Richard Edelman is the president and CEO of the world's largest independent public relations firm with wholly-owned offices in 53 cities and more than 3,600 employees worldwide. He was named president and CEO in September 1996. Prior to that, he served as president of Edelman's U.S. operations, regional manager of Europe and manager of the firm's New York office.
Richard has extensive experience in marketing and reputation management, with current assignments for the National Dairy Council, Hewlett-Packard, McGraw-Hill and Scotts Miracle Gro. He has counseled several countries on economic development programs, including Egypt, Israel and Mexico.
Richard won the Silver Anvil, the highest award in the public relations industry, in 1981. He was named "Best Manager of the Year" by Inside PR magazine in 1995. In 2006, he was awarded "Entrepreneur of the Year 2006 - NY Metropolitan Area" by Ernst & Young. Richard was named the "Most Powerful PR Executive" by PR Week in October 2008, for the second year in a row, and "Agency Executive of the Year" by AdAge in January 2008. In 2010, he was named one of "America's Favorite Bosses" (#8) by Forbes.
He serves on the Board of Directors of the Ad Council, the Atlantic Council, the Children's Aid Society and the National Committee on U.S.-China Relations. He is also a member of the World Economic Forum, the Arthur Page Society and PR Seminar.
BOLTON: This is Roger Bolton and I’m here to interview Richard Edelman for the oral history series at the Page Center at Penn State University. Richard, you’re the CEO of Edelman Public Relations, a firm founded by your father when?
BOLTON: And what was the world like when he founded this firm and what was he thinking when it began?
EDELMAN: He had the idea that marketing public relations was really the potential larger force, even in corporate or public affairs, and he felt that the so called independent validation by credible third parties would be very important in the marketing process and ultimately he’s been proven very right. His really big idea was the media tour and he did it for the Toni Company in “Which Twin Has the Toni?” And he toured the Twins and then he did it for Sara Lee and ReaLemon and Kentucky Fried Chicken and California Wines and he was off to the races. But it was an incredibly different time Roger, because you know, relatively few media, national media in particular, a lot of local media. And, it was a time of very high trust in institutions; it was President Eisenhower, after all. Everything was good and normal. And also PR people were called publicists so it wasn’t exactly the way in which we’re regarded now. My dad used to have parties with 300 journalists from the Chicago media core at our home and growing up we would crawl between the legs of the celebrating, tipsy reporters. Such different times.
BOLTON: So you were aware as you were growing up, what your dad did for a living, were you kind of focused on that and you understood it to some degree?
EDELMAN: Whether I understood it or not, I certainly had it in my face because we’d have people like Orville Redenbacher come over for dinner and teach us how to make popcorn or Phyllis George came over, she was Miss America and man, that was big bragging rights at age 12. That was the best, cause she was a spokesperson for Toni and for the Miss America contest.
BOLTON: And was it your ambition to follow in his footsteps when you were growing up?
EDELMAN: I never even thought about going into PR, I always figured I’d go into a big corporation. I knew I wanted to be in business I just never really particularly thought about it.
BOLTON: So how did you end up working at Edelman?
EDELMAN: Well, it’s Edelman family lore. I was all set to go work for the Playtex Corporation at age 24 graduating from Harvard B School. You would understand why as a young guy you might want to do that so my dad got an offer to be acquired by DDB in 1978 and he really didn’t want to sell and he said come spend one year, see if you like it and if you don’t you can go back to Playtex. So here I am 32 years later so I guess somehow I worked it out.
BOLTON: So how did you start, what did you do at the beginning?
EDELMAN: I was an account executive. I accept the job and say I want to go travel in Europe with my then girlfriend for 6 or 8 weeks after business school, decompress a little bit. We won a client called Conticommodity Continental Grain, futures trading and no one really understood it except for me because I had written my senior thesis on futures trading. So my father said, sorry Charlie, you get to show up the day after graduation and get to work at Edelman as of first of June cause we have a new client. So that was an interesting start. So I worked in the Chicago office for about six months and then I moved to New York in ’79.
BOLTON: Did you have much of an operation here [in New York] at that time?
EDELMAN: We had about 12 or 15 people and the best part was I got to work for a guy named Dick Aurelio who had been deputy mayor under John Lindsay in New York and all of a sudden I got into Hooker Chemical at Love Canal, and the Pan-Am National Airlines merger, and hazardous waste citing for PPG, and Nestle through the formula boycott. So all of a sudden I was thrust into crisis management at a pretty rapid clip.
BOLTON: And it sounds like a different kind of work than your father had really contemplated when he founded the firm, as you explained a few moments ago, with a focus on marketing and public relations. It’s crisis work that you were doing.
EDELMAN: I think that’s right. I think Aurelio brought us really into that kind of crisis work. Also our DC office had done the Concorde landing rights issue, which was all related to environment. Aurelio had been very central to that cause of the JFK Airport noise issue. It was logical for me to get trained in that way.
