Bad Financial News? 5 Tips to Deliver the Difficult Message to Your Audience

Whether you report to stakeholders or shareholders, you probably dread delivering bad financial news.

No one wants to experience — let alone talk about — missed earnings, revenue shortfalls, contract losses, budget overages, etc. But they’re potential topics every time you step up to the podium, join the Zoom meeting or make the call.

It’s even more difficult when the bad news can make things worse: For example, a week prior to IBM’s second-quarter earnings meeting, CEO Arvind Krishna published an open letter to investors, warning them of missed goals. IBM stock dropped nearly 25% that day — the worst single day in the company’s history.

Facing Bad Financial News

You don’t want to make a mistake in the delivery, whether it involves stock or not. You want to help the stakeholders or shareholders understand how you got there and, more importantly, how you’ll rebound.

In fact, one corporate communication consultant says Krishna’s approach wasn’t exactly wrong. Although there was some immediate backlash on Wall Street, the early warning wasn’t bad. The execution was, according to Dean Foust, the founder of Inspirent Communications.

“Krishna was right to go early, and no letter, however worded, was going to spare IBM from a drop in the stock price,” Foust wrote in the Harvard Business Review. “But how a warning is written shapes everything after: whether the stock keeps sliding, whether investors believe the future results management gives them, and how much time they allow for the fix to work.”

Getting the Message Right

Foust shared these strategies to deliver bad financial news when results start moving in the wrong direction. They’ll help you curb uncertainty and the assumptions that fill the space when no one explains what’s actually going on.

When you frame the message at the right place and time, you can shape what happens next. You’ll want to:

1. Speak Up Early

Share the news as soon as the facts are clear enough to support it. Gather and organize all of your evidence before you share it. The plan should be to share with honesty, not to wait to shape the message when the timing seems right.

In fact, you want to avoid releasing negative information in stages. You don’t want people to worry more, bracing for the next surprise.

2. Size Up the Problem

While some complained about the timing of Krishna’s financial bad news release, the bigger problem was its lack of detail. He didn’t give size or depth to the quarter’s miss. He didn’t distinguish whether the miss was due to lost deals or dried-up demand — issues with very different solutions.

Instead, you want to show the shortfall against prior guidance or estimates in the first 100 words. Help shareholders or stakeholders see the magnitude year-over-year and year-to-date … before they fill the gap themselves.

3. Don’t Allow Speculation

Anticipate and answer the obvious questions. Different audiences will have different outlooks and questions, so be prepared for everyone’s take.

Even better, bring along backups. They aren’t scapegoats. Ask other leaders to be available to provide context when you explain what the setback means. Again, everyone will have different perspectives, so adding context from different angles will help people swallow the bitter pill.

4. Pair Accountability with a Plan

Be clear about what went wrong. Don’t point fingers. Just explain how internal or external factors impacted the results.

More importantly, explain what you’re already doing and will do in response. If other functions will act to improve the situation, explain their role. Include specific actions and timelines.

5. Cut the Sales Pitch

Show any evidence you have that will help people see the path forward. Leave out promotional, feel-good gibberish that feels phony.

“In a difficult moment, a focused message is more credible than a falsely optimistic one,” Foust warned.