As an executive, board member, or business owner, you would surely see record profitability as a good thing — a good outcome for investors, an opportunity for innovation or growth, a sign of a successful year of meeting and exceeding targets. But without careful tact, that victory can be tainted by negative public perceptions and PR landmines.
Society is placing an ever-increasing premium on transparency in business. Especially for a public company, profitability cannot be expected to remain an internally guarded secret. Whether or not your financial statements or earnings calls garner enough attention to become mainstream news will depend on several factors: your industry, the overall economic climate, and how your numbers stack up to your competition, among others.
If your profitability figures are unusually high, or even at record levels, you need to be prepared for what comes next, from a communications perspective. Before your profitability numbers become public, you should have already invested time thinking strategically about the narrative: what you will say, when, to whom, and over what channels.
The Tough Reality of Public Perception
Especially if you are in a consumer-facing industry — food and beverage, power and utilities, retail, transportation, tourism, etc. — you cannot expect your customers to be intimately familiar with the inner workings of operating a large business. To the untrained eye, record profits can look bad, especially when paired with layoffs or inflation. Periods of social or economic upheaval will only increase scrutiny and suspicion of your earnings numbers.
Terms like “Greed-flation,” “Profit-price spiral,” and “Profit Mongering” have entered the mainstream, to the point where they are now being used regularly by journalists and politicians.
Everyday consumers tend to oversimplify the financials of big business. People understand the need to raise prices amidst rising costs, but that still leaves some questions unanswered. For example: If your price increases were proportionate to your cost increases, wouldn’t your profits stay the same?
It is not unheard of in Canada to find yourself on trial in the court of public opinion, or even testifying in front of government officials, being asked to explain why your business took home so much money. Some survey data from 2022 suggests almost 80% of Canadians believe “greedflation” is to blame for the rising costs of everyday goods. When the public holds this belief, and government officials feel the need to dig deeper on their behalf, trying to get by with some rendition of “Well, it’s complicated” will not always work.
Consider the PR backdrop of your financial statements. Amidst headlines of high inflation, record profits can seem like price gouging; organizations are sneaking in higher prices than they need to, in hopes that nobody would notice.
On the heels of layoffs, record profits can look like they were earned at the expense of people’s livelihoods; this business did not need to take home that much money and could have used some of it to keep people employed, but they chose not to.
Fortunately, you have the benefit of foresight and can prepare a communications strategy to mitigate these risks.
How to Address the Public
Proceed with the assumption that your consumers and clients do not dissect your financial statements, but they do read headlines about your organization.
Here are some approaches that will help you manage your business’s reputation:
Where you can, talk about outcomes rather than dollars. A lot of stakeholders will simply tune out any number that ends in “illion” because the sums are so large. Anticipate the question: “So what did you DO with all that money we gave you?”
Consumers will relate far more with a statement about outcomes — a human-centric story about how your record profits enabled you to house X number of people through charitable giving, or give a Y% raise to your front-line employees, or fund a new green facility that will improve access to more shoppers.
If you do not specify what your elevated profits are used for, many consumers, critics, activists, and even some reporters will automatically assume corporate greed.
Prepare for the reaction on all sides. You have the benefit of foresight and preparation because you know when your earnings calls will be. Ideally, you will never be caught off guard by a negative reaction to your financials and profits, and thus forced to do damage control.
Although your media relations strategy will be key, negative reactions do not just come from the press; you should also be ready to field questions from employees, especially if your organization is in a unionized environment or if there have been cutbacks, layoffs, or freezes. Give careful thought to your internal communications strategy because the perceptions held by your employees can carry significant weight in the narrative.
When possible, have someone else tell your story for you. Consider how much more effective it would be to have a statement from a local non-profit about a corporate donation, rather than a message about your donation on your own media channels. It comes off as more credible, more discreet, and less self-serving.
Your employees are a credible source of storytelling as well. As you invest in the growth and happiness of your people, they can become ambassadors who, consciously or not, help protect your organization’s reputation in times like this. Your record profitability will be much more palatable if people know you pay your employees a good wage and have created a positive and safe workplace culture.
Where to Spend Your Time
Unfortunately, there are people who, no matter how carefully crafted your communications strategy is, have already decided to be critical and antagonistic of high corporate profitability. Trying to persuade this group is not the best use of your time and resources — do not feel you need to explain yourself to everyone at once.
On the flip side, do not underestimate the number of rational, level-headed people that your communications strategy can reach. They can seem like a small group, simply because they are not a vocal group; but they’re often the ones quietly buying or endorsing your products and services.
Barring a PR crisis, customer behavior will almost always be driven by the usual factors like price, product quality, and customer service more than your communications and messaging. But as we have seen recently, these reputational issues can have big ramifications for individual executives, employee morale, and investor confidence. So it is still crucial to get your messaging right in these pivotal moments.
At Crestview Strategy, our team can help you build a proactive strategy and consistent message, to ensure your financial communications propel you towards your objectives, rather than holding you back. We are here to help you approach your earnings disclosure with confidence and peace of mind.
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