BOLTON: And now you’re CEO.
EDELMAN: Yeah. Can you believe it?
BOLTON: Yes I can. When did you become CEO?
EDELMAN: I became CEO in ’97, I was 43 and my dad was 77. I had been manager of the New York office at the tender age of 26, if you can believe. We didn’t have anyone in the office really over 30 and we took the office from 15 people to about 150 people in a ten-year period. I was moved over to run Edelman in Europe for about 2 ½ years. I never moved actually. I sort of felt like Dustin Hoffman in “The Graduate,” showing up at the hotel with my toothbrush. Stewardesses all kind of knew me because I would go back and forth. Actually, my wife, who then was working as an investment banker, made more money than I did, so it didn’t make sense for us to move, so I just commuted. So, that was an excellent experience, really rounding me out – what would and wouldn’t work. Then I came back and was COO with my dad for two years and then in ’97 got the CEO job.
BOLTON: And how has the firm evolved under your leadership in the last, over a dozen years?
EDELMAN: Well, I think first we’ve really had quite significant growth. We’ve gone from about a $100 million firm when I took over to just about, we finished this last year Roger, at $487 million at Edelman. And if you add in Zeno, our second firm, it’s a $500 million business. Second, I think we’ve been very early in digital and that’s really been a boom for the firm. In fact, somewhere between 10-15% of our fees are directly related to money that we would never otherwise have had that would have gone to advertising or other firms. And then third, we’ve really built out our global network. We are seriously in 52 cities now and we’re in every one of the BRICs, we are substantial in the Middle East and Indonesia and so we’ve stretched ourselves substantially.
BOLTON: The firm has changed, the world has changed. Think about the world in 1952, when your dad founded the firm and the world today; how would you characterize the difference in the environment in which Edelman operates?
EDELMAN: Well I think, first point is, advertising was by far the dominant force in communications, and I don’t think that’s true anymore. I think that we’re absolutely at the table and arguably have a more substantial relationship with senior management than advertising. Advertising is a functional, tactical skill and public relations is a strategic and counseling [skill], as well as execution. And so, the way I describe it is moving from the sort of tail of the dog to the brain of the dog. Also, you know you’ve had the evolution of media in such a substantial way with the dispersion of authority into social media, into companies’ so-called owned media with their own channel on YouTube or whatever. You clearly also have very important blogs like Politico or TechCrunch or Techmeme, that are setting the agenda and that’s a big change. And then last is sort of this emergence of civil society, the rise of NGOs really in the last decade and when you see this from the Edelman Trust Barometer where NGOs are now much more trusted than other business or government, they’ve sort of sponged up the loss of trust in those two mainstream institutions. And they’re really the fifth estate in global governments. So it’s business with civil society now and it’s not just in opposition to.
BOLTON: So, your dad founded the firm with a focus on marketing PR as you came into the business in New York, there was this kind of move into crisis PR and more corporate kinds of issues. You’ve just described an environment in which the agenda’s being set by new kinds of media, new kinds of institutions, the emergence of civil society and NGOs. What does Edelman today look like in terms of its business mix and where’s the growth and where’s the focus?
EDELMAN: So we’re still probably 60% marketing and 40% corporate and public affairs. But the way we look at marketing is really much different than the sort of small box that we used to occupy which was, you take the advertising creative and make something of it so, you know when Morris the cat ran for president, and that was the basis of the ads for the Heinz brand, we took Morris on tour and had street rallies and all kinds of things but we basically took the creative. Now, let’s compare that to what we’re doing for eBay at the moment, we said we want to be the authority on fashion because eBay is ultimately the destination for properly priced fashion products. Well, we’ve created a whole concept called The Inside Source. We hired a woman who had been at Lucky magazine, she’s a genius on fashion trends. She looks through the eBay site every day and she basically posts her views on the five or ten best deals of the day, and then from that, we are able to multiuse that. Cross cellphone, almost RSS kind of feed. We also put that up into people’s PCs because we have this on the eBay site, and if people are trolling, they can go right to Inside Source and get the advice of the day. So in a sense, we’ve created our own media for eBay. It’s a completely different approach. Also, the pop-up store we’ve done for the period between Thanksgiving and Christmas, to literally manifest what is available digitally at the EBay store, but to also understand that consumers need to see this and that media, mainstream media needs to see it. So the sort of pinging back and forth between what is mainstream and what is social media is a very interesting further approach. But also even more so in the marketing of a healthcare product such as Alli for GlaskoSmithKline, which helps you reduce weight. The marketing challenge for that is as much dealing with medical opinion leaders, establishing appropriate use guidelines for consumers—what to and what not to eat, as it is doing classic you know, get on the Today show. You must do both. You must establish a foundation of scientific strength, if I can put it that way, that allows you the license to operate into the mainstream media. So, I actually look at PR now, on the marketing side as in a sense, creating a runway that allows the advertising plane to take off. Because without the base of support with opinion formers, and even actually the new influencers—could be diabetic moms or any other activist types—you’re going to lose.
