A common response from businesses during an emerging crisis is to sit tight and avoid communicating about the issue in fear of making the matter worse. At 7.21pm (ish) last night that became the wrong response, with Alan Kohler leading the ABC's finance update with the 'hit to super fund members'. Not the oil price war or largest equity market falls since the GFC.
Some of you have NOT turned your thoughts to stakeholder communication beyond your own people and the ‘first wave’ of inbound requests from your clients - it’s now timely to start to consider this if you haven’t.
While getting the timing right on proactive communication is hard, we almost always favour going early rather than late. There are many reasons for this some are:
1. The media are not the right people to help your investors understand the impact to their investments and guide their choices
2. While you feel you have nothing to say because of uncertainty, investors gain comfort and increase their loyalty when you 'show up' in times of crisis or uncertainty
3. Leadership visibility ONLY drives reputation in a crisis. And the only time you’ll gain reputational credits for communicating in a crisis is if you do go early. On the other hand the downside of being late can be very high - back to point 1 above.
By sharing our experience around Coronavirus response management, plus the learnings of other event-drive market disruptions such as 9/11 and the GFC, we can help lift the standard for the whole industry response.
1. Why media is the wrong source of Coronavirus information for superfund members and investors
In the course of our conversations with clients we’ve been asked about communicating with stakeholders around Coronavirus impacts on real and financial assets.
The biggest retail cohort is SMSFs and super fund members. We’re expecting that with the ASX now losing nearly 20% since February 20, the “wait and see” approach has become “not if, when” – wait for regular member comms or send a special communication.
While many funds and advisers will sit on their hands, waiting to be prompted into action by inbound enquiry, we encourage proactive communication, even when a professional investor thinks there’s nothing to say.
Should media determine the response and action investors and superannuation fund members take now? We're guessing your answer would be no.
Research and our own analysis have repeatedly shown media reporting dials up emotive content and doesn’t always replay factual information objectively. The obvious risk is that superfund members reading the media react in ways that cause them long-term financial damage.
The alternative is that they hear regular fact based updates from their own investment managers and super funds, and that these updates, even if not weighty, give confidence, reduce the risk of panicked action and help them make good choices.
Our view, and experience (more than 100 years of experience in the firm) is this…
Leadership is in large part about communication. Good leaders, in these moments, use pro-active communication to send a message in itself. That message is always a version of this:
“Despite uncertainty, we’re leading. We have your best interests top of mind. We’re communicating what we know, and we’ll take action when we have enough information to do so”.
A second part of that message is for your to determine based on your own audiences and clients, and your ability to segment them, might be something like "We expect volatility in markets. In a long term investment horizon such sharp short term movements are smoothed out by longer term gains. On the other hand reacting to volatility can cause investors serious detriment."
Stakeholders such as members, institutional clients and commercial partners, will normally accept and understand leaders and brands not having full information or foreknowledge of what’s to come. They won’t necessary accept or understand leaders not visibly leading when the path forward is unclear.
Large numbers of members, retail direct investors and commercial counterparties are in for bad news. Bad news doesn’t improve with time, and most stakeholders won’t thank you for not communicating despite uncertainty, in tough times, or forewarning them of expected impacts that you were in a position to see coming but they were not. They do tend to reward funds and fund managers by leaving their investments where they are, and behaving in ways that are more considered and less panic-driven, IF their manager or fund communicates through uncertainty. The research shows this, we saw it in the GFC where some clients who did this had either zero redemptions or in one case net inflows, and it’s in every case study of good crisis management. The reason CEOs don’t do it, is fear of getting it wrong or provoking more panic by ‘mentioning the war’.
We’re well past that window now with the ABC news leading their financial markets impact reporting with the hit to super funds balances, not the ASX drop or the oil price war. Those latter two would once have led the finance news, not followed Alan Kohler’s grim super commentary.
2. Market feedback
With a lot of unknowns, and some panic-driven community responses, most clients are erring on the side of muted management and communication responses.
Expectations of recession are very high albeit potentially some of you are predicting a shorter sharper downturn and a bounce back in asset values.
3. Management responses
A. No one is at panic stations but whether or not this is good or bad news depends on your business.
B. Uncertainty means most of you are not racing to communicate – unless your clients are asking for it.
C. Anecdotally hiring, travel, inbound offshore visitors and lease negotiations have all stopped, are being halted or dramatically scaled back. Offshore manager visits, speaking engagements and large events are all being cancelled or postponed
D. Management teams are enacting, or testing, business continuity plans including adapting their BCPs to remote working rather than offsite BCP locations that require their team to reassemble
E. Most of you are trialling or evolving your teams’ capability to work from home
F. Several clients last week instituted daily response meetings of the executive team to address the effects on their own people and clients
4. CEO guidance regarding Coronavirus responses
A. Show up: don’t go ‘dark’ despite uncertainty
In particular, manage expectations -and think through the experience your clients, members or partners might have in weeks and months to come. Keep communicating, even when it’s only to say ‘We’re monitoring the situation as it evolves, and continually assessing what it means for your and us. We don’t believe significant actions are yet in your best interests or ours’.
B. Dial up contingency communication plans and responses now
Consider a separate communication response team to support the management response. The comms team, person or consultant should be charged with stakeholder communication and escalated media, social media and market scanning (aka ‘early warning’ systems) and the synthesis that are essential to trigger, escalate and fine tune both management and communication responses.
C. Lead. Don’t lag. Or worse, freeze
Review your whole-of-business stakeholder analysis and their communication needs if you haven’t already.
Consider impact modelling business wide, and follow that or parallel process it, with scenario planning to inform issue response.
Escalate your management response, if you haven’t already into ‘live response’ mode.
There’s a risk of over- or under-reacting in these moments. This level of issue or crisis management is NOT BAU. Most leaders experience, in their whole careers, a few sharp disruptions, isolated in time, rather than the kind of leadership experience that involves continually managing major issues or crisis. We see varying levels of crisis management ability as a result.
We rarely see clients over-react so the risk we’re flagging here is the probable one - of under-reacting.
There are playbooks, well proven methods and responses in these situations. Lean on those if you have them or seek counsel to help ensure your response is robust and your people’s experience is of having what they need to act with certainty despite the uncertainty.