All Blogs >

June 01, 2022
4 minute read

Communicating bad news when you miss your growth plan.

placeholder
Written by Alan Priest
growth plan

No one likes bad news. It’s hard to hear and even harder to deliver. As a finance leader, you often have the unenviable job of delivering news of a missed forecast to the leadership team and the board. However, any growing company is going to take hits. Although your instinct may be to fear such losses and the presentations that follow, learning to accept them as part of the business cycle can take the sting out of sharing painful information.

The classic question of “who’s gonna tell ’em?” is often met with darting eyes or eyes glued to the floor. Unfortunately, those left to present gloomy reports can vacillate between self-consciousness and tactlessness as they attempt to get through an uncomfortable presentation. Avoiding this takes planning and perspective.

Multi-ownership in missed forecasts.

Part of your preparation is to understand accountability for missed numbers. But this is not creating a finger-pointing exercise. Getting the full details of missed forecasts includes looking into the teams responsible and what impacted their performance. This is not an attempt to identify incompetency, which will show up in many other ways, but rather discover whether those responsible were facing temporary or sustained stumbling blocks, which can help inform future planning.

Since, in most cases, a missed forecast is multi-owned, the responsible thing to do is look at it as a team. What happened? What can we do differently? How do we course-correct going forward? Inevitably, missed forecasts means a loss of credibility, so it’s important to find a way to quickly rebuild that loss. One strategy is to honestly relay enough details to demonstrate command of the situation without sharing every painful bit of minutia. Create a balance of presenting bad news with enough detail to minimize the pain against glossing over important details and appearing unaware of the situation.

Delivering the bad with the good: A blended approach.

When presenting to the board, creating harmony between the good and the bad news can make reporting a lot easier. It’s helpful to start by summarizing the quarter, putting all the highlights and lowlights together to show a blend of situations. It’s rare for a quarter to be all bad, and even more rare that it’s all good.

Don’t belabor the bad news or make it the focus of the meeting — address it appropriately. Summarize your findings, report within the context of all of your news, explain what happened, then move on to next steps — which are far more interesting.

Don’t just blame external factors — break apart the forecast and show the details.

External macro factors can negatively impact any business forecast, but professional teams adjust forecasts according to these events as they occur during a quarter. The important part is not just recognizing the micro and macro factors that impact your models — it’s understanding how to make adjustments. Board members know economies affect sales, they always have. Communicate how quickly you identified the situation and what adjustments you made, or are in the process of making, to deal with external factors. Never capitulate that the quarter was due to the economy, it begs the question, then why are you here?

The importance of next steps and circling back next quarter.

Once you’ve provided a detailed account of what happened and identified the various contributing factors, the next step is to explain how you will fix it. This is a challenging part of the process. It’s tempting to play the role of a hero on paper and paint a rosy picture that may just lead to further disappointments in the future. Even if you can check your own instincts, the board or the leadership team may ask things of you that you know aren’t possible. Prepare yourself to communicate limits honestly and resist pressure to build impossibilities into forecasts. It’s one thing to miss forecasts in a single quarter, but quite another to repeat the same miss the following quarter.

Next quarter, circle back and show the board what you did to fix things. Reminding them of what was done provides continuity to your findings and demonstrates a focus on the bigger picture. It creates cohesiveness in your strategies and rebuilds credibility in your forecasts.

Transparency, team mentality, and leadership accountability.

Fast and straightforward delivery of bad news always works best. In business, the earlier you share bad news, the more time you and others have to respond to it and keep it from getting worse. But don’t rush to report without gathering the facts. This requires a deliberate focus on the communication strategy of the finance team. Encouraging openness within your department and the others you serve means that all information flows freely throughout the quarter, not just at reporting time. You want the maximum time to make adjustments and communicate up the chain when necessary.

With a culture of openness and transparency, you have a much better chance of meeting all your numbers because the whole company knows them and the whole company talks about them. There’s a balancing act of how much to share, but having everyone know your sales goals is always a good thing.

As a leader in finance, you ultimately own the forecast. The responsibility of others in a missed forecast is helpful to know, but, as a leader, you need to acknowledge your own accountability and focus on what you can do differently in the future. It’s not necessary to fall on your own sword, but leadership matters most in tough times. Move swiftly and rationally from analysis to working on fixing the problem. With a balance of transparency, teamwork, and active leadership, combating bad news can be easier to communicate and put behind you so you can get back to running the business.

Alan Priest

President at ACP Strategy Group

Alan Priest is a CFO advisor to SaaS start-ups through his company, ACP Strategy Group. He served as CFO at Anaplan and Nutrient Foods. Prior to that, he held various FP&A positions in the High-Tech industry. He is a graduate of the Georgia Institute of Technology and Harvard Business School.
Off the Ledger

OFF THE LEDGER:

Finance & Accounting Slack Group.

Join to connect with other finance professionals building great companies. Ask questions, provide your perspective, join the conversation, find resources.

Apply now

Are you ready to achieve spendlightenment?

lines with ball

Other posts