AIG Hires Burson Marsteller…for….?

As reported in PR Week, the insurance (and shrinking) giant, AIG, has recently employed the services of one of the largest public relations agencies in the country.

According to the article, an AIG spokesperson,Peter Tulupman, responded:

“We have hired Burson-Marsteller to help us respond to the huge volume of requests for information we are receiving from customers, employees, and the media,” Tulupman said in an e-mail to PRWeek. “We have more than offset the cost by canceling advertising and sponsorships.”

I get the second part of the quote, that being in reference to the recent “scandal” that erupted a couple of weeks ago in which members on congress (small caps on purpose) responded with “outrage” that B/M had the stones to move forward with “…$440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings.”

That’s sensationalistic crap.  If you dig below the surface, which few outlets have done during this nation’s financial crisis, you will discover that this was not just for executives, but was a pre-planned event that the top performers earned before the crisis. For any of you who know folks or have been in sales, you know that often, companies dangle a trip to Hawaii or something of the like as an incentive for performance.

My controversial ten cents?  The AIG top-performers should be left alone because they had already earned the reward.  Keep top performers motivated when company morale is likely at an all-time low is more important than ever.  What AIG could have done differently is gotten ahead of the story;  one would think that someone in public relations would have thought to get in front of this. Maybe they did, but got quashed.  Who knows.  But back to my main point.

AIG announcing that they have hired Burson Marsteller to handle “huge volume of requests for information we are receiving from customers, employees, and the media” is like saying that you have hired ten rabid German Shepherds to guard a lollipop that fell on the floor.  I competed against B/M for a long time, and I can tell you that their rep is for gloves-off, hand-to-hand combat for clients.  There will be the inevitable information that B/M is the agency of record for Philip Morris, USA, but that is irrelevant.  The point is that if you want someone to deal with the “huge volume of requests for information we are receiving from customers, employees, and the media,” hire a firm in India to answer the phones.

AIG suggesting that Burson is going to help them answer inquiries is disingenuous.  Hiring B/M to help them stem the flow of both negative publicity the the outflow of capital would be a more honest answer. I wonder who is calling the communications shots within the company.

Whoever it is should be smarter.

Mark

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Comments

  1. Mark, they may have “earned the reward” by selling the very things that caused / contributed to the crisis. Who knows.

    To me, this is a time for all of the involved corporations to be hyper-sensitive to public perceptions. They should have canceled the trip. That would have made quite a statement if all involved had agreed to do so.

    Yes, the kerfluffle about the retreat was more fodder for politicians than meaningful news. But, people are angry – and rightfully so. I’m not sure AIG really gets that; meaning, they don’t understand how to properly respond. Time for action. Public action.

    Love your suggestion that AIG “hire a firm in India to answer the phones” as it plays into more of the anger (outsourcing) out there today.

    Yep, AIG is doing a CYA with this expenditure. I’m curious to see how well it works. It strikes me as more of the same ‘ol, same ‘ol. I’m really hoping for innovative and daring strategies to emerge by at least one of the entities involved in this mess. Don’t worry, I’m not holding my breath.

  2. Mark Story Says: October 24, 2008 at 8:41 am

    Robert,

    Thanks so much for writing; I regularly follow your blog, and although teaching at Georgetown is my part-time job, I love to inject as many online tools as possible, like this blog. You do a terrific job in ensuring that your students can “walk the walk” and should be very proud.

    I even used to work with one of your alums as a client (I won’t give her name in a public environment) but she spoke very highly of you and your program.

    About AIG: I get the fact that there is anger, believe me. I don’t talk about it much in this setting, but my “day job” is at the Securities and Exchange Commission. I suppose where my prior comments were coming is that I see the bad economic times in which we live, believe me — and I wish that they were not happening.

    Personally speaking, I would love to see a whole lot less sensationalist journalism and more questions about how this can be fixed. I know that the government is working hard — very, very hard — to try to stop the bleeding in our economy and restore order.

    My two cents, and since I don’t ever mention the SEC, I’ll add the little disclaimer that the views that I have posted are my own and do not represent those of my employer. Sorry for the disclaimer, but I use it whenever I speak publicly.

    Thanks again for visiting my little corner of cyberspace.

    Best,

    Mark

  3. Mark,

    The quote is ridiculous. You’re right. Are they going to create a colorful glossy FAQ?

    However, after living in NYC with three mergers and acquisitions guys and seeing their paychecks and bonuses, I bet the “top performers” aren’t pinching pennies. So I have to disagree with you on that point. We’re all getting cuts, we can’t do what we did before, even if we earned it and then some.