BOLTON: Advertising is clearly a tact that you described earlier, and one that is less effective without the PR planning strip that you just described. Marketing, arguably, is a strategic discipline and function within corporations. Do you see a trend to convergence of marketing and corporate communications or corporate public relations, and if so, driven at least in part by the digital realities?
EDELMAN: But it’s also driven by a change in expectation of business, Roger. I think you see that it’s now business in society. The whole theory of Milton Friedman, which is that the sole responsibility of business is to make profit, is now being eclipsed by Indra Nooyi for instance of PepsiCo, taking about Performance with Purpose. It’s both. So business thinks of itself in a stakeholder mentality instead of just a shareholder. So the reaction by companies is very interesting where you see a chief communications officer, a Jon Iwata, moving also now to take on marketing. So he comes not out of, in a sense of brand management, as much as he does with reputation management. So he’s put the two together and I think the program IBM does on Smarter Planet is brilliant. Because it puts IBM at tables where they are convener they are intellectual capital creator and they are not just selling boxes and software. It’s a whole other way of selling. And then you have a person like Leslie Dach to Wal-Mart who’s in the top 7 of people in the firm who is pushing Wal-Mart to be the change agent in environment through supply chain leverage and I think that’s again, indicative of this merging of brand and corporate reputation.
BOLTON: What do you see as kind of current trends in public relations agencies and relationships with corporate entities? Are your clients more the marketing people or the corporate communications people or both, and how is that relationship evolving and working?
EDELMAN: Edelman’s always had strong relationships with the marketing side of the house. So, that we are tied to the CMO and it is nothing new for us. What is new is that the PR executive, the Roger Bolton of Aetna days, wants a firm to be involved as counseling on global issues, on NGOs, on areas employee engagement, on things that may be outside of core strength of classic PR director. And wants particularly the global aspect to be on call so when CEO visits China, what’s going to be expected; how to do, what to do. And what bases to have made sure that you’ve covered which think tanks to have seen, what intellectual capital should we have developed, which speeches, a lot of that used to be solely internal and I see more of that now being, in a sense, a shared responsibility between the PR firm and the corporate center.
BOLTON: Strategic partnership?
EDELMAN: It’s much more a strategic partnership, that’s right. I use the agency only for arms and legs. Give me your thinking, give me your connections, give me your wisdom, what do you see out there and, that’s really rewarding. It’s much better than when I started in the biz. Absolutely.
BOLTON: 1952. 1997 I think. We’re now in 2010. Imagine we’re in 2025. Can you take a stab at what the world might look like as it continues to evolve? What do you see?
EDELMAN: I think some of this is straightforward which is that the power of India, China, Brazil, maybe Russia, will be enhanced. You’ll see a continued shift. I think the FT (Financial Times) 500 ten years ago, had only 25 companies from developing nations; as of this year it’s 125 of the 500, maybe it’s half by then or maybe it’s close to half. So we have to move our mentality to be able to hub business from Sao Paulo or Beijing, not just service business, it’s a big change. Second, we are absolutely going to have to make digital core to how people practice our business. It can’t be called on Edelman Digital, you know. That’s nice but everyone has to appreciate the impact of having a Twitter embassy or other techniques that are necessary for connecting corporations in digital world. Third, I think the battle is still being decided about whether it’s business in society or whether it’s just business for shareholders, and the extent of relationship between business and government and how this is going to play out. Whether this is shortwave amplitude, where there’s heavy government or whether it’s long wave, as in the 1930s. I can’t tell you that…it seems that the populace doesn’t like it, to have so much government. They see business as a wealth creator. But if that’s the case, business is going to have to re-earn their trust and they’re going to have to behave differently. And whether it’s issues of compensation or giving back to community, how they feel philanthropically or products that are better for…I think that’s probably the way it will go. Business having the leeway but you know, higher expectation context.
BOLTON: Well, one of the issues clearly is that government hasn’t really earned the trust either and so all institutions seem to be suffering from a lack of trust. Is that accurate?
EDELMAN: Yes, I think you see a general malaise about trust, that’s correct. Interesting dichotomy between the rising markets of China, India, where everything is great. We love government, we love business, we love CEOs. Whereas in the West, it’s not the case. It’s the opposite. We don’t like government, Mr. Sarkozy‘s 25% popular, Obama’s now at 40%, and we don’t like CEOs; we only trust 25% of them. That’s pretty bad. So that’s a long, slow climb back out of the abyss. 2008, September was a big moment and it wasn’t just the demise of Lehman Brothers, it was the demise of centerpiece companies in the world economy and destruction of pension funds and you know, decline of sovereign nations and Greece needing a bailout. All these are just almost unthinkable. But it happened. So then the people have to say, what are my basic assumptions? Who do I trust? Well, I trust experts, I trust employees within the company, I don’t trust the CEO. I have to hear things five times before I get to believe, not once. It’s not the age of Uncle Walter Cronkite, that’s over. I get news from eight sources a day, not two. And so we’re going to have to do surround sound and agility and speed but basic reordering of priorities I think for business.
