In the world of corporate finance, bad news can hit at any time. As much as we are trained to prepare, there will always be difficult situations that need to be addressed, and as CFO, it’s usually my job to be the bearer of bad news to the CEO, the board of directors and investors. While it’s never fun to deliver bad news, especially to the disappointment of investors, I learned early in my career that facing issues head-on is the best way to manage them, and that proactive communications about financial issues builds credibility and successful long-term relationships.
My first experience as a finance chief was working for a bank holding company in Louisiana. The company had been on a successful growth track for many years, but shortly after I started the shifting economic environment caused a sharp downturn in performance. The company’s customers were heavily dependent on the success of oil and gas exploration, and while the bank was making good decisions, it could not avoid a sharp decline in revenue and a steep increase in loan losses.
While it was a very stressful and difficult situation, it was also a great learning experience. One of the best practices I learned during this downturn came from the company’s CEO. He taught me that when there’s less than good news and it seems like things are going down the tubes, the first reaction is usually to duck and cover and wait to return calls to investors. But, as I remember quite vividly, our CEO called for a different approach.
He advised me to step-up our investor relations efforts and meet the issue head-on. We picked up the phones, made calls to investors with news they didn’t want to hear and dove in head-first. Our investors’ reactions were priceless. They actually appreciated our approach and it ultimately helped differentiate the company in their view. This tactic helped us weather a tough period. We improved our reputation and built long-term relationships with key stakeholders from ratings agencies and regulators.
What I came to understand from this experience is that when things go wrong and people are left to their own devices, they will assume issues are worse than they appear. That is why it’s so important to be candid and visible, especially as the CFO of a company. Be quick to return calls and emails, be open to meeting face-to-face, but be conservative with what you promise. In tough situations it can be easy to overpromise when attempting to correct a situation. Try and minimize the current damage, and discuss what can reasonably be done in the short-term — and start to move on.
These are the principles that I have brought with me to my current position as CFO of Intuit. At Intuit, we believe in integrity without compromise, and our philosophy is to not only let investors ask us questions, but also to ask them questions. What part of our story rings true to you? What causes concern? You must listen fearlessly to what they have to share in order to gain valuable insights and develop a strong relationship.
At Intuit, we employ a proactive approach to investor relations. At our annual investor day, the transparency starts from the top down. Each year our CEO, Brad Smith, kicks off the day telling our investors what worked well and what didn’t. I’ve had investors approach me at these events surprised that we are so willing to share the bad with the good. Many of these analysts attend various investor days on a regular basis, and they are accustomed to the pep-rally style, in which news is always “great.” While we love being able to share our wins and accolades for what worked well, we’re always upfront and give equal weight to what didn’t. Humility goes a long way in our book.
CFOs must expect that they are going to hear things they don’t like and encounter problems they can’t always fix. It’s the CFO’s responsibility to tell investors when things don’t turn out as planned or when they go wrong — for reasons that could have been controlled and reasons that couldn’t. They are not fun conversations to have, but you will gain more credibility and build better relationships if you face the music.
Remember to be candid about your problems while being realistic about how big your problem is – and always end a meeting by telling your investors what you’re going to do to fix it. Put your arms around it, embrace it and keep pushing forward so that investors can clearly see beyond to a strong outlook for the company.
Neil Williams became Intuit’s senior vice president and chief financial officer in January 2008. He is responsible for all financial aspects of the company, including corporate strategy and business development, investor relations, financial operations and real estate. Before joining Intuit, Williams was the executive vice president and chief financial officer for Visa U.S.A. Williams concurrently served as chief financial officer for Inovant LLC, Visa’s global information technology organization.
Williams is a member of the board of directors of RingCentral, a provider of cloud business communications solutions, and Amyris, an integrated renewable products company.