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Financial Times: BP chief learns lesson one in the PR cookbook

By Chris Hughes
Published: September 26 2007 03:00 | Last updated: September 26 2007 03:00

Tony Hayward, the new chief executive of BP, was naïve when he lambasted a hundred senior executives for the company’s “dreadful” operating performance and assumed the comment would not leak out. But this should not be a hanging offence.

Details of Mr Hayward’s frank pep-talk were revealed in the FT yesterday. BP’s share price duly slid as investors feared that he was conveying new information about the company’s forthcoming third-quarter results. Had that been true, Mr Hayward would have committed a serious gaffe. Price-sensitive information should be conveyed to the market in an orderly way – not in ad hoc briefings of senior staff.

The reality is that the market already expected BP’s results to be bad. That was evident from the weekly performance indicators posted on BP’s website.

Mr Hayward’s error was failing to anticipate how his internal message might be construed externally. Public relations consultants charge a lot of money to deliver common-sense advice and rule one is to keep internal and external messages aligned. Mr Hayward was addressing a fairly large gathering, so he ought to have considered that his comments were semi-public. He should have anticipated that casually using the word “dreadful” to describe BP’s performance might have ugly consequences.

Clearly, it would have been wiser to say something like: “Stock market analysts expect our performance to be dreadful. I have not disabused them of this notion.”

So, yes, Mr Hayward made an error of judgment. Yes, he has some learning to do about how he communicates as chief executive. Can he move on from this? Sure.

In fact, this episode should give investors a degree of comfort. Far better to have a candid Mr Hayward who reads staff the riot act than the sort of savvy chief executive who knows just how to use investor communication to his advantage. It is not uncommon for new brooms at poorly- performing companies to advertise widely their commitment to “driving shareholder value”. Talking like that often becomes a self-fulfilling prophecy in that investors applaud and push the share price higher.

But generating shareholder value by telling the stock market what it wants to hear is not the same as creating real value in the enterprise itself. By focusing his communication on the staff, Mr Hayward should stimulate behaviour that will be good for BP as a business.

In time, the share price should follow.

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