Pressure Points

1 September 2005

Margery Kraus, president and CEO of multinational public affairs and strategic communications consulting firm APCO Worldwide, speaks to Chief Executive Officer about the pressures and responsibilities she and her fellow CEOs face today.

The reputation and standing of CEOs seems to have been badly affected by recent corporate scandals. What should CEOs do about it?

In my work, I have found that the definition of a company reputation is unique to each and every company. But the common trait is trust. CEOs must build trusting relationships with key stakeholders.

To build trust, a CEO must have consistent, open and frequent communication with the company stakeholders, including employees. It's a lot easier to do the right thing in the first place than have to spin your way out of a problem later. If a CEO builds a workplace that is based upon truth, responsibility, fairness and respect, the corporate reputation will reflect the reality.

Would changing the title CEO to an alternative be useful?

Changing a title will not make a jot of difference. The title CEO is clear. Its meaning depends upon the performance of the person who holds it.

What qualities do CEOs need today?

Today's CEO, more than ever, must lead both the company and the community. It is not just a matter of making money for shareholders, it is a matter of having the vision and values that inspire employees to want to do their work as well as they can and to give something back to the communities in which they work around the globe.

"A CEO must have consistent, open and frequent communication with the company stakeholders."

Learning to understand not just business measures, but the factors that build a good reputation among all a company's stakeholders, is essential for the company of tomorrow.

How should we judge the success of a CEO?

A CEO has to be judged on both people performance and financial performance. Both are important for a successful company. APCO Worldwide is a service business, and I always tell our employees we have a very simple business model based on three legs of a stool. The first is happy clients, the second is a fulfilled staff and the third is a profitable company. This is a symbiotic relationship, and it only works if you focus on all three. If any one of them is broken, the stool cannot stand up.

Are CEOS overpaid?

That is a hard subject for sweeping generalisations. The CEO has a tremendous responsibility for the welfare of people, the production of goods or services in an innovative way and a host of other jobs, including a role as a community leader. A good CEO with all of those skills is hard to find and should be paid accordingly. There have been a lot of excesses, and corporate reputations suffer when there is no correlation between performance and compensation, but there is also more scrutiny by stockholders now, which should help put things in balance.

"A CEO has to be judged on both people performance and financial performance."

APCO has a very low staff turnover for the industry, and the company is often cited as a good place to work. How do you retain talented staff and create a good work environment?

APCO has tried to create a corporate culture that brings out the best in people by establishing a professional and collaborative work environment. The company encourages its staff to work together in ways that allow everyone to grow and learn from one another. People come to APCO because the work is diverse and meaningful. They stay because they like and respect their colleagues. The culture is designed to give everyone a chance to win and succeed.

APCO has attracted some exceptionally talented and experienced professionals. Many come to it from high-level positions in government, the media and business. Their experience allows APCO to offer its clients superb advice on sensitive issues.

In many cases, these people have sat in the chairs of the company's clients, so they know what they need and what pressures they face. In addition, APCO's recent management buyout gives it the chance to control its own destiny and to retain the values and culture that I am convinced has contributed to its success.

There's a lot of talk about CEOs creating and maintaining the company talent pool. How do you address these issues?

The first step is creating the right culture. If you get that right, the company is a place where people want to work and want to stay.

"If you build it, they will come."

There's a line in the movie Field of Dreams: 'If you build it, they will come.' It's true in business as well. As the company grows, it continues to build, change and sometimes fix the culture. It learns from its staff and its mistakes. A fair compensation programme is also critically important. APCO's recent management buyout allows it to align compensation with its corporate culture. This gives employees a stake in the future of the business and ties compensation more closely to performance.

How do you make sure the values stick?

Any company is a reflection of its leadership. I believe in living my values and leading by example. For a CEO to say one thing and do another breeds cynicism and convinces employees you don't mean what you say. This sort of duplicity underlies the corporate scandals of recent years. My primary stakeholder group is my employees. If they do not share my values and vision for this company, how can customers and others?

I care deeply about this company, and I express a clear vision about where the company is going and what it can do to give more value to its clients and lead innovation in the marketplace. I believe in trust, hard work and passion.

"Every CEO also has to deal with technology and using time more efficiently."

How do you monitor the way the business is performing?

Well, feedback from client and staff surveys tells the company what it is doing right and what it is doing wrong. Monthly financial statements and other financial documents are always important, but the surveys tell it whether or not it is performing well.

Many companies have difficulty turning strategy into action. How do you manage execution within the business?

APCO has a good team, and each member of the team has a job and responsibility. The company keeps nimble by keeping attention focused on its client needs and achieving results.

What are the major challenges facing CEOs in the next two to five years?

Successful CEOs need to learn more about communications, both internal and external, but I guess you would expect that from me, since it is the industry I represent. But I really believe it. So much of the value of a company can be affected by one false step in the way the company communicates around business challenges, crises, litigation, international market entry, global expansion and other increasingly complex areas.

A CEO who can anticipate these things and develop a direct and open communication style will be able to do a lot to enhance a company's position and reputation. Building and restoring corporate reputation in a society where trust of CEOs is low is a major challenge. I call it obedience to the unenforceable – doing what I ought to do, not just what I have to do.

In addition, every CEO also has to deal with technology and using time more efficiently. The demands imposed by rapid communication from Blackberries over the internet are profound.

APCO recently opened an office in Shanghai. What is the key to doing business in China today?

China is a very exciting country for companies in almost any business, but it is not a simple country to understand. For business, China is a roller coaster of high but uneven rates of growth, rapid legal and regulatory change and sharp regional market differences that are as dramatic as the differences between European countries. Business is conducted against a backdrop of intensely felt political sensitivities in the USA-China relationship, a high degree of commercial corruption, frequent violations of intellectual property rights and serious environmental constraints. At the same time, the market is growing and changing. There are enormous differences between the generations in consumer preferences and in the growing consumerism in China.

All of these factors pose challenges for investment decisions, corporate positioning and communication. APCO assembles teams of consultants with diverse backgrounds and experience. It helps its clients achieve the due diligence required to make sound business decisions and then build and communicate messages to key stakeholders.

How do you divide your time?

My average workday is about 14 or 15 hours. I spend as much as half of my time helping clients and a lot of my time on activities that build and brand the business. This includes speeches, community service and pitching to new clients. Finally, I spend about 25% of my time on administrative tasks involved in running a business.

Margery Kraus, president and CEO of APCO Worldwide.