BOLTON: Represents opportunity though, does it not? In the sense that there is a long way to go upwards—but there is an opportunity to go there.
EDELMAN: I think companies that recognize that opportunity and are not afraid of letting go a little. So I see this dichotomy between control and credibility and, the more you control the less you’re believed. But it’s scary. I’m sure the first time you skied really fast down a hill - you said I’m out of control. And your ski instructor said, come on Roger keep doing that cause you’re actually more safe than if you try to lean back into the hill. That’s about the best analogy I can make and having fallen many times cause I was nervous. You can’t be nervous. And even if you make a mistake you just have to get up and say, I’ve got to ski to the bottom of the hill or else I’m going to walk. So, you don’t have that option really, unless you want to be laughed at.
BOLTON: Many business leaders aren’t prepared to cede control in that way, or don’t have the understanding of the trends or the background to be able to trust the letting go as a way of building trust.
EDELMAN: I think that they’re starting to see object lessons in the success of that letting go. And letting the middle part of the company speak up. And you know, a company that historically would have thought of this highway control, Microsoft. They have, I think 20,000 people blogging one way or another. It’s a huge change maker for them and allows a discussion as opposed to a “talk at.” I think there’s genius in that. And similarly you see a change in mentality at a GE or a Wal-Mart. As icons do it, people at others say, well maybe we should be doing the same. And then also certain brands, Ben & Jerry’s Ice Cream, for which we do work, they’ve really led in social media. They had a couple hundred thousand friends on Facebook. They did a contest where they said please tell us which flavors—here are ingredients you can play with, make it on your home stove, come back to us, we’ll commercialize it if it works. They jumped into a million friends on Facebook within 6 weeks and, they commercialized one of the products and you know, it’s become a big seller. And the point is, involve people with your brand and they have an advantage, right? Because they had a history of eco and sourcing appropriately but they’ve changed their mentality completely.
BOLTON: This is the “people like me” phenomenon?
BOLTON: Do you want to explain that?
EDELMAN: Sure. We found, starting 4 or 5 years ago, that a person like yourself is a very important source of credible information so…you and I both like theater, if I were thinking about whether to go to a Shakespeare festival, I’d definitely send you an email, much more than rely upon local media or other because, I know you know because, you’ve lived your life in it. So that’s what has evidenced itself in a sense in Facebook. Where a sort of peer recommendation leads to a six times more likely to buy than other—than if it was just an ad on Facebook.
BOLTON: With major impact obviously on the established media, how do you see the media environment changing? You mentioned a few minutes ago the surround sound or the need to hear it from multiple sources. People don’t just rely on Walter Cronkite as the one trusted source, so there’s a proliferation of media outlets and yet at the same time perhaps, still a need for media to establish credibility and trust as well…yes?
EDELMAN: I think they’re going to establish credibility and trust differently. Which is to say, they’re going to be much more immediate. On a continuum you have; reporters blogging, they’ll write short form copy that might go up on a wire service. And then they’ll have the long form piece that will show up the next morning. But again, it’s the continuum but interestingly, it’s as much about the blog post and the subsequent conversation, as it is the long form piece that then yields letters to the editor. So, actually, I think the reaction by mainstream media has also been to open up their walled gardens. So, if you think about the WashingtonPost.com, they have decided that they’re no longer going to have a front page mentality which is to say, Roger’s going to read a little bit of foreign news, and a little bit of local news and a little bit of domestic tax legislation. Maybe Roger’s just interested in domestic politics and so we’re going to have WashingtonPostDomesticPolitics.com. And then we’re also going to aggregate best of—even from Politico or from AP because narrow and deep is what we have to offer. So, I think that’s a profound change for media. I think the unresolved question is whether they’re going to be able to have an advertising-support-only model, or if they’re going to have a model that charges for content, and if so how? Do I charge as the Wall Street Journal does, an annual fee of $100 for access? Do I have a tiered play where I could write to Bob Woodward at the Washington Post if I had a real question about Iran if I paid $500 a year, and that’s possible. But what’s the impact on the PR firm is the real issue. And I think we’ve got to become much more quick. We’ve got to have much more visual content, not just written. We’ve got to go where the conversations are, meaning we’ve got to put up an embassy for our clients on Facebook if in fact that’s where the locus of conversation is. We can’t just rely on people to go to New York Times.com because that’s where the article is, no way. And I also think we’ve got to do a better job of identifying who the true influencers are, as opposed to just the amplifiers. A person, Ashton Kutcher, has a million followers on Twitter, does not make him an influencer, because he’s probably not a thought starter. He might be on certain subjects; he might be on eco for example but on use of a tech product, not so sure. Maybe a gear head in Silicon Valley who’s got a very interesting view but we’ve got to identify them, work to reach them and then turn them on to the latest BlackBerry or whatever else we’re promoting.
