By Mary Beth West, APR
The current issue of Harvard Business Review features as its cover article, “The Big Idea: Leadership in the Age of Transparency.” In it, Christopher Meyer and Julia Kirby delve into the issues of managing “externalities,” defined by economists as “the side effects – or, in the positive case, the spillover effects – of a business’s operations.”
An example of an externality as cited in the article: “A smokestack in Akron may send particulates into the air that descend on farmlands downwind, but in the absence of any measurement of those, the factory isn’t charged for ensuing crop damage.”
Of course, we all know that the company may not be charged a monetary fine by a government agency (yet), but if the matter is brought to public attention, there can be an even higher price to pay.
In public relations, we are confronted every day with managing the reputation and relationship impacts of our employers’ and clients’ externalities. In more cases than not, we are called upon to mitigate negative outcomes. And as the Harvard Business Review article title suggests, we operate in an age of transparency wherein every negative externality is in full public view and subject to vast scrutiny – even activism – via social as well as traditional media.
As “In the Profession” focuses on sustainability this month, the issue of externalities in the realm of environmental impact is timely. My firm advocates for the role of public relations to help guide management leaders in not only identifying and managing the outcomes of externalities – but perhaps more importantly, to be proactive by avoiding practices and decision-making that give rise to negative externalities in the first place.
That company with the Akron smokestack, for example, might be counseled to seek out cleaner production processes to cut particulate emissions and then communicate with stakeholders about its efforts. Of course, most decisions are not so clear-cut. Many costs and complications can make the “right” decision difficult, if not nearly impossible, for a company to make and still be profitable – or even be able to exist as an entity.
Managing these complicating factors effectively makes the case that public relations professionals should be at the table, influencing decisions and policy. Our profession seeks out and understands the attitudes, opinions and behaviors of all stakeholders to an organization – particularly relative to externality impacts in the court of public opinion. As such, we’re best prepared to represent those views in the context of decision-making.
Whether an externality is environmental or not, the voice of public relations can enable organizations to balance their business objectives with serving the public good. And this approach can help companies consciously strive for externalities that are positive rather than negative.