    And while the strategies of B&M are a little inside baseball for me, I know that perception is reality. And AIG is getting crushed with the “common man” in DC with these transit stories even if they don’t have a policy with them – Metro Owes $400 million – https://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102303820_pf.html. Not to mention people calling every radio and television station – no matter what the demographic – asking if they will still be insured.

    What should they have said? We need help to preserve and rebuild our image. I’m curious what the messaging should have or will be?

    And as a former reporter, I too am frustrated that most of these stories on these perfectly legal but complex deals are buried on business pages. Let them explain in plain language why people shouldn’t be nervous. Let them translate the millions of words in fine print for a general audience. Let them explain in plain language why AIG owns Metro cars. Maybe that’s what B&M will do. Because the journalists won’t or can’t. And if you chop the WSJ and NYT, how many business reporters are there in the country. They tend to be some of the first to go … and many are gone.

  4. I have to disagree with Robert about the retreat. In that particular industry, rewards to those among the top are standard and, in a way, is part of a person’s earning potential. Had each person been given a monetary bonus rather than a retreat bonus, would people be happier? I understand other’s thinking on the matter and for them – know that the second planned retreat was canceled.

    Also, when reading the statement from AIG, my first thought after reading “to respond to the huge volume of requests for information” was “do they have a call center at B/M or a large mailbox/inbox? It seems the language used pointed to a questions/answers format rather than a well-crafted PR campaign that disseminates information to each public providing the information needed.

    If B/M wrote that statement – good luck with the campaign…

  5. Adriana Gallegos Says: October 27, 2008 at 6:05 pm

    I agree with Robert French’s comments that during these times it is no time to hit the spas. This is a time for AIG to think about their code of ethics…if they have one. Many people invested their money in AIG because they trusted them, but with the current crisis many have lost a lot of money and now no longer trust them. Instead of giving the money to B/M to play defense they need to go a step further and sit down and listen to their public’s interests and points of view. One way of doing this is by conducting a survey to get feedback. In this way they consider the perspectives of their clients and get a better sense of what their values and principles are. As CEO of Schering Plough Corporation said, “By doing the right thing when it comes to business integrity, you will also be doing the right thing to grow your business for the long term.”

  6. Shilpika Das Says: October 27, 2008 at 6:48 pm

    I agree with Mike. I think earned or not, the $440,000- retreat for the ‘top performers’ was a bad call. Tax payers are angry — and are not feeling very philanthropic at the moment. Hiring an expensive PR firm to change their perception of the company doesn’t seem like the wisest move to me, especially since the firm has already been criticized for their extravagant expenditures.

    After being rapped on the knuckles, AIG has scrapped other events, frozen bonus plans and is also withholding $619 million in severance and bonus payments. Let their actions do the talking and the damage control instead.

    I think George Sard, CEO of Sard Verbinnen, a public relations agency, gave AIG some smart advice when it briefly considered running ads to explain the company trip to the Ritz. “To spend the taxpayer’s money on an expensive ad campaign to apologize for how you used taxpayer money leaves you open to further attacks.”

    Hiring a PR company to “respond to the huge volume of requests for information” is equally absurd in the current financial environment.

    Less than six weeks after the bailout, AIG is reported to have already spent two-thirds of the $122.8-billion credit line. Can it really afford to spend a projected 100,000- $200,000 a month as fees to Burson-Marsteller? They need to seriously rethink their expenses.

    I would rather AIG first work on repaying the taxpayer and then try to get back on their Christmas list.

  7. Thira Sannikorn Says: October 27, 2008 at 6:55 pm

    When it came to such a crisis time for AIG to do something to bring back trusts. AIG needs to respond the event to the right way. I agree with Adriana that instead of hiring B/M, conducting survey should be the good way for AIG to get feedback and AIG will know what they should do for the next step. If AIG need to deal with huge volume of requests for information, it should inquire with customers, employees and media for receiving information.

  8. Yes, perhaps AIG should have halted the $440,000 retreat, or maybe they went ahead with it because it had already been planned. If money has already been spent, and to cancel still meant paying money out of the pocket, why not allow the “top-earners” to have the reward they earned?