BOLTON: It’s a highly sophisticated, complicated world that you’re describing. Let’s think a little bit about the people in public relations and how they prepare themselves to succeed in the environment you just described. Let’s start with your own education—you have an MBA from Harvard. How important is the business education, the business focus from a preparation standpoint for people coming into the field today?
EDELMAN: I think that a smart student will study science, will have a background in economics, will have a fluency in foreign language, and will also somehow or another be capable in digital and be a digital native. And all of those are required, why? Well, because we, in our line of work have to explain in laymen’s terms, a scientific evolution, technological evolution. Whether you take a science course or an engineering course but whatever it is, have some fluency. Be able to read a balance sheet be able to have some sort of discussion with someone in finance. You must have some exposure to culture that’s not your own. Spend a semester overseas. Take a language in a serious way because again, English is not going to suffice in the next period of time. And then lastly and sort of obvious, most of the people who are 17, 18, 20 are digital natives, they are able to do 3 and 4 things at the same time but the ability to create content, defend your position, have lived through a kerfuffle and get up on your feet again, I think is important.
BOLTON: What are you seeing in terms of young people coming out of public relations education today? Is that a good thing? Do you look for people with a PR background or do you look for different kinds of backgrounds in young people just starting?
EDELMAN: We’re happy to have people come out of PR training at university and in fact, that’s why we’ve been so committed to this new media academic summit, where we’ve tried to help teachers move their curriculum to incorporate more new media. But we, Roger, don’t limit ourselves to PR grads. We’re also happy to take journalism or economics, or government, or international studies because the dimension of what we do has moved from sort of functional to much more strategic and advisory and I think we need that mix of people coming in here.
BOLTON: What are you seeing in terms of the level of preparedness of entry level people coming into the profession today?
EDELMAN: I think they write well. I think that some of them are just remarkably willing to lead and particularly on matters of social media. We have a couple of young people here, Amanda Mooney is one who just—she’s 24 and she came out of college 2 years ago and she leads presentations to clients on that which is social. That’s the great opportunity at the moment, because we sort of have this dislocation. You and I are digital wannabes; we’re trying-to-be’s. These people have it inside themselves and they’ve grown up that way and it’s just this kind of, great moment in time for them. Because we can’t do that, we can’t live that cause we just didn’t have it. We’re trying, doing the best we can. But we’re making up ground.
BOLTON: What about the competency that’s required for strategic counseling of business leaders? How do people, as you bring them up in your firm, how do they develop that?
EDELMAN: They get strategic experience in counseling partly by watching masters at work so someone who’s attached to a Gary Grates in doing change management will see the work on a Kraft-Cadbury merger and say you know, I get this, I understand the tradeoff on nationalism and I get the concern about plant closure. So one of it is sort of a mentoring, that’s a classic. We’re also trying very hard to automate some part of this. We’ve put together a thing called the Digital Belt System where—and it doesn’t sound as S&M as you might think. It’s all to do with—you get your blue belt and then your orange belt and then ultimately your black belt. We’ve created a curriculum and I think 2/3 of our people have taken it. If you make it available, they will do it. It’s a little bit like, make the baseball field and people will come. It’s important to keep this training aspect of the business front and center.
BOLTON: Can you describe the competencies that you think are important to being a successful strategic counselor at a senior level?
EDELMAN: I think you first of all have to live in the big world. You’ve got to bring your knowledge from, whether it’s world economic forum or your seat on the board of an NGO or your senior relationships with media so in a sense, bring the outside world in. Second, I think that some aspect of bravery and integrity is just so fundamental. Too many are willing to go along get along and senior people expect that kind of counsel and it may not jive with what your direct client wants but you need to speak your peace. If ultimately the client decides not to do it, so what? You’ve done your job. And the third, I think, is that you must be able to bring in additional resource from others who have superior expertise in change or in CSR or in financial or whatever. Just don’t try and arrogate all onto yourself. You can be the locus-point of connection but you know, even after 32 years I’m smart enough to realize that I’m good at certain things and self-actualized enough to realize that I’m not perfect at everything and that’s really important. Don’t wall people out.
BOLTON: On your second point, the bravery point. Marilyn Laurie, who passed away yesterday, and we were just talking about our sadness about that, called it guts. Having the guts to be able to speak up and do the right thing.
EDELMAN: I think Marilyn Laurie was an exemplary public relations person because I saw her not just at AT&T but also when she was on the Board of Trustees at Columbia and, she would sit with the president of the university and say, “You know, Lee, I just don’t think you’re doing this right.” And she didn’t care whether she was one-on-one or in a group. She spoke her mind as a true New York City born and bred gal. She was just right up there and all of us should aim to be as full of intelligence and integrity as she has been.
BOLTON: And you used the word bravery which I think is a good choice because, unfortunately I think we’ve all seen people who know they should be speaking up and out of some fear or just unwilling to and they become not as valuable to their clients as they would be if they had the bravery, or the guts as Marilyn would call it to speak up.
