The CEO’s Guide to Prime-Time Survival: No Hard Swallows
Even a good chief can stumble in the spotlight, emitting anxious signals that do great damage
By John Stoll
When General Electric Co. GE +0.58% ’s board hired Larry Culp to replace John Flannery after one year, they sought a more seasoned chief executive with a greater sense of urgency. Six weeks later, he fumbled a task straight out of Executive Leadership 101.
In a 20-minute CNBC interview Monday, Mr. Culp assumed the role of GE’s chief spokesman to soothe investors who have endured a rocky ride and myriad surprises. Mr. Culp said a lot, but only a few things sunk in: GE’s struggling power business hasn’t hit bottom, he said, and assets would be sold to raise cash.
The share price plunged as much as 10%, dipping below $8 for the first time since the financial crisis. GE declined to comment.
GE’s new chief committed a mistake that can wound almost any CEO, even after years of polishing communications skills during conference calls, town halls or board meetings.
“A lot of CEOs simply overestimate their ability to effectively communicate when they aren’t looking at a script,” said Anett Grant, a Minneapolis-based executive coach. Ms. Grant published research in 2014 showing a gap between perceived ability and actual performance.
“The feedback from their team is ‘you’re doing a good job,’” she said. “But the public is trying to figure out ‘what is he hiding?’”
Remember Tony Hayward ? Before he was the tone-deaf CEO bungling a response to BP PLC’s Deepwater Horizon disaster, he was just a brainy geologist leading a seemingly successful turnaround. And before Mr. Culp went on CNBC Monday, he was an accomplished executive who spent more than a decade successfully leading a lesser-known conglomerate, Danaher Corp.
Jack Brown, a physician and body-language expert in Henderson, Nev., analyzed Mr. Culp’s TV performance and noted mistakes in everything from wardrobe selection to the use of nonverbal cues that contradicted words coming out of his mouth.
GE’s boss should have opted for a dark suit and a tie, for instance. He also needed to avoid anxious signals, such as a dry throat, and focus on giving direct responses.
Dr. Brown said Mr. Culp exhibited a cluster of hard swallows, gravelly voice and voice tics that raise red flags with an audience. “Any layperson or shareholder would look at this characteristic alone and correctly interpret that this is a nervous man who’s bit off more than he can chew.”
Bill Mayew, an accounting professor at Duke University who analyzes conference calls of bellwether companies, said audiences are on alert when a potential crisis looms or targets are missed, listening intently to changes in voice pitch and tone. “The listening goes up, and so does the intensity—it heightens the stress.”
Corporations spend a $2 billion a year on executive coaching, Ms. Grant estimates. Advances in technology make the examination of communications patterns more accurate and more abundant.
“The explosion in the research is happening because the power of statistical measures has gone way up,” Mr. Mayew said. Even with all that data, chiefs need to choose their words wisely.
Investors generally appreciate the blunt style of Glenn Kelman, the outspoken CEO of real-estate brokerage Redfin Inc. But they didn’t like his message on an Aug. 10 quarterly conference call that the housing market was slowing.
“I got angry email mostly from retail investors saying that I should have been more diplomatic or pulled some punches,” Mr. Kelman said at a conference in October. “I’ve always thought Redfin’s instincts for candor would serve it well in the public markets and my job during an earnings call is to bring investors into my brain.”
Shareholders didn’t like what they saw inside there. Shares fell 22% the day of the call to the lowest point since the initial public offering. Declines continue, and shares trade about 35% lower than the Aug. 9 close.
In an interview Friday, Mr. Kelman said he doesn’t use conference calls to drive share prices. “If you use all your special powers as a CEO to move your stock up as high as you can for that one day, well you’ve just set yourself up for a fall.
Consequences of CEOs’ missteps can prove fatal, or leave a permanent dent in corporate reputation.
After Alan Schwartz, pictured in 2010, took to CNBC at the dawn of the financial crisis, the decline in Bear Stearns shares quickly gathered steam.
PHOTO: JONATHAN ALCORN/BLOOMBERG NEWS
At the dawn of the financial crisis, Alan Schwartz, the CEO of Bear Stearns Cos., took to CNBC on March 12, 2008, to try to discredit market rumors of a cash crunch at the struggling Wall Street firm. The stock closed at $61.58, already down dramatically from the 52-week high. The decline quickly gathered pace. Two days later, JPMorgan provided emergency financing to Bear, sending shares to $30.85. Two days after that, Mr. Schwartz became the venerable firm’s last CEO, agreeing to sell it for $2 a share. Investors eventually forced the price up to $10.
Earlier this year, pundits criticized Facebook’s Mr. Zuckerberg for a lack of transparency in televised interviews and Capitol Hill testimony, staged to ease concerns about data privacy. The company has struggled to recover. Shares are off sharply from annual highs, multiple studies show an erosion of public trust in the social platform, and employee confidence in Facebook’s mission has waned.
Ms. Grant said former Starbucks Corp. Chairman Howard Schultz set a good example of how to reassure stakeholders amid crisis earlier this year. The company was immersed in controversy after the arrest of two black men who tried to use a restroom without buying anything at a Starbucks in Philadelphia.
“Schultz did a good job of saying he didn’t have solutions ready, but still insisting ‘this isn’t OK’ and ‘what I care about is a good solution.’” Ms. Grant said his audience walked away confident company management “had a moral compass even if he didn’t have all the answers.”
Mr. Mayew said that although Mr. Culp is experienced, he’s stepping into a much higher-profile role at GE than he held at a smaller rival. He doesn’t necessarily have the credibility Howard Schultz enjoys.
“The market can form such strong expectations early in the life of a CEO,” the Duke professor said. He suggests that Mr. Culp can build a track record over the course of several quarterly conference calls.
Unfortunately for Mr. Culp, investors don’t have a lot of patience left for the once mighty conglomerate.
Write to John D. Stoll at email@example.com
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Appeared in the November 17, 2018, print edition