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Editor’s Note: March 24 Ram Charan and other experts will share a new, multi-disciplinary approach—from communication to pricing to cost cutting—to help your management team fight inflation and win. Join us >
The CEO’s first and most important task is to communicate, communicate, communicate. Once is never enough. Repeat the seriousness of the challenge confronting the organization and the urgency with which that challenge must be met with total candor and honesty and credibility, both internally and externally. The CEO is both an educator, ensuring the senior team understands the challenge and consequences of failure, and a social engineer, overseeing the coordination of the various functions so information flows freely and quickly from every silo, acting as a lever for the culture. Management must counter confusion and anxiety created by the media, particularly social media. This is of great importance.
When communicating, there are three essential principles to follow: Did the recipient receive the message the way it was intended? (Measure that.) Did you get the recipient’s reaction to your message? (Be sure.) What new behavior of the recipient did you discover? (Find out.) True communication is not a one-way PowerPoint presentation in which the recipient absorbs less than 20 percent of the message.
The CEO can start by rallying the team. Say, “We’re going to win in this new environment,” and communicate how you’re going to win. Yes, you’re going to take some costs out. Yes, you’re going to change some KPIs. And you’re going to have to have information come to you unfiltered from the ground so that you know what is happening with customers and with your cash position. Make sure this message is clear—no filtering, no hiding bad news. Assure employees that you are not just being defensive and making shoot-from-the-hip decisions on narrowing the focus and cutting costs. You must continue to communicate about innovations, new products and new ideas, too.
Working in conjunction with the CFO and CHRO, the company’s internal communications people should create a website or dashboard accessible to all employees and updated at least fortnightly that presents an analytical picture of the company, its competitive position and the steps it is taking to execute its strategy. It should also include macroeconomic news, such as Federal Reserve policy statements and actions and relevant international news, including price increases in various companies and industries to educate employees and partners, giving them the context of your own company’s moves. It may be appropriate to establish a hotline to respond to employee concerns and queries.
Externally, people in charge of internal and external communications need to adopt an attitude of more transparency to reduce anxiety within the company and build a relationship of trust with media outlets.
Communications staff should be proactive in establishing links to both national and local media, demonstrating that the company is methodical, solid and has a realistic view of the environment in which it is operating. The media is confused about the economy, so the communications people should work with reporters and editors to demystify the company’s situation and how the company sees the current economy and be able to clearly show how the company is working through these challenges.
At public companies, the firm’s IR people must learn in detail from the CFO and others how the company’s performance indicators will be affected by inflation and an economic slowdown and must convey that information accurately and fully to investors. Any misstep that hints at cover up or distortion will be disastrous in the investment community.
Unfortunately, most IR people’s understanding of what is going on in their industries and more globally is very inadequate right now. That does not allow them to communicate clearly what—or why—the company is doing what it is doing in the context of the larger world.
The IR person must be able to do this, to communicate clearly and unambiguously to the investment community how the company is positioning itself. They need to build a record of outcomes from the company’s actions, showing, for example, where price increases stuck and where they didn’t and be able to explain the company’s next moves as a result of that.
IR should be attuned to the investment community and able to seek out big investors who understand the company’s situation and its prospects in the post-inflation world and are willing, as a consequence, to invest in the company.
The trust part of investor relations is very important now. Be sure your IR people are spending 80 percent of their time with the buy side. Buy-side people need to know that an inflationary period is here and what you’re going to do. Your IR person has to be savvy, to extract information from investors about what is really happening in the industry. The subsectors investors are moving toward will tell you how inflation is playing out across the industry and economy.
It is imperative to have your IR person—and perhaps you, as CEO, as well—reach out to critical investors to understand their assumptions about the economy and the industry they operate in. Ask them for their views. Then, educate them on yours. Say: “I’d like to give you our worldview of the industry under inflation.” Getting at the reality of what the buy-side people are thinking is going to be the most important thing an IR person can do to help the company.