EDELMAN: Well I think, Roger, some part of it is that some element of Stockholm Syndrome sets in, particularly if you’re on the client side and been put into a box by the chief legal counsel or whatever, or by circumstance. And that again is a very positive role that a firm can play which is to provide an outside perspective and say, you know, this isn’t right; this isn’t best practice; this isn’t moving in the way that a leader should move. Your expectation Mr. CEO or Ms. CEO is you’re the biggest factor in the category. How can you NOT lead on this debate? You must.
BOLTON: Can’t there also be that kind of fear or concern on the part of an agency? If you’re leading an account, it’s your first big account and you know that they don’t want to hear the advice that they should be hearing, isn’t there kind of a built-in concern about possibly losing that account and what happens to you when you have to go into Richard’s office and explain why?
EDELMAN: Sure. And I think that’s where your culture at a firm plays a central role, because you’ve got to not only encourage but incentivize that kind of appropriate pushiness or bravery or however—Marilyn would call it pushiness. And I think it would be a shame if everything were down to, so what are your quarterly numbers? And I think we’ve all seen that some unfortunate PR firms have been hurt by their ownership structures and the extent to which they’re either subordinate to advertising or they’re simply seen as little cash machines from which deposits which will be you know, taken out all the time. And that’s not the right way to run a business.
BOLTON: The Page Center at Penn State is dedicated to integrity in public communication, and we’ve started to move into the territory of talking about how one builds that, and you just mentioned the culture of the firm. How do you build a culture that’s based on integrity and a culture that stands for the values that you think are important?
EDELMAN: Well I go right back to one of our big clients—J&J and Credo. And I think you have to establish, in a public way, what it is you stand for. And then it’s by your actions that you demonstrate it, so it’s no longer enough to just consider that public relations is about communications. It’s actually about advice on what to do, and then an elegant explanation of why you’re doing that. So it’s both, and I think Larry Foster gets that completely because, it was the action on Tylenol well explained—the both – that’s the basis. So how do I build that in Edelman? Well, I try to walk the talk. I blog, as you know, regularly. I make a big virtue out of seeing midlevel people. I run on the Edelman New York team for the JP Morgan Chase race in the park and I have 90 people over afterwards and we have beers and, you know, talk baseball or fashion—some will like baseball; some will like fashion. It’s good to have daughters. I know nothing, but a little. And you have to, in a sense, live a very public life, I think. So leading from the front is important; demonstrating yourself. But also making sure that others in the firm are given leeway to do interesting things. So we have a thing called Edelman Escape. People can go for—after being at the firm for 10 years—they go on 2 weeks paid sabbatical, then they write about it and they blog about it. One person went to Africa and helped in Rwanda and, these are stories that express a certain kind of conscience that—I want to be part of the firm. Or similarly it gets around if you quit a client because you’ve been abused. You’ve offered advice, you’ve been screamed at, whatever else. You at some point have to say, no more, that’s enough. Roberto Duran, you know. We’ll take our advice elsewhere and that’s fine.
BOLTON: You mentioned the J&J Credo. What would your observation be of global corporations in terms of their commitment to a public set of values and a willingness to inculcate them throughout their organization and live up to them?
EDELMAN: I think, Roger, there’s a continuum. I think that some still believe in the sort of Friedman theory of, I’m here to maximize profit for shareholders, I will pay lip service through my corporate philanthropy to other activities and I do like being honored at the right dinners. That’s the minimalist approach. And there’s another approach which says the world has changed and that the expectations of business are now to be a partner in society. And so that continuum will continue with the ultimate decision to be made by the market place. I heard a wonderful comment from Ian Davis who’s the former chairman of McKinsey, and he said you know, it’s not a matter of shareholder versus stakeholder, it’s a matter of long term versus short term. His view is that long term shareholders maximization is what companies ought to be about, not short term and if that’s the case, then business in society makes eminent sense and that one cannot possibly consider a world where you just pay maximum bonuses and don’t consider the societal context or otherwise.
BOLTON: And there is some evidence, as you’ve mentioned, I think some companies get that and yet we continue to see horrific examples of companies that don’t.
EDELMAN: The problem is that business is judged by the lowest common denominator and it seems to me that in the interest of business and in the interest of the PR people behind the scenes pushing the C-Suite agenda to have business seen in a broader manner. And also frankly, to criticize as necessary, those who break those behavioral rules. Because otherwise it’s seen as nodding to, as opposed to really changing your behavior.
BOLTON: You mentioned the Edelman Trust Barometer earlier. Certainly you’ve been a leader in studying this phenomenon of trust in global institutions -- businesses, and other institutions as well. And I believe that you began this work roughly around the time of Enron/Worldcom.
BOLTON: Can you describe what’s happened in the intervening 8 or so years and what the trends have been since then, and what you see happening in terms of the public’s view of business? And I understand that it varies by location around the world as well.
