Facebook backed down today to a storm of protest over its new terms of service that granted the social networking site ownership of all network content forever. Founder Mark Zuckerberg said in his blog that the site was going back to the drawing board and rewriting the terms. In the meantime, the old terms will prevail.

A couple of weeks ago, we revised our terms of use hoping to clarify some parts for our users. Over the past couple of days, we received a lot of questions and comments about the changes and what they mean for people and their information. Based on this feedback, we have decided to return to our previous terms of use while we resolve the issues that people have raised.

Discontent and complaints erupted over the weekend when Consumerist revealed the new terms of service and questioned whether Facebook should be able to own all the rights to all the content that users post on its site.

Part of the issue, I believe, is the way Facebook went about changing its terms of service. They did it very quietly, making no public mention of it other than updating the terms on its site. Nothing leads to a swarm of negative attention on the Internet like the appearance of deceipt and abuse of power.

Now Facebook seems to have learned that the old rules of public relations have plenty of application in social media. I’d argue they’re even more important. With Facebook, we’re dealing with the biggest community relations experiment in human history.The key is to win credibility by acting with consistency, integrity and honesty. You need to be prepared to consult broadly, which means you need to be prepared to not like what you hear.

The process can be messy. It can take longer. It might lead to imperfect solutions. But if done well, it should leave you with your organizational reputation (and market share) in tact or strengthened.

Facebook says today that it will consult with its users as it redrafts its terms of service. That process will be more difficult for it today than if they had started with that strategy two weeks ago before posting the new terms unilaterally.  Instead Zuckerberg and his posse violated one of the most sancrosanct rules of public communications: don’t bully communities.

If you’re in a crisis and there’s an elephant in the room, the number one rule of communications is to share your observations about the elephant with your audience. Point out the elephant. Marvel at its size. And if you’re the one who invited the bloody thing into the room, apologize for doing so. Prime Minister Stephen Harper had an opportunity to do just that last night, but failed.

In this case, the elephant was a massive, sweaty, angry elephant stampeding around the room smashing the furniture, but still he ignored it. Canadians are angry at what’s going on here. No one voted for this bizarre and distasteful coalition of Liberals, NDP and Bloc. Had it been an option on the ballot, not even the most religious Dion or Layton supporter can believe it would have won.

But all of that aside, the Prime Minister caused this mess with his hamfisted attempt to kneecap the opposition parties by proposing to take away their financing. In the same economic update, he put off any mention of a stimulus package though he’d promised one just days before. Last night was his chance to apologize for his lacklustre presumption that he had the support of Parliament. Last night was his chance to say he’d withdrawn the party financing measures and that he was sorry for bringing them forward without consultation. Last night was his chance to say he was willing to work with the opposition to ensure this government - the government that Canadians elected - could continue.

But he didn’t say those things and he’s probably going to be trampled by the elephant because of it.

Of course the opposition parties deserve more disdain and criticism. To dress this naked power grab up as the only means to save the economy is to beggar belief. Nobody can possibly believe that having NDP leader Jack Layton and five of his droogs in cabinet will be good for the economy … nobody, except for Jack Layton, of course, whose party has lusted for power for years and been stymied by voters every time.

Layton is now on record saying he started plotting and scheming for this turn of events even before this Parliament began sitting. He wants his turn to spend the public purse. His plan has always been to hike taxes on our corporate sector and to give away billions in social spending. That approach, in our current economic crisis, will be a two-headed monster that will devour any economic advantage Canada currently has.

Liberal leader Stephane Dion wants his turn to rule and he has the side benefit of being able to dig a knife into his archrival Harper before he’s forced to step aside (even his own party doesn’t want him as PM). And Bloc leader Gilles Duceppe has a Cheshire Cat smile as he covets veto power on budgets that will no doubt deliver untold billions to Quebec.

In this crisis, the best way out is for Harper to recognize that he is the lightning rod. What is happening on both sides is not rational behaviour. It’s turned into a petty, partisan, personal vendetta against him. He must apologize for his behaviour first. And if he can’t ratchet down the rhetoric and get Parliament working again, then he must also consider resigning to defuse this situation. What a shame, because he is the best one we have to lead us out of the current economic crisis. Canadians just said as much a few weeks ago in an election.

