Thanks to Ron Shewchuk for pointing us to a segment on Canada's Business News Network. Asked about the wisdom of Citigroup's recent employee memo that, when leaked, drove the stock up 38%, Edelman Public Relations CEO Richard Edelman endorses the notion of communicating to the financial world by getting the word to employees first.
"Employees are now the new secret credible source for corporations because there's a lot of horizontal communication that happens to friends and family. I think too much of the communication has just been straight at the analysts in the past."
Well, it's actually not all that new—Crescenzo and I were reporting on "employees as brand ambassadors" more than a decade ago in The Ragan Report and an imbecile company I worked with actually created a newslettter full of good news that employees were to share with everyone they knew. (The title of the newsletter? Why, The Ambassador, of course.)
But the notion of influencing analysts by deliberately giving a leaky workforce information that might raise the stock—this is novel. Of course, the way Dick Edelman explains it—keep employees in the loop and transform them into credible resources for analysts—it sounds great.
In fact, let's just leave it at that, shall we? And let's head up the elevator and see if we can't get some of those IR funds to supplement the employee communication budget.
Glynn says
Sending a memo like that one has the effect of turning all employees into insiders for stock trading purposes. If the same information wasn’t previously disclosed publicly, like via Dow Jones and Reuter’s, then the company faces very serious trouble.
David Murray says
That’s exactly right, Glynn, and I wondered why Edelman didn’t make that disclaimer about this specific practice, before going on to make what really was a legitimate point about it being good general practice to make employees credible (and reasonably accurate) sources of information for anybody who cares about the company. Right?
Susan says
What about the fact that you are placing trust in all of your employees to know the difference when something can be shared and something cannot? There are already way too many instances where media gets information from an undisclosed source, and the company has to go into crisis communication mode to ensure that facts are corrected, etc.
David Murray says
Well, I think this issue must be evaluated case-by-case. But in general, I think you ought to trust employees with–and verse them in–at least as much financial, strategic and market information and analysis as you give to analysts.
So that when a reporter or an analyst or a potential investor inevitably DOES ask the Citibank accounts payable person, “Do you really think things are on the rebound there?” the person answers in more detail than, “Dunno.”
The alternative is the old cartoon that shows two guys turning a pole that disappears into a hole in the ceiling. One guy says to the other, “I think they got a merry-go-round up there.”
Bucket Trucks for Sale says
Whenever I see the word “memo,” my messed up brain sees “nemo.” Do you think that means I should get a clown fish?? I have one in my Happy Aquarium Facebook fish tank.