No executive likes to hear bad news, whether it’s a failure to meet revenue projections, a very significant slip in a product ship schedule, or a key team member leaving for a competitor.
But delivering bad news to one’s “superiors”, to the CEO or from the CEO to the Board, is much harder in startups, where optimism reigns king and gallons of corporate Kool Aid are consumed daily.
Having served on the boards of four VC-backed companies and two non-profit boards, I can tell you that the Board wants to hear bad news immediately. Why? That gives them the best chance, and most time, to help you recover from it. Trying to keep the bad news from your Board will only severely erode your credibility and trust with them if they find out the news from some other channel, which is all too likely. You’ll do the same damage to your reputation if by the time they are informed the problem has mushroomed from serious to critical.
Obviously you don’t want to go to your Board every time an engineer finds a bug. But I remember being told my Bill Kaiser of Greylock, that what VCs want most from entrepreneurs is predictability. So when unpredictable things happen, like not meeting revenue targets, severe schedule slippage or loss of an important executive to a competitor, your Board will probably want to know about it – immediately – not a month later at the Board meeting. So if you’ve gotten bad news that’s worthy of Board level attention and a Board meeting is not imminent, pick up your cell phone and start calling. Be prepared not to just deliver the bad news, but to explain why the incident happened, and what you plan to do about it. If you don’t have the answers to those questions, don’t fake it, ask for their help. Don’t be defensive, don’t be verbose, and listen to whatever advice you are given.
Conversely, go slowly with good news. Make sure it’s thoroughly vetted and you can be confident about communicating it. As Wayne Oler once told me, “Don’t tell me what you are going to do, tell me what you have done.” So good news is not that the VP of Engineering just told you he’s going to beat the ship schedule by two weeks. Good news is that he actually did, that the product is in the hands of your customers AND that they are happy with it.
A good way to start the next Board meeting.
Finally this principle needs to be inculcated throughout your startup – it’s not just for the CEO, executives or founders, everyone needs to learn that bad news is not like wine – it does not get better with age. The sooner others know about it, the sooner they can help fix the problem.
And it goes for everyone in the organization, that just delivering bad – or good news – is necessary, but not sufficient. The reasons behind the news, and at least tentative plans on how to handle it should be communicated as well.