It was bad enough that sales for Ault Inc.'s power conversion equipment had slowed and that the $85 million Minneapolis-based company would have to cut 21 percent of its staff. But for CFO Donald Henry, there was one more issue to deal with: the scrutiny of the media.
Henry was the front line of defense for the firm when reporters from local newspapers came calling, since Ault CEO Fred Green was out of town when the news broke. Henry was prepared, however, because the executive team had spent a full week prior to the announcement deciding not only who and what to cut, but how to explain it. Press release in hand, Henry discussed why the layoffs were occurring, which locations would be affected, and what benefits were expected to emerge. "Spending time on the release really helped organize our thinking, which made it easier to talk to people," he says. And the ensuing media coverage, he believes, was "fair, and very focused on the business issues."
Henry is not the only finance chief being tapped to deliver tough news these days. When JDS Uniphase had to announce a $1.29 billion earnings shortfall and 5,000 layoffs mid-quarter, CFO Tony Muller was the primary source quoted in major newspapers. Likewise Heidi Kunz on Gap's sagging sales this spring and Gateway's Joseph Burke on the PC maker's restated, lowered 2000 earnings. "As the pragmatic voice of an organization, the CFO lends credence to the numbers," says Marilyn Pittman, a San Franciscobased media coach for executives.
It's little wonder, then, that finance executives are crafting press releases in tandem with strategies, and turning to coaches like Pittman to hone their PR skills. "A media interview is slightly riskier than an analyst call, because you can reach a broader audience and have a bigger impact," says Norm Hartman, a former television journalist who has coached hundreds of finance executives on media skills. "If you do a good job, it gives you the chance to advance your own career and your company; if you blow it, it can sink you."
And there are plenty of ways to blow it. For one, because investors often rely on mainstream media as well as analyst reports, inaccurate or incomplete disclosures may leave a firm vulnerable to shareholder claims. There's some relief in knowing the media is an approved outlet for Reg FD compliance, but feeding news to a publication of limited circulation may still leave some investors feeling slighted. Plus, "there really isn't an effective legal remedy" for poor press, beyond corrective statements, which readers often bypass, says Theodore Sonde, a partner at Washington, D.C.-based Dechert, Price & Rhoads and a former Securities and Exchange Commission official.
On the other hand, press coverage can help with marketing efforts and community relations. "As a newly public company in a brand-new industry, it's important to get the story out," says Reagan Y. Sakai, CFO of Crossroads Systems Inc., a data storage provider in Austin, Texas. "We see interviews as a way to educate the market." In a similar vein, Dick Forsythe, CFO of Eggers Industries, based in Two Rivers, Wisconsin, hosts local reporters up to 10 times a year to let the small town know about company initiatives ranging from an ERP launch to employees' community-service projects. "It's not just good for our egos, it helps when we're looking for new employees," he says. "That's our advertising."
THE LAST WORD
While companies can't control what gets printed or aired, coaches say executives can improve their chances of a successful media mention by knowing as much as possible about, for instance, the publication, the reporter, and the scope of an article, including other participants, before an interview. Says Lou Hampton, a Washington, D.C.- based media coach, "You want to reduce the surprise factor." He takes clients through a process of thinking about the questions a reporter might ask and helping them prepare answers that can be related to two or three main themes. "If you can't figure out the three most likely quotes before you go into an interview, you're not prepared enough," he says.
Adds Pittman: "You've got to assume you could be cut off at any moment. That means you've got to get your three points across as soon as you're given the opportunity, without avoiding the question."
It sounds like easy enough advice to follow. But when the corporate agenda clashes with the reporter's agenda, staying on point becomes much harder. Pittman reminds her clients not to get angry or defensive when reporters probe sore spots, nor to get lulled into a false sense of security if the reporter appears friendly. And while other experts may disagree, she advises against going off the record. "The reporter may not use it verbatim, but they can use it to frame an interview a certain way," she says.
Canned responses, however, may provoke suspicion, and can deflate enthusiasm, which is crucial. Hartman says one of his newer clients came to him for help when the company's stock price dropped after an earnings call--despite the fact that the company was reporting good news. Listeners, they later learned, thought the CEO and CFO "sounded really down, and had a hard time believing their positive report."
Still, say the coaches, just being available to the media sends a positive message--even if you're not willing to discuss details of a certain event.
Gregory Gould, CFO of Boulder-based medical-devices manufacturer Colorado Medtech Inc., found this to be true in several recent crises, including a hostile takeover bid and a warning letter from the Food and Drug Administration about violations at one of the firm's facilities. "It's not easy to talk about bad news," says Gould, "but if you don't, the reporter will be forced to fill up the page with someone else's view of it."
In the case of the FDA letter, company executives issued a press release and began responding to reporters within three days, even though they'd decided not to disclose any details beyond what was in the release. "Mostly, I was just rephrasing the press release," says Gould, but the interviews allowed him to head off some initial misperceptions about the scope of the warning, and to discuss compliance efforts under way. The net result: the stock price actually went up slightly the day the story was reported, and held steady in the week following the announcement.
So, is there ever a time to clam up completely? Perhaps. Most media- savvy CFOs say they typically avoid commenting on competitors, short- term stock-price fluctuations, and most personal issues. But in many cases, an oblique comment will serve better than none at all. "There's a very educated consumer out there, and that means there's no hiding from the truth," says Pittman. "You can frame it, but you can't escape it." -- Alix Nyberg
PITFALLS IN PRESS RELATIONS
Media coaches reveal what not to do in an interview.
- Don't lie, misguide, or confuse a reporter.
- Don't repeat a reporter's negative question.
- Don't trash competitors unfairly.
- Don't react in a knee-jerk fashion.
- Don't speculate or respond to rumors.
- Don't get angry, defensive, or cute.
- Don't assume a reporter is your friend.
- Don't use buzzwords or jargon.
Source: Marilyn Pittman and Lise Olson
NICE WAYS TO SAY "NO COMMENT"
- "Our competitors would love to know that, too, so I can't discuss it in this forum."
- "That's a great question but, by law, I can't talk about that."
- "We're not prepared to discuss that yet."