EDELMAN: Well, just to sort of make a general observation, trust in business was affected by Enron, WorldCom, Global Crossing; but it wasn’t fundamentally altered. What’s happened in the last couple of years is a reevaluation of the relationship that I, as stakeholder, have with you, business. Because again, it was centerpiece companies and also the need for massive bailout. So the whole theory is kind of Anglo-Saxon deregulation, business will take care of us—whoa, wait a minute, it didn’t quite work. But I can’t count on government because government’s proved to be awkward and inept at job creation; we don’t believe in that either. So, I think people are wary, they’re multi-sourcing, they’re more self-reliant, but they are really looking for people with specific credentials. Whether it’s as a friend because you know Shakespeare, or even more profoundly, [it could be that] I trust a professor from Oxford or something. Or even a financial analyst and this is remarkable. Financial analysts, which you may remember in 2002 were blamed for the demise of the market’s overhyping, are now the second-most trusted source of information, because Sarbanes-Oxley created that sort of separation between church and state, between I-Banking [investment banking] and analysts. And now they’re seen as really credible sources. So you can build back technology, which was not so high in 2002; has moved to be the #1 trusted industry. Banking which was the #3 industry only 2 years ago is now #9. It’s just falling off the cliff. So there is real volatility based on current events, I think banks can re-earn trust but it’s going to be a long, painful process. And it’s going to require explanation of how we do what we do. I even think that sort of phrase, proprietary trading, is difficult. Proprietary means something unto myself, I’m not sure that that’s okay. I have to understand why we’re able to be backing up financial institutions as citizens. Why is that good for us? What do we get in return?
BOLTON: That’s the mutuality concept, how can I trust you if my interests and yours are misaligned.
EDELMAN: Well our friend from University of Maryland certainly understood that, our professor friend. Mutuality, right?
BOLTON: Yeah. And the business model does matter. The public perception of how an industry makes its money and whether it’s heads win, tails you lose.
EDELMAN: Right. Which I’m afraid is the sort of cynical, populist approach. But I don’t think that there’s been a complete flop over to pitch forks and death to business, and we want a lot of government because basically, you see sort of underlying aspects of trust in business. 80+% trust in technology. That’s indicative, so what is it that the tech industry does that is so magical? Well, they constantly create new products where the price points over time decline. They make my life better; they’re an employer of diverse populations. They are wealth creators, meaning the stock prices go up. They have some characters, Jobs or Gates. Gates has given something back to society—that’s very important for Microsoft. Gates Foundation. So, they’re making the world better, is sort of the sense.
BOLTON: So it is possible for an industry or even an individual company to build integrity through those things.
EDELMAN: I think so. And it’s also possible for a country. In the last two years, we’ve seen the reputation of the United States recover substantially. The Obama Effect is real. Arguably he’s more popular abroad than in the United States.
BOLTON: What about the profession itself, public relations and its reputation. This kind of disdain for spin and disdain for the public relations counselor in the broader media. How do you view that?
EDELMAN: Well, I think over time it’s a really important problem for those of us in the business to address, and I think we’ve allowed ourselves to be categorized by movies like Wag the Dog. We’re this sort of shadowy force, a sort of unaccountable, almost dirty tricksters with a sort of Washington heritage that people inherently don’t like. And we have an obligation I think, to point up our work as catalysts in creating and forging new relationships between civil society and business, in helping to promote the Ecomagination kinds of programs that GE does. Beth Comstock is a change agent for global business. On her own with the backing of her chairman and CEO has made a major change. Leslie Dach again at Wal-Mart, the same kind of profound change on business and we as an industry need to tell those stories because you know, they’ve had as much impact as any advertising or other executive in the last five years. They are our people, and we need to lay claim to those. Listen, frankly it’s harder for PR agencies to do that because we always work for a client. But the client should take the credit for that. Some of the work you did at Aetna was absolutely essential on financial literacy, on understanding your ability in health to speak back to your healthcare provider. But again, you brought wisdom from your prior life in Washington so sensitivity to those sorts of things.
BOLTON: It’s a young profession. Harold Burson, Dan Edelman, they are among the pioneers and they’re still active today.
BOLTON: The corporate communications senior counselor, the Beth Comstocks and Leslie Dachs and Jon Iwatas that you just mentioned through our stories, it’s not an automatic that a major company has someone like that in a key strategic role to the same extent that you would expect it from a general counsel or the CFO. True?
EDELMAN: I think that’s fair. But I also think the rate at which the canvas is changing plays to our advantage. Meaning, smart PR people within these big companies have to advantage themselves with this, have to say you know, this is not a time to play cautiously and go into our defense mode. We have to explain our approach on privacy because, the only way we’re going to expand if we’re a search engine, is for us to improve these engineering things, but also to have the mandate. And you don’t build a mandate by hiding. And Elliot Schrage at Facebook is as important to the success of that company as any of their marketers or engineers because again, without his ability to play in DC and Brussels, etc., they’re going to be constrained.