I’m in the middle of reading The Snowball, the ‘authorized’ biography of Warren Buffett by Alice Schroeder, and it has made me realize what a master of public relations the old mega-billionaire is. I’ll go one further: I would say that Buffett’s razor sharp PR instincts were key to him becoming one of the richest people in the world. The public relations efforts he led saved (or earned) him billions over the years.

But he’s just an investor, you say? He’s a numbers guy. What does he know about RACE formulas (Research, Analyze, Communicate, Evaluate, for those who don’t know) and winning over ‘key stakeholders’ and all that good jargony stuff? It’s because he understands how important one’s reputation is and how hard it is to earn credibility.  In his words: “it takes a lifetime to earn a reputation, and five minutes to blow it.”

One of the best examples of his PR instincts came from the Salomon Brothers scandal of 1991. Buffett had parachuted in a few years earlier as a white knight investor to save the firm from a hostile takeover. With eerie echoes of today’s financial mess, Salomon was a brash, bullying investment bank that had run afoul of regulators by trying to corner the market on treasury bonds. When the scandal broke, Salomon was in a crisis to survive. Leveraged to the hilt, its lenders were calling its loans and the bank had to unwind huge investment and derivative positions around the globe. It looked as though the bank would fail and that a global financial crisis would ensue (sound familiar?).

As a board member, Buffett had been insulated from the shenanigans of the bond traders, and was the only person close to the situation who had the reputation and experience to take the helm of the sinking ship. He did so reluctantly, but he recognized that the credibility he had built so preciously over 50 years was about the only thing that could steady the bank.

He immediately held a news conference where he told all. He sat there for more than an hour taking question after question after question. The reporters were spent before he was, but he left no room for misinformation or obfuscation. The effect of his performance was to take the air out of the sails of the newshounds who were hunting for injured, scandalized fat cats. He talked about the wrongdoing. He expressed his huge disappointment with it and broadcast loudly that the old culture of Salomon would change immediately.

Then he also decided to cooperate so closely with investigators that he even waived attorney-client privilege for the firm so anything its lawyers discovered would be shared with regulators. Now, that’s transparency. Finally, he took immediate action to change policies (including compensation policies) at the bank, fired people who had to be fired and told everyone that the old ways were over.

In the middle of the storm, this is how he dealt with his PR firm:

Everything at Salomon was turned topsy-turvy as the new culture of openness went into effect… Buffett walked into a room at 7 World Trade Center for a meeting. Someone, acting on autopilot, had hired a new public relations firm. Around a large square table, two dozen people sat waiting for them. Some worked for Salomon, but most were public relations people and lobbyists who were billing by the hour. Buffett listened for fifteen minutes as they described how they wanted to manage the crisis. Then he stood up. “I’m sorry, but I’ve got to excuse myself,” he said. He leaned over, whispered in [lawyer Ron] Olson’s ear, “Tell them they won’t be needed,” and walked out of the room.

“It isn’t that we’re misunderstood, for Christ’s sake,” said Buffett afterward. “We don’t have a public relations problem. We have a problem with what we did.” (page 602)

I disagree with the last quotation… he did have a PR problem, but I agree that he didn’t need help to “manage a crisis.” He knew what to do. It was his reputation on the line and, at that moment, he was Salomon Brothers. I’d love to know what approach the firm had  pitched. Not that it would have mattered. Buffett was already following the perfect crisis communications plan. He did, however, need his communications and PR people to carry out that plan.

CEOs and business leaders should take note of this, as should public relations people. It is a perfect example of why it’s so important for a CEO to understand intuitively what needs to be done to protect a firm’s reputation. The first step is to build a good reputation in the first place. Be honest. Be credible. And do your thing.

In the end, Buffett’s approach to the crisis saved the bank, saved thousands of jobs and billions in shareholder equity. It burnished his reputation as a corporate do-gooder further.

I’ve worked with and for quite a few business leaders here in Winnipeg and, judging from what I’ve seen, more than a few of them could take lessons from this on how to relate to their publics. I remember one episode where I had to explain gently to a senior executive why a ‘no comment’ response to a potential crisis in his organization was the wrong approach. If I’d had The Snowball with me that day, I’d have liked to have thrown it at him.

As the country recovers from an uninspiring federal election campaign, I’m left wondering whether the Tories lost the election by trying to be too careful.

Much has been made about Stephen Harper’s controlling nature. As the leaders criss-crossed the country, it became very clear that no one other than Harper would be speaking for the Conservatives. Funny that, when he had more than 300 candidates. Only Finance Minister Jim Flaherty was permitted a microphone and that was only due to the extreme financial crisis that boiled over during the last two weeks.

