage good behavior ought to communicate credibly on all three fronts (assuming that counting on people’s essential goodness is, ahem, sometimes not enough). You will be caught. You will be punished. And it’s gonna hurt. If any one of those three things isn’t believed, your communication is probably ineffective. This is true at any scale. It’s why governments advertise that they execute people (or even just fine them) and why your mom told you that she had eyes in the back of her head and that you’d lose your allowance if you fought with your little brother and that she was serious. And probably busted you once or twice just to prove it.

    Making a public spectacle of a punishment, say by widely publicizing it in the media, is part of this process. The problem is that when an occasional person is conspicuously made an example of, people are apt to discount the message. It was political. He was unlucky. He didn’t have good enough connections. He was stupid. He was a much bigger fish than I was. All of these rationalizations are ways that potential misbehavers might distance themselves from the person being made an example of, diminishing that sense of the likelihood of being caught.

    If you don’t think you’ll get caught, the other two factors –the likelihood and severity of punishment– are irrelevant. All that stands between you and tainted lucre is, well, your conscience. Furthermore, it’s easier to distance yourself from someone who is unlike you. That’s why Zheng’s execution might be a reasonably strong message to senior cadres and civil servants, and a fair demonstration of party resolve, but why it probably doesn’t mean much cadres out in the provinces or to the guy making counterfeit drugs in the suburbs of Bengbu. (This idea of identification works in reverse as well, and it’s why you use role models to advertise to people.)

    So if the occasional, high profile punishment is ineffective, what might work?

    Let’s start with an assumption: People have to believe that the institutions responsible for the processes of identifying transgressors and dispensing punishment cannot be easily short-circuited. This doesn’t mean that you need western-style rule of law for punishment to be effective, but it does mean you need to demonstrate consistency. The Taliban were ferociously effective based on the simple expedient of consistently shooting or beating to death anyone they thought wasn’t toeing their line. It was repulsive and barbarous, but it worked.

    China probably aspires to a less arbitrary process than the Taliban had, even if it sometimes doesn’t look that way. But this is where endemic corruption causes problems because it short-circuits the institutions and processes by which lawbreakers are identified and punished, rendering them terribly inconsistent. In the absence of consistent proof, communication is reduced to noise. Ultimately, it’s not enough just to say it. You need to do it regularly or people stop listening. The most effective PR, remember, is based on actual deeds.

    But you can’t line up everyone against the wall and shoot them (unless you’re the Taliban). So what should China do?

    What would be effective in the long term is to launch and visibly communicate a nationwide campaign of much tougher enforcement against garden variety businesses and businessmen who cut corners, make unsafe products or skirt the rules, and against local and provincial regulators and cadres who are found to be corrupt. If garden variety misbehavers believe there is a real chance they’ll get a painful fine or jail sentence, that their businesses will be closed or that they’ll be successfully sued, then they might reconsider the percentages. If they don’t believe that, they won’t care whose head gets rolled in Beijing.

    It won’t be the distant threat of execution that does the trick, but the immediate threat of a routine inspection. Beijing shouldn’t avoid punishing corrupt senior officials, but hearing that the guy up the street got raided despite being the cousin of the head of the local PSB will be much more effective than a distant guillotining in the capital. Many such examples –by which I mean thousands– would provide the basis for a much more broadly effective communication campaign.

    To China’s credit, the government is trying to do this. Recent announcements thathundreds of businesses have been closed for safety violations are a start. But ultimately it becomes a question of scale and that’s where the problems seem insurmountable. Without root-and-branch reform of its institutions, and there are eight involved in food alone, it may simply be impractical for China to enforce this kind of program at any meaningful scale. In that case, there is little alternative for the government to continue to rely on “showcase” prosecutions to make its case, ineffective though they are.

    This is also where government control of media and public expression exert a cost. If you can’t build credibility from the top down, an alternative might be to aid communication from the bottom up. Grass-roots anger from Chinese people who are the victims of many of China’s quality problems and scams could be a powerful thing. So could a less fettered media, free to range across the country and peer more deeply into dank corners. But the media is prone to many of the same problems as government institutions, compounded by regulations that make it difficult to report on issues that the government finds sensitive.

    Charitably, Zhen Xiaoyu’s execution shows the government’s resolve to attack its institutional problems as starting point for better enforcement at all levels. Less charitably, it will sail over the heads of the small-time crooks and entrenched powers responsible for so many of China’s problems and doom Mr. Zheng to being just one more in a line of long-forgotten high-profile examples.

    See also: