The Concept of Bad Business News

Sometimes companies don’t do so hot and they must report the loss in their capital, their returns and their sales prospects to shareholders and public stakeholders. Few CEO’s and companies desire to share their information but there is a good reason to do so when we utilized the concept of “kitchen sinking”.

The concept of “kitchen sinking” means that corporations and businesses will make their information public so that people will believe that they have hit rock bottom and that the only place to go from this point on is upwards. It is similar to the concept of drawing a line and the sand and saying this is where we hold the line and we will fight for gains each inch of the way.

If people assume that this is the end of the line they will be looking for signs of recovery and strength. This is predominately one of the reasons why companies should install plans to increase their success with new initiatives and programs. Workers are looking for a chance to comeback. Investors desire to see signs of recovery and a new initiative can help them with that concept.

Let me give you an example at Mitsubishi. The company had some slumping sales that scared both investors and workers. They instituted a new initiative that became a rallying cry for its workers that included calls for workers to cut expenses by 5% and increase sales by 5% (Treece, 2005). The new deal actually worked out and the company recovered because people were looking for a sign of hope.

The world of reporting is becoming more negative according to a study conducted on media companies like The Wall Street Journal and the Washington Post (Porth & Sillup, 2007). Their overall concepts, the image they portray and the news they report are simply becoming more negative in tone. This can be an advantage because newspapers are read with a “grain of salt” whereby people don’t often believe the news is as bad as the media giants state.

If you are going to report negative news then try and places within the report, news media, etc… as much detail as possible on how you are going to turn around the company. This information will give people hope, give them direction and sooth investors concerns about what you are going to do with the business. They want action they simply don’t want to hear the company is having problems.

However simply releasing information about a haphazard turn around plan won’t do much good either. The plan should be well thought out, the highlights should be referred to and it should actually be feasible to complete. Throwing some poor plan for public relations purposes into the wind is likely to destroy your credibility.

Your credibility and accountability will be the key components that people will think about when they decide to either pull their money out of the company, find another job or work harder to turn the company around. They want to believe that what you are telling them is true, that you have a plan and that you have the ability to turn around the company. With enough credibility and accountability you might even be able to draw investors who feel the prices is undervalued and the current slump in value is temporary.

Porth, S. & Sillup, G. (2007). Stop the presses!: the media are becoming more negative and one-sided when it comes to reporting industry news. Pharmaceutical Executive, 27 (4).

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