Five Tips For Communicating Bad News

For many years, Financial Profiles has been involved in helping boards and management teams communicate on a wide range of difficult topics or bad news, ranging from significant earnings disappointments to unexpected executive departures. Here are a few key considerations:

• Transparency and complete information are critical; provide as much information as you can, but avoid making statements that you will need to retract or change in the future. Carefully craft your message or response. In the absence of a coherent response, you lose control of the story as others fill in the missing pieces

• Bad news does not usually get better with time; if it’s material, you need to get it out there. In any case, bad news should be announced as soon as all of the facts are known and the situation has been evaluated. The goal is to avoid the age old credibility buster: “When did you find out about this and why didn’t you tell us before now?”

• The best way to deliver bad news is with a solution – an action plan for fixing or moving beyond the problem, including a reasonable timeframe and milestones. While you can’t change history, you can impact what is being done to fix the problem and what policies or protocols are being put in place to make sure the problem doesn’t occur again

• Audiences are interconnected. Think through and prepare for the impact of bad news on all key stakeholders – investors, employees, customers, regulators, vendors, etc. For example, news about a company sale may be well received by investors looking for a quick return on their investment, but would be negative news to employees who may lose their jobs

• Finally, don’t forget to turn the bad news into good news by communicating how you addressed a challenging situation and moved beyond it. Take credit for positive outcomes. This will help shore up credibility