Archive for August, 2017

Skin in the game: ‘I’ and ‘We’

August 7, 2017

Investors like to know a CEO and other leaders have “skin in the game” – a personal stake in the company’s success in creating value. Now a study by accounting profs at Tulane University suggests that reassuring investors is as simple using the first person on conference calls.

Described in today’s Wall Street Journal (“CEOs’ Simple Trick on Earnings Calls: Saying ‘I,’ ‘We’ and ‘Us’”), the study of investor psychology “found that investors leave with a more positive impression—regardless of a company’s results—when managers use personal pronouns such as ‘I,’ ‘we,’ ‘my,’ ‘ours’ and ‘us,’ or what the researchers refer to as self-inclusive language.”

The study takes two approaches: Analyzing more than 50,000 earnings-call transcripts with a textual-analysis tool, the researchers found that market reactions to the calls were more positive when executives used self-inclusive language. Separately, more than 250 people were asked to make investment decisions after listening to simulated conference calls on a fictional company, Webtex – some using “I/we/us” language and the alternate version referring to “Management” or “Webtex.” First-person language won.

Some companies like to refer to themselves in the third person – as if humility requires saying “The company” or “Management” did such-and-such. Worse yet, they’ll use the passive voice: “Full-year earnings are expected to be $1.80 to $2.00.”

I’ve always thought that using “We” or “Our team” is stronger, allowing management both to take credit for accomplishments and to acknowledge shortcomings. It’s not a matter of ego – it’s a way to affirm that we’re accountable. We have personal skin in the game.

© 2017 Johnson Strategic Communications Inc.