Happy new year. A chatty column in the Financial Times, “Three cheers for new year trepidation,” touches on a central issue for investor relations in 2012: How should companies communicate with shareholders about what we can’t foresee?
Citing the obvious risks in trying to predict what will happen in a fragile global economy, FT management editor Andrew Hill notes that many companies are simply waiting, hoarding cash, holding off from embracing any particular scenario. But, he adds, mere expressions of caution don’t do much for their investors:
As executives’ reluctance to commit themselves grows, so the appetite of outsiders to know about their future plans increases. Investors are now far more interested in the “outlook” section of the company report than in the backward-looking summary of the historic results. But in their public statements, most chief executives hide behind a “lack of visibility”, adding to the general nervousness.
Hill says CEOs should “embrace uncertainty” in 2012 while at the same time communicating what they can see in the current situation:
Business leaders need to count on their ability to be the one-eyed man in the land of the blind – a proverb recently recast by Richard Rumelt in his book Good Strategy/Bad Strategy: “If you can peer into the fog of change and see 10 per cent more clearly than others see, then you may gain an edge.”
Tags: CEOs, Forecasting, Investor relations, Recession, Strategy
January 4, 2012 at 11:29 am
Vision is a critical element of leadership and its expression should not be stifled because CEO’s are unwilling to take risks. A better question to ask within the context of this post would be just that, why are these highly educated men and women afraid to tell us what they are thinking?
To borrow another analogy, if a boat’s captain is in dangerous shoals does s/he have the luxury of just taking their hands off the wheel and claiming lack of visibility makes steerage irrelevant?
At these times, we look to experience to help guide us even when it cannot plot an exact course. Executives and their teams must be quick to course correct for real mistakes before they get too far along. And herein lies the soft underbelly. Most organizations cannot get out of their own way, especially when peer pressures drive them into the pack whereas their own vision could very well enable them to lead it.
January 4, 2012 at 12:11 pm
Good thoughts, Mike. Keeping the hands on the wheel, making those quick course corrections and explaining this to investors seems a lot better than closing your eyes in rough waters.