    The public wants AIG to act responsibly and to start paying the taxpayer’s money back. In class, we constantly discuss the need for PR in a company and how it can ultimately, in the end game, contribute to the overall success for the company. How can AIG start paying the taxpayer’s money back if all it does with the bailout money is give people their money back? Everyone also missed that they “have more than offset the cost by canceling advertising and sponsorships.” Perhaps that was money put aside before the loan now being diverted to the PR, or maybe it’s just PR being thrown at us. Either way, some money must be spent on reputation management, and even marketing (although they have clearly made their choice), in order to rebuild AIG’s reputation. They have to start earning back the public’s trust, by doing everything from restructuring the business and getting their business back on track, to communicating effectively to their publics. AIG has recognized that the internal PR and hired firms have done a horrible job so far. They have chosen to hire a firm who has a strong reputation (negative or positive, that is up to you) in order to start working on it in a global perspective.

    With all of these aspects of the business being taken care of, perhaps AIG can finally start making some money, because ultimately, that is the only way they will get out of this situation, eventually repay taxpayer’s money, and finally inject some money back into the economy. The $85 billion loan was to keep AIG from collapsing because of the debt they incurred, so even with the loan, it might bring them near even, but there is still a matter of making money so that they can pull themselves out of this crisis.

    I will say this – their statement on hiring B/M was horrible. But, it only resonates the fact their own PR could not handle the crisis before them. From a business perspective, AIG is taking the steps towards doing what is right to the public, for the interests of those invested in the company, and for the company itself. They still have a lot more than reputation management to do, but they’ve begun. Whether it’s a failure or success? Only time will tell.

  9. Lindsey Brothers Says: October 27, 2008 at 8:34 pm

    There are several thoughts that come to mind after reading this post. Even though AIG had “top performers,” the company overall was in a horrible financial situation, having to rely on the government for bail out. While AIG’ers enjoyed a relaxing retreat on the beach, the company was going down in history as the “largest government bailout of a private company in U.S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a week earlier,” as Wikipedia explains.

    I understand the action of following through with a reward, which is what the retreat was for, but for a company that was making headlines left and right for going bankrupt, I wonder how they thought the public would react.

    On a different note, my Dad is a steller businessman who has won hundreds of awards throughout the years, some of which were cruises. I can understand the need to maintain company moral and for AIG to follow through on its commitment to its employees. Unfortunately I think they were stuck and decided to apologize to the public after the fact.

    Moving on to B/M. Companies like AIG will increasingly need to use high powered PR firms to
    explain it’s actions to investors, employees, and the general public. However, PR stands for public relations, not people responders, they are not an answering service. Whoever thought it was fine to say the company hired B/M to help with calls and media inquieries must be the same person that failed to handle the retreat in a propper fashion.

    Getting back to the basics…it doesn’t seem evident that AIG has used Katie Delahaye Paine’s, “Ten Questions Every Professional Should Answer,” because if they have, there would be some sort of organized path of communication.

    After trying to learn more about the company through various Web Sites, it was difficult to answer a lot of the questions, much less get an easy answer to any of them. Katie, this company needs you.

  10. Aimee Saldivar Says: October 27, 2008 at 9:53 pm

    I am on the fence about the extravagent bonus for the top performers. I would have to say that from a “sales” perspective, I would be upset about not getting my promised bonus for my performance. From a management perspective, I would try to figure out what could be done in the interim to recognize these folks for their efforts with a non-monetary bonus until further notice. This would perhaps eliminate turnover and create a commitment from those top performers for a certain amount of time.
    Working in a corporate world in general can be very frustrating for the folks at the bottom of the totem pole because of the salaries/incentives that all these executives make, when the one person really doing all the work is their executive assistant.
    I really think that AIG should start making cuts with their internal PR team if they are going to invest with B/M to implement their PR strategy. Obviously, the internal team was not competent enough to do their job so now the company is having to spend additional money they can’t afford to spend on something that should have been done right the first time. Creating an off-shore team to answer questions for the company would be worse and more frustrating to the general public and create more controversy. People are going to become very frustrated with this situation since they are trying to cut back on driving to work by taking public transportation. Today NBC news 4 said that traffic and commuting via car was down about 23%. People are trying to utilize their time more wisely when they take public transportation as well save money and eliminate traffic. BUT since AIG is trying to collect early, major Metro Transit Authorities all over the country may have to cut their schedules/run times if they have to dish out all that money to AIG. They have to understand that this is the only transportation that some people have. Today USA Today featured an article that further explained how this was going to snowball for everyone.
    So back to my point, AIG will need to figure out what their company stood for ETHICALLY, when they were in business and congress will need to rethink this idea about supporting AIG with a penalty. I definitely agree that they need to read Paine’s book. Getting back to basics sometimes gets overseen in the big picture. They should start by cutting back on the executive salaries!!

