To tell investors the full story, numbers alone do not add up

If you read the sports pages of a newspaper, you know that there are two ways to find out how your team fared in its last game.

If you read the sports pages of a newspaper, you know that there are two ways to find out how your team fared in its last game.

There is the story, a narrative of several hundred words, or the box score, a statistical account of the game. While both provide similar information, their approach is entirely different and sports fans prefer one or the other.

It's essentially the same for companies delivering quarterly earnings and the accompanying press release and conference call. Every 90 days, public companies are required to tell investors how they're performing and what they see down the road. But how companies do this and what they say differs widely.

The company press release usually has a comment or two from senior management putting the quarter in perspective and then reaffirms or recalibrates expectations for future performance. Pages of financial tables - not very different from the aforementioned box scores - that accompany the release provide granularity. The conference call often does little more than add a shade or two of color while answering narrow questions from analysts who are tinkering with their company model.

But savvy companies use the captive earnings audience to tell a story that helps investors understand what has happened over the past 90 days and what's likely to happen in the next 90. While some may object to what they'd call too limited a focus, the reality of the marketplace can only be ignored at one's own risk. A customer wants what a customer wants.

Even though storytelling is a deeply embedded human activity that helps us make meaning of events that we experience, there is a deep-seated reluctance to recognize the value and importance of stories. Some fear the connotation that storytelling is necessarily fiction, an act of imagination, which indicates a desire to cover up or distract your audience from truth. Simply put, storytelling is seen as something for the young and unsophisticated, not for serious investors.

Yet if that were true, why would investors bother to dial in to the earnings call? The company has already provided the "box score" and the number crunching can begin. Investors will spend an hour or more on a call to hear your story. By their very nature, the numbers are a rearview mirror of performance.

Instead, investors want to hear senior management's story. They want to know why and if they can continue to trust management. They want to know whether management has the same passion and drive that it had in the past. They want to know what keeps management up at night and how they plan to confront and overcome those business nightmares.

Your story doesn't need to compete with the drama of the most recent Stephen King novel. It need only add the human element that demonstrates your determination to succeed.

 While numbers certainly play a key role in understanding and evaluating a company, people also matter. It's not an either-or choice. Companies who understand the delicate balance use both to build trust and confidence with investors.

Fred Bratman is president of Hyde Park Financial Communications.

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