Local Conservative candidates in Winnipeg skipped all candidates meetings. Trevor Kennerd - by most reports a decent guy with a good head on his shoulders - was attacked by critics who labelled him an extreme social conservative. Yet he did not respond in any substantive way. Minister of Agriculture Gerry Ritz even went so far as to make the media wait outside in the cold on election night rather than inviting them in to his headquarters as is the tradition. According to the CTV reporter last night, she was told he’d deign to give the media three minutes at the end of the night.

My theory is this kind of micro-management by the Prime Minister’s Office probably cost them their coveted majority. Preventing candidates from debating and discussing the issues is against democratic principles. It breeds mistrust, and acts contrary to the creation of a credible national party. Leaders need to trust their people; they need to be proud of their party and allow their people to do what they’re supposed to do; and they need to cultivate future leaders.

What I fear, however, is that Harper believes his team was too weak and not ready for primetime. He hoped he could skate through a few weeks without anyone really recognizing the lack of bench strength. We don’t know that for sure though and won’t until the Conservative leadership allows its MPs and candidates to have their own points of view.

What I find most perplexing about the muzzling strategy is just how impossible it is to control messaging this much in a blog-a-day, twitter-filled world. All it does is allow your opponents to frame the debate and position you as untrustworthy.

I’m not hopeful.

Political campaigns make for some interesting studies in communications theory and issues management. Take the case of Trevor Kennerd, former football player and current Conservative candidate for Winnipeg South-Centre (which happens to be my riding).

Twice in the last two weeks, Mr. Kennerd has been ambushed by critics trying to tar him as an extreme social conservative, anti-abortion advocate and homophobe. If he were running in rural Alberta, he might just cheer that kind of characterization, but he’s running in what is probably the safest Liberal (and liberal) riding west of Ontario. It’s Lloyd Axworthy’s old riding; the only riding in Western Canada that remained Liberal in the Mulroney landslide of 1984; and one that’s been held quite comfortably Liberal likely since the Tories hung Louis Riel.

The Conservatives have made Liberal incumbent Anita Neville a target and have flooded the riding with pamphlets for the past two years trying to soften up her support. They recruited the well-known Mr. Kennerd earlier this year and local media were starting to talk about the possibility of an upset.

Then came the first blow. It seems Mr. Kennerd accepted campaign financing from an anti-abortion group. I don’t know if it’s true or not. Mr. Kennerd didn’t answer the charge in the media. He said nothing (as far as I can tell anyway).

Then the next blow (see Gordon Sinclair’s column here). A gay and lesbian group dug up an old letter that Mr. Kennerd and his wife had written to the Winnipeg School Division in 1999 blasting plans to use the classroom to fight discrimination against homosexuals. This time, his campaign responded, but only with a written statement which didn’t deal with the central issue, the accusation of bigotry.

I don’t know what Mr. Kennerd truly believes. That’s not why I’m writing this. From a pure communications perspective, he did himself a great disservice by remaining mum and not responding quickly and directly to the attacks. Instead, he let his opponents and critics position him as a man with views that many in this riding would consider intolerant. By not responding, he missed the opportunity at air time and ink to refute and reposition.

In issues management and branding… you can never let your opponents position you. You have to position yourself. As a marketing guy, he might have followed the examples of the advertising world in this regard. Witness Microsoft’s recent I’m a PC advertising campaign aiming to do just that versus Apple.

Okay, okay, it’s starting to seem like I’m picking on the Winnipeg Police Service. But I can’t resist pointing out that they are reaping what they sowed in their current PR battle about the case of the stolen camera card. A local man is accusing the police of confiscating his camera’s memory card after he refused to stop taking photos of a police takedown of a couple of ne’er-do-wells.

After the police service’s recent display of selective memory (what many have called dishonesty) on the witness stand at the Taman Inquiry, is it really a surprise to see the service is having a hard time getting people to believe its side of the story? (Police say they didn’t take the memory card.) This is how credibility affects performance of organizations. This crisis of confidence is far from over for the police and that is a crying shame because most of the cops I’ve met have been straight-up ‘good guys’ trying to do what’s right for our community.

Sound public relations is rooted in credibility and trust. If they’re missing, it doesn’t matter what you say… no one is going to believe you.