  11. l’m thinking that AIG should be smart enough to know this new deal is a relevant self-salvation from the worst-so-ever publicity and shattered image. The key is how they address to the publics, how they try to be open and honest to the audience without completely crashing their confidence or making them feel like they’re being manipulated.

    Nowadays the public care more about the openness and also, in my opinion, the sincerity. Since AIG has planted a bad impression on the public already, they had better show more sincerity and use every opportunity of public exposure to gradually bring back the lost public trust. And the simple “helping us dealing with customer request of information” statement seems to disdain the damage they have caused.

    And I do agree with the reward thing for increasing employee’s morale and motivating the workers for better performance. But if such prize has to take a huge amount out of someone else’s pocket that would put your company in financial crisis, it’s not a wise thing to do. However, the executives are still the first to condemn.

    Anyway, hope the new B/M will teach AIG how to talk better and more “pleasing”!

  12. Emily Howard Says: October 28, 2008 at 6:29 am

    The company trip issue is all about timing. The timing of that trip could not have been worse from a PR standpoint. I agree, Mark, that the top performers already earned the reward and morality is most likely at an all time low, but don’t you think the top performers would be understanding if they postponed the trip? I know it is the PR team’s responsibility to handle the companies reputation, but as employees, they should all care about it. I’m not saying to cancel the trip all together; it is important that the company does actually follow through and take them on the trip or give them some type of compensation for their effort and hard-work, just hold off until the crisis is over. My company does offer a luxurious trip and it is one of my incentives. If my company would have been in this situation, and told the people that are going on the trip that they are going to postpone it, I think they would be dissapointed, but understood that it would be better for this company at this time.

    They shot themselves in the foot on that one. I can’t imagine their PR team sitting down and thinking this over and going through with it.

    I agree with Mamie and Mark and that it is obvious that AIG’s own PR couldn’t handle the crisis they are in because of the statement they issued. I know it is tough to judge a whole PR team on one statement, but clearly they needed to outsource their PR to handle this disaster they are in. They waited too long. They should have outsourced this before it was too late.

  13. Lindsey Brothers Says: October 28, 2008 at 9:38 am

    Hi Class – Maybe AIG should have reached out to a digital strategies PR firm. Here is an interesting article about how digital agencies are taking the lead. Whether you think this is something AIG should have explored or not, it is an article that is very relevant to our class overall.

    “As the Lines Blur, Digital Agencies Are Taking The Lead”
    https://adage.com/agencynews/article?article_id=132026

  14. Anca Bilegan Says: October 28, 2008 at 9:45 am

    Heather Elms, a business professor at the Kogod School of Business at American University in Washington makes a good point on AIG’s behavior: “Whether the company’s behavior is wrong on an absolute basis doesn’t really matter right now. It’s become a question of perception, and it seems that they’re being viewed as behaving unethically”. I wonder if AIG has an ethics department. If they don’t have it, they should create one.

    What AIG needs to do know it is regaining the taxpayer’s trust and regaining the trust is much harder than maintaining it. Hiring Burson Marstler it’s only the first step toward rehabilitation. However, it seems that AIG has to reconsider what PR stands for: establishing and maintaining mutually beneficial relationship between an organization and its publics and not handling huge requests for information.

    I think Emily is right when she says that the company’s trip issue is all about timing. Rewarding the employees it’s important but timing it’s even more important. You just can not afford to spend money on extravagant trips right after your company has been bailed out.

  15. Heather Lovett Says: October 28, 2008 at 11:42 am

    I completely understand wanting to reward your top performers, but I think the timing was off. Mame asked if people would have been happier if they were given a monetary reward opposed to the vacation. I’m not sure how this could have been handled. Maybe a press release prior to the vacation would have helped the situation, but I think putting it on hold would have been the smarter plan. I know it is important to keep the employee morale high in a time like this, but public opinion is huge and thus far BM and the other firms AIG has failed to mention are not doing their job. Good luck answering those phone calls Mr. Penn.

  16. I don’t agree in having kickbacks for the CEO’s just because of their title. But based on merits like top performers is understood.
    As many have said, it is time that AIG starts building trust with their customers. If it werent’s for these customers there would be no money for their extravegant bonuses. I have worked in a financial company that rewards their top sales representatives. But I would also have to question the culture of this company in how they attained their sales. As Adriana questioned; Did they have a code of ethics?

