Wednesday, June 3, 2009

Communicating Strategically

While managers usually think strategically about their businesses, they tend to overlook the importance of strategically communicating with their constituencies. In order to correct this, they must know who their constituencies are, the attitudes of constituencies toward the organization and what a particular constituency knows about the topic on which management wishes to communicate. The case study in Chapter 2 outlining an internal communication problem within the Carson Container Company is a prime example of how time, human resources and money can be wasted if a company fails to recognize and analyze their constituency.

Several years ago, as the marketing assistant for a scientific equipment manufacturer, I was appointed by the marketing manager to oversee the introduction and implementation of a line of plumbing fixtures into our existing product line. Early in the process, I failed to recognize, and was not informed of the importance of meeting with the estimating and sales staffs to give them details about the new product and discuss with them all new and impending developments. Instead, I sent out dozens of memos giving directives on related issues without asking for input. As a result, I alienated the very people who would be promoting these fixtures in the field. Because these two constituencies worked very closely, they each fed off the other's resentment and dissatisfaction. Morale plummetted. Time, money and resources were wasted because I had to rework a number of processes to everyone’s satisfaction. I had to recruit extra staff and lost valuable time “mending fences.” All of this could have been avoided had I recognized my constituencies, primarily the estimating and sales staffs, and analyzed what it would take for them to support my efforts. The following link is an article from Business Day that discusses the importance of effective internal communications.

Changing Environment of Business: The Marcellus Shale

Breaking news in Pennsylvania

Anyone who has picked up a local newspaper, turned on a local television news broadcast, or listened to a local radio station has probably heard about the 3.6 trillion cubic feet of natural gas reserves locked some 8900 feet below Pennsylvania’s surface, in a geological formation known as the Marcellus Shale. According to some experts, this reserve is the one of the largest in North America. This untapped reserve has enormous economic potential for the natural gas industry in Pennsylvania.

A brief background of the history of Pennsylvania's natural gas industry

From a period spanning from the early 1900's into 2007, the industry standards for natural gas production in Pennsylvania were based on drilling large numbers of low volume production wells. These wells were drilled vertically to an average depth of around 3000 feet. Of course, this led to the rise of entire service and supplier based industries built around these standards. As the years passed, these support industries grew more and more complex and became heavily intertwined with the industry as a whole, employing tens of thousands of people ranging from high powered CEO's to rough necks working on the drilling rigs. Many of the natural gas production companies were small, locally owned and operated businesses, allowing for close and personal relationships between the service and support company owners and the producers. Business was done on "a man's good word and a handshake." Although there was much competition among the service based companies, it was not uncommon for these contractors to have exclusivity with the work. In other words, many producers developed what one might call a sense of "brand loyalty" and were willing to pay little extra to retain the services of companies that they trusted.

Major changes and shifts in the industry

The discovery of the Marcellus Shale reserves has dramatically changed the face of the local natural gas industry in Pennsylvania. Many of the cost of completing standard wells (from now on I will reference these wells as "shallow" wells) such as leasing tracts of land, permitting, environmental studies, drilling, and construction were long established by the laws of supply and demand. These expenditures had been very stable and predictable for many years. The news of the Marcellus Shale discovery, along with its astronomical profit potential, attracted the attention of several very large, NYSE and NASDAQ traded companies that could raise huge amounts of needed capital. The cost of completing Marcellus Shale wells (from now on I will reference as "deep-horizontal" wells) was significantly higher than those of drilling the shallow wells. This posed a problem for almost all of the small, locally owned companies that had the leases and reserves to drill the deep horizontal wells, but couldn't get the capital. Many of the large, publicly traded companies were coming to the area and making severely overpriced offers to local producers to acquire their reserves, along with lofty offers to Pennsylvania land owners to obtain new reserves. The industry wide dollar amounts in Pennsylvania literally totaled in the low billions. Also, the philosophy was shifting form a large number-low per capita production rate, to a small number-high per capita one. In other words, this meant a significant reduction in new construction projects. This posed a huge problem for the support and service based business in the region, including my own. The overpriced offerings have completely turned the local natural gas economy upside down in Pennsylvania. Hundreds of local jobs have been lost, due to the reduction of new construction volume. To compound the problem, the Pennsylvania Department of Environmental Protection (DEP) has taken notice to the increased demand for water in order to complete these deep-horizontal wells. Many new agency laws and restrictions have been recently enacted by the DEP such as requiring more intense environmental impact studies, water restrictions, and more strict requirements for drilling permits, driving the cost of Marcellus based drilling even higher. This means that natural gas prices have to continue to rise to make production profitable. Finally, the recent economic prices have sent natural gas prices plummeting. The industry is currently in "sleep" mode. Many of the remaining small, locally owned producers are unable to acquire new leases for shallow drilling because the overpayment for leasing has literally driven the per acre cost of leasing new tracts of land hundreds of times higher than in 2005.

This revolutionary change has driven many small local service based companies out of business. The new, NYSE traded producers do not care about the principle of "brand loyalty" I discussed earlier, or about building trusting relationships with experienced service contractors. It now goes to the lowest bidder. Every aspect of the projects is solicited for bid, even minuscule amounts by industry standards. Many of the local companies need a "steady and consistent diet" of work to survive. They are not accustomed to the sporadic work generated by the new "bid everything" policies. However, it would appear that the change is here to stay, at least for a while. If a company is to survive, its management has to recognize this changing environment and must adapt. I have made several fundamental changes to my consulting and construction business in order to survive. I have sat down with my partner and went through our budget line by line and cut out any and all unecessary expenditures. We also restructured our employee personnel by consolidating two of our construction crews into one, saving on vehicle and heavy equipment overhead costs. We also had to make minor adjustments to our employee health care plan to ensure the survival of our firm. I have sharpened my skills immensely at scrutinizing every project we bid to determine the best profit margin I can work with, but still be competitive. I still work on the same basic principles, just changed my style. To quote Thomas Jefferson, "in matters of style, swim with the current; in matters of principle, stand like a rock."

Communication Theories

During the 2008 Elections, I noticed than many peoples' opinions on the presidential candidates, and the whom they voted for constantly changed between the Primaries and the General Election. No matter how fit or unfit a candidate was to lead this country, America still chose to support the candidates that they could relate to the most and who shared mutual values. With this being said, many Americans from all demographics had different perceptions on each candidates' morals, objectives, foreign & economic policies. Many Americans felt that the Gulf War was the greatest concern compared to others thinking that the global economic recession was more important.

After the Primaries, there was a lot of speculation about who would better represent the United States. Each candidate openly exclaimed what their top 5 concerns that they planned to address immediately on their first day in the Oval Office. The three month period before the General Election was very dull and the news was redundant. There was relatively no new information about either candidate. However, during the Summer and early Fall last year, Many celebrities and well-known politicians were endorsing each candidate. President Obama was considered to be a celebrity ONLY because he was the most popular candidate. Major endorsements for President Obama were Oprah Winfrey, Ex-Secretary of State Gen. Colin Powell (Former Republican), Paris Hilton, Will Ferrell, Chelsea Handler, and the list goes on forever. Major idolized celebrities have more power of persuasion than the experts on CNN or MSNBC. This method of politics supports Katz & Lazarsfeld's Model of 1955, which found that the political messages sent over any medium had little effect on voting decisions. People have minds of their own and are influence more by opinion leaders (i.e. celebrities, politicians, family, and friends) than mass media.

Celebrity endorsements are not always good politics.
List of Obama Endorsements