Four times a year, around earnings season, the job of a public company CFO and that of a New York City maître d’ don’t seem too different.
It all comes down to managing expectations.
The staff at Clinton Street Baking Company are so good at it they can make you feel happy to have waited “only” an hour and 45 minutes instead of the two hours originally quoted. That’s an hour and 45 minutes. For blueberry pancakes.
Likewise, the more transparency management can offer information hungry investors, the more leniency they can expect from the markets. It explains why Company A’s stock price gets pummeled even after reporting healthy earnings, while Company B escapes unscathed despite announcing a 300 million dollar impairment charge. The CFO of the former gave analysts little in the way of future outlook, whereas the latter had been guiding towards a goodwill write-down for several months, and laid out clear forecasts for revenue growth and margins.
Knowing how to manage expectations is one of those skills no one gives you much credit for when things are going well, but whose importance becomes painfully clear when botched. Think back to your last well-managed project experience. Chances are it was characterized by frequent and open communication, realistic deadlines, and judiciously imparted praise and constructive feedback.
It’s actually quite astounding the kinds of things the human mind can come to terms with as long as it’s given fair warning. Don’t abuse people’s ability to handle the truth, but don’t discredit their understanding either.