BOLTON: Well this very complicated environment that you described earlier in our discussion really cries out for that kind of leadership in corporate communications, public relations at the most senior levels, does it not?
EDELMAN: Of course it does Roger and I believe that we have it in ourselves to do it and I think the only thing standing between the achievement of that dream and where we are today is the willingness of some of the most senior practitioners to take that risk and whether it’s on their own or in partnership with a firm, they have to lay out an agenda. They can’t be managed by the weather of the day. They have to say, here’s our 3-5-year objective and we are central to the achievement of that. Whether we’re a food company, whether we’re a tech company, we’re a pharma company; every one of those industries has substantial public interest issues. And God knows if you’re in financial services, how do you play it if you’re to rebuild that institution’s credibility among its customers, its depositors. God knows, regulators.
BOLTON: You’ve been at this for a while now.
BOLTON: Can you reflect on biggest challenges or lessons you faced over your career?
EDELMAN: I think that the first thing is to realize that even if I made a mistake, I’d rather act and correct than temporize. And I’ve made some hiring mistakes, I’ve made some acquisitions that probably weren’t the best but you know, you’re going to get up the next day, put your shorts on and get back in the ring. Some element of stamina or just determination, that’s really essential if you’re going to be a senior executive. You’ve got to be able to take the punch, because they’re going to come, and you don’t know when they’re going to come. I think second is, I really learned to be a much more global exec. It’s not just because I travel 90 or 100 days a year, it’s because I’m thinking about that all the time…that NGO risk might arguably come from UK first and how and having met some of them, I internalize that now. I don’t think I’m anywhere near as smart as I need to be about nationalism in China, for example with US brands, but you have to constantly be improving yourself in this learning thing. And then, it’s also a challenge when you take over your dad’s company, let’s be real. And I had several people who were longtime partners of his kind of thinking, what did he do here, naming this guy to run the firm? And I never had that as sort of a chip on my shoulder I just did what I did but I think it’s a special burden, in a way, to have the family name on the door but, it’s a special advantage too. If you’re going to get yelled at, it’s going to be by your dad who ultimately has an interest in your succeeding as opposed to some German who ultimately wants to stab you in the back and bring in one of his henchmen or something.
BOLTON: It’s quite remarkable the firm’s still independent after all these years. Most of your competitors have long since been bought out by large media conglomerates of one sort or another.
EDELMAN: Yeah it’s quite a story and I think when I consider that many in the industry a decade ago were basically saying that we were outmoded and those that were with Omnicom or Interpublic were necessarily going to crush us because clients all wanted a solution that melded the firms, we didn’t see that, we saw in fact that it was going to constrain us much more and that there was a lot further to go. But also appreciate that this is not just a family business. What I mean is, 15% owned by the nonfamily but also, we distribute 40% of the pretax every year to our people and the business model goal for us for the family is to make an 8% or 9% return, it’s not some huge money machine, we need enough to make acquisitions and buy new PCs and re-outfit offices. We built the enterprise with no debt, we have been prudently aggressive in buying up firms, hiring senior people and we make people feel as if they’re entrepreneurs, and they are. If they have good ideas, then bring them. You want to start a business, I give credit to Nancy Ruscheinski, who in ’95 said you know I want to start this thing called Edelman Digital. It’s fifteen years ago we did this. We were the first firm to have a website. And we were the first firm to really appreciate the potential of the web in crisis with Odwalla. This was in ’97, but this is a bottom-up phenomenon. It wasn’t just we have to do this. It’s not so centrally controlled and it’s not run on the basis of the numbers either Roger. It’s not if you don’t make 20% margin you’re toast; if you don’t make 20% margin, do better next year. By the way, we don’t want 20% margins we want 12. That way you serve clients better. And it’s a little old fashioned but actually it’s better because ultimately, clients pay for advice. They’re not really interested in your multiple on Wall Street. So it’s better to be private.
BOLTON: Thank you for this conversation. As you think back on what we talked about over the last hour or so, the trends in the industry, the learning that you’ve done, the learning that all of us need to do together to be better and more strategic; does anything come to mind as an enduring truth or two that you think are relevant?
EDELMAN: The big message for me, Roger, is the more we explain what it is we do, the better we will be. I think way too much discussion happens in closed rooms and we have a tendency also to be very centrifugal in the PR industry so there’s the Council of PR Firms and there’s the Page Society and there’s PRSA and there’s seminar and there’s the Institute of PR and it’s sort of you know, cacophony. At some point, I guess, I’d like there to be somehow more tendency to be together as opposed to apart. And I’d also like more people in the industry to stand up and speak out about what it is they’re observing in the world, and not just on functional aspects like writing or you know, social media. But on the big issues that matter. How are we going to achieve trust for business? We have a huge role in this and we have to help our clients do this. And it’s advice on strategy and being brave, as Marilyn Laurie would always say.
BOLTON: Thank you.