Bad News? The Markets Think Not
Investors are a fickle bunch. The market is rallying on bad news—something new for 2023.
As job cuts make headlines, discussions have focused on how, when and where to inform workers. Salesforce, BlackRock, Goldman Sachs, Amazon, Coinbase, and others have blamed waning demand or fall out from a hiring surge during the pandemic. Regardless of the reasons, the recurring explanation in the press closely follows details listed in the 8-K filing swiftly followed by an apology and more often than not, a thank you by the CEO.
If you find yourself travelling the same path in the coming months, take a cue from smaller companies such as Flexport (a freight forwarder), Verily Life Sciences (a healthcare unit of Alphabet Inc.) and Compass (a real estate technology platform provider) who are traversing their very first downturn. These businesses nailed the five elements of narrative (plot, characters, point of view, setting, theme, conflict, and style) and came out pretty much unscathed by the market.
After its third round of layoffs, CEO Robert Reffkin booked a press tour. Appearing on CNBC’s “Squawk on the Street” he put a positive spin on the story sharing that the latest round of job cuts would pave the way for the company to be free cash flow positive by mid-2023.
The market got the message loud and clear: shares jumped 15% and are up as (of yesterday), 53% YTD.
Bad news, like the prospect of disappointment, is inevitable. It’s how you script it that can make all the difference.
Our 5 Dos and Don’ts for delivering bad news:
Don’t sugar coat it; be direct and get it over quickly.
Do provide a level of granularity and color that inspires confidence.
Don’t talk negatively about the sector or play the blame game unless you can back it up with hard core facts.
Do look to future growth and address how you plan to deliver on the opportunity.
Don’t just talk strategy, but explain in some color how this move is expected to enhance your operating model.
