3 Questions Every CEO Needs to Understand to Communicate with Investors
Communicating with investors is one of the most important tasks CEOs need to master. But strong CEO communications might not be beneficial only for the reasons you expect.
All companies want to hire charismatic leaders with strong communication skills. What you might not realize, though, is that a CEO’s communication style and presence can actually impact corporate value. According to a 2020 study, companies led by a CEO who communicates effectively, better withstood the initial negative share price impacts of the COVID-19 pandemic.
Of course, communicating with investors takes a special touch. Investors are a tough audience. The most successful investors approach new investment opportunities with healthy skepticism. And how CEOs respond to skeptical investors is key. Investors look for authenticity, authority, and credibility.
In our article for the Harvard Business Review, Audacia Strategies Partner and CEO of Green Room Speakers, Sarah Gershman and I distilled our advice from 20 years of experience working with executives and investors to three core questions. Here, let’s look at strategies CEOs can implement to better connect with investors.
1. Is the CEO confident, without being overconfident?
Investors want to see a CEO who has confidence in their company without being blind to the real challenges they are facing. We like to call this “reasoned confidence.” An overly optimistic presentation runs the risk of losing credibility. As one investor put it, “Don’t be a LEGO-movie leader telling us that ‘everything is awesome.’”
Reasoned confidence is especially critical during specific types of CEO communications, especially crisis communications. Feeling overconfident during a crisis can lead to over-promising or what I like to call the Top Gun Problem: “Your ego is writing checks your body (or in this case, your business) can’t cash” (and with the release of the new Top Gun: Maverick, this reference is more relevant than ever).
To avoid over-promising during a crisis do the following:
- Triage: You can’t put out all of the fires simultaneously. Instead, you need to prioritize carefully and make hard decisions about where to distribute your attention. An investor relations professional can help you with this.
- Be transparent: It’s important to set expectations with investors – and other stakeholders! – during a crisis. But if you try to do this in a way that could be perceived as a cover up, you’re digging yourself deeper. Be honest and up-front about issues and what you don’t know.
- Continue to monitor the situation carefully: Your initial statement is only the beginning. You next need to implement the crisis plan and follow through on your commitments. The absolute worst outcome after a crisis is for a new crisis to develop as a result of mishandling the original crisis.
- Keep internal communications open: It’s critical to maintain an open dialog within your company, especially during a credibility crisis. In addition to stabilizing the team when they can feel in freefall, employees are your frontline communicators to customers and business partners.
2. Is the CEO a straight talker?
In addition to being overconfident, CEOs may overcompensate by trying to gloss over the truth or talking in circles. Say it with me: More words does not equate to better outcomes. We often work with CEOs to ensure that they use plain language and give the news to their investors straight.
Further, while strong preparation is crucial for investor presentations, it is possible to over-rehearse, over-polish, and completely forget about connecting with your audience. An overly polished presentation can leave the audience wondering whether you’re simply telling them what they want to hear.
Investors want to feel seen and heard in a way that sounds authentic and credible. It’s time to get human. Here’s how:
- Think like a reporter: Journalists are trained to give the who, what, where, when, and how of a story in the first sentence or two when reporting on a story. Replicate this tactic by getting your communications teams together (or go outside of these departments for a different perspective) to brainstorm.
- Dump the buzzwords: Buzzwords do more than whitewash the stuff we don’t want to talk about. They also obscure your message and make your organization seem less authentic. If you confuse investors with jargon or industry terminology, they will ignore you.
- Get vulnerable: If you’ve faced a genuine struggle that has made you rethink your company, now may be the time to pull it out and share what you learned. Don’t be afraid to step back from the spreadsheets and share your bigger vision with investors.
- Step away from the webinars: The formality of webinars can result in investors feeling totally disconnected. Consider how you can incorporate less formal discussions, roundtables, open mic Q&As, etc. While it may make sense to give a short written statement or update to kick off an investor meeting, listening to written remarks being read for any longer than 10-minute intervals is probably too much to ask from those on the other side of the camera.
3. Do they know how to listen?
Sure, as a CEO, you likely know how to talk. It’s tough to become a successful leader without having the ability to communicate your vision with others. But, how good are you at listening?
Listening is one of the most undervalued skills of CEO communications and a CEO who lacks the ability to listen happens to be one of the biggest red flags for an investor. For CEOs who master the art of listening, however, answering questions from investors can be a great way to boost your credibility. Every question expresses a need, and your answer should show that you hear what’s behind the question.
A question about your research and development investment strategy, for instance, may actually also be about whether an investor can trust you with their money. If you can’t suss out the deeper need, then you may need to ask for clarification before attempting an answer.
One way to make sure to prioritize listening is to run a murder board before the presentation. To make sure you’re prepared for investors, you’ll want to call in your toughest internal financial analysts and encourage them to live out their wildest inner Shark Tank dreams. Assemble your investor relations murder board and have them begin coming up with “tricky” questions regarding different angles on your message and the numbers.
For example, suppose your firm calls for 10% year-over-year growth. That sounds amazing to your team, unless your biggest competitor comes out with an expected 15% growth rate. Now you’re behind in an investor’s eyes. What does it mean for your business and key competitive differentiators?
This type of preparation can remind you to listen closely to the question and its intent, focus on the facts and not speculation, and practice answering in a way that connects with the audience.
There’s no doubt investors are a tough audience. We have found that the best investor presentations happen when CEOs stop focusing on their own performance and instead speak to investors using reasoned confidence, straight talking, and masterful listening.
For more tips about how CEOs can prepare to answer these three core questions, read the original article in the Harvard Business Review. And if you’d like to learn more about how Audacia Strategies can help you prepare for your next investor meeting, schedule an initial consultation.
Photo credit: Professional Woman Standing In Boardroom Giving Speech To Team by Jacob Lund Photography from NounProject.com