Core Issues

Glass houses, stones, etc.

Two years ago, we highlighted media coverage of Biovail, a Canadian pharmaceutical company that had filed suit against a hedge fund which Biovail alleged was manipulating information about the company. 

Among other things, Biovail claimed that SAC Capital had spread unfounded rumors to drive down the price of Biovail's stock and reap profits from short positions in the pharma company's stock.

In our earlier story, we said, "The reality is that hedge funds and other short-sellers cannot cause stock prices to decline for anything other than the short term, unless there is a valid reason for the decline."

So we were interested (but not too surprised) to see this in today's WSJ.com:

Biovail Reaches Fraud Settlement; 
Four Executives Face Civil Charges

Crafting a "Sticky" Message

The McKinsey Quarterly has an interesting and useful interview with Stanford professor Chip Heath, who has thought a lot about how top executives can communicate core messages effectively.

Heath's academic training, in industrial engineering and psychology, leads him to conclude: "Leaders will spend weeks or months coming up with the right idea but then spend only a few hours thinking about how to convey that message to everybody else. That’s a tragedy. It’s worth spending time making sure that the lightbulb that has gone on inside your head also goes on inside the heads of your employees or customers." 

We'd add investors and several other corporate constituencies to the intended audiences of sticky messages, but we think his six basic traits of a good message are right on the money.

Fewer companies provide earnings guidance

The National Investor Relations Institute (NIRI) kicked off its annual conference today with a review of guidance practices by member companies.  The survey found that revenue and earnings guidance is provided by still fewer companies today than a year ago.  Last year's survey found a decline, too.

Interestingly, NIRI members whose companies have stopped giving guidance report that lack of earnings guidance has had little impact on their companies' stock.

The survey refutes the perception that discontinuing guidance will adversely affect stock price, increase volatility and be negatively regarded by investors.  The largest percent of our respondents reported an indifferent reaction from both the buy- and sell-side to discontinuing guidance; that the decision had a neutral effect on valuation; the stock is not more volatile; has not experienced unusual shareholder turnover, and has not experienced a substantial change in the short position.

The survey summary is available here.

Perhaps not as clueless as they seem

HBS Working Knowledge, a weblog from Harvard Business School, recently published an interesting interview with Gregory Miller, associate professor at HBS.  Miller  concludes that financial media may not be as clueless as many managers would like to believe.

Miller's findings include the sobering fact that the financial media uncover a large number of corporate financial frauds, even before the SEC finds them or they are disclosed by companies.

One of Miller's recommendations: "I spend a lot of time on relationships with the press, and I would say, 'Think about the fact that the press is going to be there whether you like it or not.' So you might as well develop a good relationship. That means don't try to spin things to them, don't try to use them; rather be honest with them."

A portion of the interview follows:

(Thanks to Poynteronline's Romenesko for the tip.)

No one to blame but ourselves

For those of us who have spent a good portion of our professional lives in meetings -- creative or otherwise -- Jared Sandberg's piece in today's Wall Street Journal may strike a familiar chord.

Per one of Sandberg's sources:

"'There are so many things people do in management because they think it's good, but there's no evidence for it,' says Paul B. Paulus, a professor of psychology at the University of Texas at Arlington. 'Teamwork is one example. Brainstorming is another.' Prof. Paulus conducted research on the number and quality of ideas of four people brainstorming together versus four people brainstorming by themselves. Typically, group brainstormers perform at about half the level they would if they brainstormed alone."

The article cites a number of disillusioned brainstorm participants who label the process "blamestorms" and "coblabberations."

But a strategic planner for whom we have a great deal of respect counters Sandberg's piece with the following:

"These are all good examples of brainstorming sessions that had poor quality facilitation or none.  Brainstorming is a specific, exacting and sensitive discipline, and it's definitely not the solution to all business problems.  Too many people think that you can put any group together, say they are brainstorming, and it will happen naturally.  They are wrong.

"A good, strong facilitator, proper group size, the right people, the correct process and sufficient time are necessary prerequisites to get great results.

"Just like putting water in your gas tank will ruin your engine, calling a plain old meeting 'brainstorming' will ruin your outcome.  If a session becomes a "blamestorm," the only person to blame is the one who should have better managed the meeting from the outset."