February 11, 2014

Be an Authentic Communicator: Six Rules

By Laura Rittenhouse – Originally Posted on Forbes.com

business_meetingRecently, I searched on Google for “the importance of communication in business” and found about 70 million results. But when I searched for “the importance of authentic communication in business,” I found over 130 million results.  Renowned CEO coach Kristi Hedges understands this difference.  A few years ago, she quit offering her successful public speaking training.  Why?  It was stifling her clients’ authenticity and eroding their power to influence others and make change.

Warren Buffett’s 45-year career at Berkshire Hathaway shows how authentic communication builds trust and creates wealth.  His annual shareholder letters embody the gold standard of CEO communication.  He owns up to his mistakes and tells prophetic stories.  In 2002, Buffett trusted me to quote from his shareholder letters to write my first book, Do Business with People You can Tru$t.  Two more books followed, the most recent, Investing Between the LinesIt was endorsed by Buffett in his letter in 2013.  Given the Oracle’s success, you might wonder why other executives don’t follow his example.  Some do.

The annual report shareholder letters published in early 2013 by Kazuo Hirai, Sony’s new CEO, Amazon CEO, Jeff Bezos and Charles Schwab’s CFO, Joe Martinetto, are authentic masterpieces.  They excel as models of authentic communication.  Use the six rules below to find other authentic and successful leaders.  Ask yourself, do they:

1)    Start Energetically: Authentic CEOs aren’t afraid to begin their letters with emotionally loaded statements.  Hirai wrote:  I became President and CEO of Sony Corporation on April 1, 2012, succeeding Sir Howard Stringer, and I am acutely aware of the weight of responsibility that comes with being entrusted to build a stronger Sony.” Hirai exposes his vulnerability, a quality that builds trust.  Bezos wrote:  “As regular readers of this letter will know, our energy at Amazon comes from the desire to impress customers rather than the zeal to best competitors.” He refers to the “energy at Amazon” as a success factor and grabs our attention by challenging conventional thinking.  Both statements hook us – we want to know more.

2)    Imagine their audience:  Schwab’s CFO Joe Martinetto started his letter by acknowledging the skeptical reader: “At first, one might be tempted to dismiss 2012 as a replay of 2011 for Schwab. After all, there were many similarities — a still-tough macro environment with persistently high unemployment and a shaky economic recovery, a tense political debate around fiscal policy, and a sustained effort by the Federal Reserve to lower long-term interest rates.” He goes on to explain Schwab’s progress investing in future growth initiatives, despite strong economic headwinds.

3)    Take personal responsibility for creating the future:  Authentic leaders know where the buck stops. They choose words that create the future.  Hirai imagines Sony’s employees when he writes that his “duty is to change the company” so they can offer their best efforts and improve results.  Bezos’ invites employees to share his long-term view of growing wealth.  He tells employees not to get seduced in celebrating “a 10% increase in the stock price like we celebrate excellent customer experience.” Instead he wants them to follow advice from legendary investor Benjamin Graham who saw the market as a voting machine in the short run and “a weighing machine in the long run.”  Bezos wants to make Amazon “a heavier company.”

4)    Put a stake in the ground: Authentic executives use meaningful metrics to report their results.  Martinetto wrote that reining in expenses allowed Schwab to invest over $160 million in client projects while still achieving “a 29.7 percent pre-tax profit margin and roughly 70 cents of earnings per share.” Hirai goes further and offers a detailed financial outlook for 2013:  “…we aim to further transform our electronics business and, for the entire Sony Group, target sales of 8.5 trillion yen, an operating margin in excess of 5% and a return on equity (ROE) of 10% in fiscal year 2014.”

5)    Choose to be original and create value:  Bezos describes how extreme customer focus is a hallmark of Amazon’s proactive culture: “We are internally driven to improve our services, adding benefits and features, before we have to. We lower prices and increase value for customers before we have to. We invent before we have to…We think this approach earns more trust with customers and drives rapid improvements in customer experience – importantly – even in those areas where we are already the leader.” If you order from Amazon (as do I) you know his talk is supported by actions.

While CEOs frequently ignore their executive team in their letters, Hirai makes a point of introducing them to investors: Masaru Kato, CFO; Tadashi Saito, CSO (Chief Strategy Officer); Shoji Nemoto, head of technology; and Kunimasa Suzuki, head of product strategy.” Together, they will work to implement Hirai’s decisions. He tells us that Sony’s R&D efforts will be led by Shoji Nemoto and Tomoyuki Suzuki, both “highly experienced and knowledgeable individuals with engineering backgrounds.”  He is making organizational changes that will “enhance cooperation among Sony Group companies.”

6)    Believe that their words and their word matter:  All three executives chose to honor their words and word. Their letters to shareholders reveal how words not only describe results, but can inspire actions and even create value.  Research at Rittenhouse Rankings over the past decade shows that executives who respect their words and honor promises typically outperform companies who do not.  While Moody’s recently cut Sony’s debt to junk status as the company works through its restructuring, consider that since mid-January 2013, Schwab was up 55 percent, Sony was up 43 percent and Amazon was up 29 percent compared to the 19 percent increase in the S&P 500.

Will these leaders continue to demonstrate their authentic powers?  Stay tuned.  The 2013 shareholder letters are on their way.  We will apply our six rules to see if these leaders have the sustaining advantage of being an authentic communicator.

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Connect with me on Twitter @LJRittenhouse and for more information visit the Rittenhouse Rankings website.