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How to deliver bad news to your Board (or anyone else)
By Lauren | January 24, 2008
My last post discussed a recent article in the Wall Street Journal that contained this warning: CEOs who sugarcoat bad news when dealing with their Boards run the risk of losing credibility over time. It’s never fun to be the bearer of bad news, but here are some tips that can help management tell the hard truths without too much pain:
1. Don’t dawdle. Once you know you have a problem, make disclosure a priority. Figure out what’s happened and what the likely consequences will be, then get the message out to your Board. (If the problem may involve a lawsuit, make sure to include your lawyer in the team that develops the message.)
2. Put the problem in context. It’s not sugarcoating to make sure your Board gets an accurate assessment of the problem. If your company lost ten million dollars in the last quarter but that loss represents less than 1% of total assets and you’ve already recouped it in this month’s sales, give the Board the whole story. If your sales are down due to a general slump in your industry, make sure the Board knows that your competitors are struggling too. The idea is not to minimize a genuine problem, but to give the Board an honest perspective on just how bad the problem really is.
3. Present solutions if you have them. The act of defining the problem for presentation to your Board has probably given you some ideas about how you’re going to manage it. If there’s clearly only one solution, tell your Board what you’re planning to do. If there are several potential ways to address the problem, present them and talk them through with the Board. If you haven’t been able to decide how to handle the problem, tell the Board that and invite suggestions. If you make make the Board a partner in the problem-solving process, you’ll have the Board’s support going forward.
4. Discuss, don’t defend. If your actions created the problem, getting defensive won’t change the past. If they didn’t, you have nothing to be defensive about. Either way, stay calm and try to recognize that questions and expressions of concern from Board members aren’t necessarily criticisms of you. Even if Board members become hostile or upset, keeping your cool will serve you best in the long run.
5. Keep in touch. Once you’ve settled on a course of action, keep the Board informed as you implement along the way. (Again, if a lawsuit is pending, keep your lawyer in the loop.)
Management is responsible for keeping the Board informed, and Board members have complementary responsibilities for dealing with the information they receive. Next time, we’ll talk about the things Board members should do to encourage CEOs to tell bad news like it is.
Topics: Business Ethics, business communications |