Authors: Peter Dietimaier, Founding Partner CCounselors; Michael Schoenenberger, Partner CCounselors and Partner and Co-Owner Hirzel.Neef.Schmid.Konsulenten.
Within a few months, the CEO of a wholly owned subsidiary of a DAX-listed company built up an enormous risk position, which was to fall on the feet of the company and the parent company after not too long. The chairman of the supervisory board was a member of the parent company’s management board. The chairman of the parent company's supervisory board and its CEO had the right feeling. Even before the crisis could erupt, they noticed that something was going wrong at the subsidiary. Both the CEO of the subsidiary and its supervisory board chairman left the companies before the damage became even greater. In the end, it was not possible to avert the crisis entirely. It was already too late for that. But at the time of the departure of the two gentlemen, none of this was known. The farewell communication was correspondingly friendly. Thanks were expressed and the achievements of both men were praised. A farewell in all honor. To the detriment ultimately of those who had acted and averted even greater damage. Because when the problem became public at the next closing, they were prisoners of their own storyline. The culprit was now oneself. Years later, the story was still hanging on the lapel of the chairman of the supervisory board and the CEO of the parent company.
The share price spoke a clear language. The turnaround for which the new CEO was appointed did not materialize. Instead of reducing costs and increasing profits, everything developed inversely proportional. The change at the top was completed. Instead of a differentiated appreciation, the outgoing CEO was thanked formulaically for his commitment and positive work. A missed opportunity that was to take its revenge. Thus, the time of the ultimately hapless CEQ was completely written off by the public as wasted time and blamed on the Supervisory Board, even though a lot of important things had happened: The clear and distinct analysis woke up the company after decades of complacency with a thousand excuses. The insight gained was the basis for the resurgence. Since there was no talk about it, the undifferentiated positive farewell communication seemed implausible. Later explanations did not help either the former CEO or the then Chairman of the Supervisory Board.
The chairman of the supervisory board would do things differently today. Instead of glossing over all the difficulties and creating an image of complete harmony that had little in common with reality, he would make it clear why action had to be taken. In the process, personal vanity plays less of a role in gaining insight than the credibility lost in retrospect, which made it much more difficult for the company to emerge from the crisis.
Honesty and authenticity are all the more important when the old wording of "mutual agreement” is now interpreted as termination anyway. The old language rules no longer work. Today, people no longer discreetly look the other way, but rather look for weaknesses. This applies to observers in the company as well as externally. In addition, in the age of social media and whistleblower portals, gossip can reach the world - or at least an interested journalist - in a matter of seconds with just a few clicks. In case of doubt, truth from the grapevine is more interesting than the spin of the company.
Communication that is thought out from the end therefore sticks to what really happened, explains and classifies. If there are different views on how the company should be managed or how it should develop, this can be addressed in an appreciative and open manner without hurting the people concerned. In case of doubt, the environment has already noticed that there is a bone of contention somewhere anyway. Nothing is worse for the credibility of the company and its managers than being caught up in reality. Then all the explanations and clarifications about how things really were are no longer of any help. If you fib once, you won't be believed. It usually takes a long time to restore the company's good reputation. And for the "fibbers” themselves, the game is usually over.
The strategy of saying one thing internally and externally in written communication and having the other pierced in the background by spokespersons and external consultants does not contribute to the credibility of a communication either. In the end, both ends of the communication reach the addressee. What is one to make of a company that communicates in this way? What does this mean for future communication activities? This does not exclude that additional information can and should be given in the background for classification, if this is correct and necessary. But this information should be based on one and the same story if the recipient is not to be left with any doubts about credibility.
Where people work, they make mistakes. In a world that is increasingly value-driven or, to put it another way, increasingly moralizing, it is easier for those who deal openly with mistakes, show that they have learned from them and want to do better in the future. If this is the case, the question arises as to why a company should wait until third parties confront it with a storyline that then has to be argued against in case of doubt. Instead of being put on the defensive, companies should think from the end and seek the offensive with honesty and authenticity. Why wait until someone tells the media that there is a supervisory enforcement procedure instead of explaining yourself what the background to it is? Honesty and authenticity increase the chance that arguments will be heard and understood.
They still exist. Companies that calculate themselves healthy. With adjusted figures, adjusted for individual effects, they prove that the underlying core business is doing very well. Even if the 'net income after taxes’ column has been in the red for years. Still others, for example unlisted German SMEs, rely on the fact that so much time elapses between the media release of the annual financial statements and the publication of the balance sheet that people don't look at them at all. Practice shows that this can go well for a while. In the end, however, reality prevails - to the detriment of credibility.
It is not uncommon to observe the phenomenon that those directly involved believe in their own adjusted storylines and have lost sight of reality - like a chain smoker who believes that he is smoking for pleasure and could stop every day. A supervisory board chairman once identified hubris in the company as the biggest hurdle to change for the better. Only when the real situation was admitted and talked about openly was the path to reform open. "I tell it like it is" was therefore the motto of a CFO in one of the most difficult situations of his company. It not only earned him and the company respect and credibility, but also helped to ensure that the problems were actually addressed internally.
Only 39 percent of those surveyed by Edelman in Germany still trusted CEOs at the end of 2022. Eight percentage points less than journalists and 24 percentage points less than their own neighbor. Although the figures have improved somewhat in recent years, they still highlight the dilemma. When credibility is already being questioned in such a way, it is all the more important to communicate credibly. The most credible communication is that which is not staged, but comprehensible. Communication that is active, that explains both good and not so good news. Communication that is coherent in itself, that is thought out from the end, that is long-term and does not just provide short-term relief. Practice and our many years of experience show that it is ultimately a question of culture. Firstly, supervisory boards and management boards must understand communication as a central management task, and secondly, communication must be approached strategically. In short: communication and strategic communication are a matter for the boss. This creates a long-term and sustainable reputation for personalities and their companies. And at the same time, this approach ensures greater resilience in the event of a crisis.