    As for hiring a top PR firm to handle questions, requests for information we are receiving from customers, employees, and the media should be done from within the company to build and strengthen the PR department in the the company. Hopefully they had a department with enough staff. I’m sure they have learned from this experience the importance.

  17. Perception is truth to the person perceiving it. It doesn’t matter if the trip was preplanned or not, in the public’s eyes, AIG is on a fast financial downward spiral and the “top-performers” are being rewarded!? Timing was definitely off (from a PR standpoint)and to actually state that hiring B/M to handle “huge volume of requests for information we are receiving from customers, employees, and the media,” was not only a direct slap in the face but it was just done in poor taste.

    The impression I immediately got from that statement was, ‘we don’t want to deal with you so we’re routing you elsewhere until we get it together.”

    I’m all for boosting morale in the workplace but while in a time of crisis, you’re trip may be guaranteed but you’re job may be up in the air when you return.

    So what if the top performers had to take one for the team, this one time, compared to hundreds of other times they may have been rewarded otherwise!

    It’s a much harder pill to swallow when you have to suffer a bailout versus losing out on money spent for a “preplanned” trip. I think everyone made some very strong points and arguments and I agree with most of you on several points.

    The public’s confidence slipped at the bailout, now their trust is lost. I’m interested to see how and what B/M will do to help redeem them…

  18. Nikiforos Gkrestas Says: October 28, 2008 at 2:15 pm

    Morally, it’s an absolute hypocrisy that AIG hired a PR company to change the minds of desperate people. Especially when they use that ridiculous rhetoric of responding to a “high volume of questions”

  19. Becky Richardson Says: October 28, 2008 at 2:35 pm

    “Once a company accepts tax dollars, there are different rules. These are taxpayers who did not voluntarily make an investment in these companies. In many ways it was a forced investment.” Andrew Cuomo, New York State Attorney General.

    In my opinion, Shilpika is right: “Tax payers are angry — and are not feeling very philanthropic at the moment.” Personally, I would much rather see the earned incentive for AIG’s top performers come in the form of equity, which is currently trading at $1.80/share. Perhaps that might motivate the top performers to keep at–invest themselves into the future of their company (work hard, build your future). Too, it might even send a strong PR message about the direction of AIG (without the expensive guidance from Burson Marstellar)…”sweat equity” vs. vacations, golf and spa treatments. Just a thought…

  20. I guess I took in this information differently. When I read the story in PR Week I viewed it as neutral. Folks should understand that this is not a company operating under normal circumstances so criticism should be given with that in mind. This is a HUGE company at possibly its lowest point. So yes, in dealing with their own crisis they dropped the ball in not responding properly to the executive retreat story, which then gained big interest from the media. The way I see, AIG is putting its reputation first by hiring BM. And since the insurer is in the spotlight it’s only necessary to hire a firm that can handle the high-level pr needs.

    I also didn’t see the statement as disingenuous. Their message about needing to respond to the huge volume of requests for information is probably very true! I didn’t read it as ‘AIG hired BM to answer phones/emails’ but that they need strategic pr counsel on how to handle many different areas of communication. I guess I just don’t see it in a public company like AIG’s best interest to be specific about its own pr inefficiencies in an announcement such as this.

  21. Just a thought here from someone who worked at a firm during a crisis: they’ve likely hired a PR firm to answer the crush of calls primarily from journalists, and maybe a bit from the employees/customers. It makes sense to have your internal PR team (which might consist of all of four or five people) handle the bulk of questions from customers, have HR handle most of the questions from employees, and hand the journalists/media off to the PR firm, along with any overflow.

    As to the particular selection of B/M I cannot comment, other than to say I love the image of 10 German Shepherds guarding a lollipop on the floor. Excellent use of imagery, Mark!

    Jen

  22. Michele Nix Says: November 13, 2008 at 12:10 pm

    Great post and discussion, Mark. I agree, Anca. Perception is key. The stumble for AIG, and I would add, many other institutions embroiled in this economic crisis, was in lingering too long behind the curtain.

    Yes, it’s not easy out there, but better there, than give the appearance of hiding. Being out front, daily, with transparent information flow and immediate accountability when retreat stories surfaced, etc. – that would have gone a long way in easing public panic and ire. When there’s a message vacuum, other people gladly will fill it for you, but generally not with information that’s credible and accurate.

    But again, this is not an AIG problem. As we’ve seen, it reaches beyond one institution, one financial sector, and one country. So we focus on recovery and hope that, in future, the leadership of our financial and government institutions will ensure that crisis comms plans will be written, drilled, retooled and ready, long before a crisis occurs.

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