I was sitting across the table from the President and CEO of a large financial institution. I had been hired to help him improve his ability to respond to analyst questions during earnings calls. I was a bit nervous, because you never know exactly how a CEO is going to respond to direct criticism. They can be prickly. And, truth be told, I often only understand half of what they are saying when I listen to earnings calls. So, I passed him the transcript of the Q&A section of the call and asked him to read one of the answers he had provided to a question. He read the passage thoughtfully, then looked at me and said, “I didn’t answer the question, did I?” I breathed a sigh of relief and said, “No, that’s what I thought, too.” We then moved in to discussing how to make better use of the opportunity presented by the questions being asked.
Questions provide you with an incredible opportunity to persuade. In fact, I would suggest they are your greatest opportunity. There’s a lot riding on how you answer a question. The way you answer a question will often retroactively determine whether or not the asker accepts anything you have said prior to the question. And yet, the Q&A is often a complete blind spot. I was helping a company that sells large laboratory tech equipment to hospital networks on their sales presentations. These are huge multi-million-dollar sales. Once we had worked on their PowerPoint and rehearsed presenting, I asked, “Okay, now how do you prepare for the Q&A? Do you practice throwing questions at each other, do you have a record of past questions?” They stared blankly at me for a moment, before answering, “We don’t.” What’s the likelihood of making a multi-million-dollar sale without the prospective customer asking a question or two?
Likewise, I do a lot of work preparing the Investor Relations teams of companies for earnings calls and investor days. In a Rivel Research study, they found that while 80% of analysts cited the Q&A portion of the call as being of high importance (the highest ranked portion of the call, even more so than review of the strategy), only 41% of analysts responded that companies do a good job of answering questions. And yet preparation for the Q&A portion of the call is often fairly minimal.
Regardless of whether it is an earnings call, a sales presentation, a townhall or a team meeting, the answer to a question provides a huge leadership opportunity. But answering questions well is an art and requires practice. You need to prepare for the questions beforehand and prove a well-structured answer.
- Want the questions and challenges;
- Anticipate what their concerns will be;
- Prepare your thesis.
Provide a well-structured answer:
- Listen to the question;
- Give the answer and bridge to thesis.
Want the questions and challenges
Okay, so this sounds a little fuzzy, but the mindset you bring to your preparation is essential. Many (most) of my clients have a defensive attitude towards questions and challenges. Sometimes they have a downright combative attitude. They talk about deflecting the question, defending their position, offering rebuttals. And it is true that sometimes the person asking the question can be aggressive or seeking to discredit the speaker. It doesn’t matter. You need to embrace the challenge and genuinely want to know what the audience’s concerns are. There is no way to capitalize on the opportunity a question presents if you have a negative mindset. The real danger is that the question goes unasked, leaving you no opportunity to address the concern.
Anticipate what their concerns will be
Really being able to anticipate questions involves putting yourself in your audience’s shoes and asking yourself, “What would I want to know if I was in their place?” We all know we should put ourselves in others’ shoes, but we rarely do it. Often, in a coaching session, a client who is preparing for a possibly conflictual event will stop and say, “I’d be thinking the exact same thing if I was in their shoes.” This perspective needs to be the starting place for your preparation. Ask yourself, “What are the top three or four issues I think might be concerns for the audience?” You won’t necessarily know the exact phrasing of the question, but by and large you know what the issues will be.
Prepare your thesis
Once you have identified what the issues will be, construct a single sentence that you want to convince them of about each issue. If you walk into a scenario where you will be facing questions, regardless of whether it is a job interview, a presentation or meeting, and you have three or four sentences that address the key issues, you are well-prepared. Typically, when I work with an Investor Relations Officer, they will have prepared a twenty- or thirty-page Word document prior to an earnings call with bullet point answers for every single question that might get asked. Often when I listen to the webcast, after an analyst asks a question, I can hear the flipping of pages in the background as the executives search through the document for the answer. This causes me to do a facepalm. The longer Word document is a valuable exercise, but the next step is to create a single page document listing the key issues and the single sentence thesis you want to convey about the issue that has been raised. Coming up with the main point is much more difficult than providing a couple of supporting arguments.
Provide a well-structured answer
Listen to the question
Well, that sounds obvious doesn’t it?! I have spent hours upon hours reading through transcripts of Q&As and e-mails and I often find that the person didn’t really answer the question that was being asked. Sometimes this is because the speaker is actively avoiding answering the question, but often the question itself is convoluted, or multi-pronged and it is clear the speaker simply stopped listening before the question was finished. The reason we do this is that we start forming our answer before they have done speaking. This displays the underlying intention of the speaker: to show they know the answer, rather than providing the person asking with something of value. When someone is asking a question, you need to really listen to the question, fully and deeply, so that you not only understand the question being asked, but also why they are asking it. Only then can you really provide a good answer, one that capitalizes on the opportunity embedded in the question.
If you really listen to the question right through to the end, you will need a moment to collect your thoughts. A pause doesn’t have to be long. But most of us start talking immediately, as if the question were a fire that needs to be put out. Or we say, “That’s an excellent question” in an effort to buy time. Unless you’re willing to call out a question as being incredibly stupid, you should probably avoid commenting on the quality of the question. The problem when we start talking immediately is that it causes a separation of brain and mouth. I am talking, but my brain is furiously racing forward to try to figure out how to make it all add up. This forces a structure where the speaker comes to the main point at the end of their answer, when in fact it should be at the beginning.
Give the answer and bridge to thesis
A well-structured answer is accurate, concise, clear and honest. The true art of answering questions well lies in the speaker’s ability to answer the question directly and then bridge to the thesis.
This should happen in the opening two or three sentences. The first sentence is the opener, and it should directly address the question as it was posed – this means answering the question as clearly, directly and succinctly as possible. If the question is a yes/no question, the first word out of the speaker’s mouth should ideally be yes or no. A clear direct answer in the opener establishes credibility and is really the price of admission for the rest of the answer. This opening creates the opportunity to then bridge up to the big picture thesis that the company or individual would like to communicate about the issue raised in the question. After the opener and message are delivered, two or three supporting points can be presented to support the thesis – usually reasons why it is true, or ways how it is being or can be achieved. The idea should always be presented first, with supporting explanation or documentation following. So, a well-structured answer to a question looks like this:
- Opener – answer the question.
- Thesis – deliver the big picture idea .
- Supporting point #1 – reason why the thesis is true or way how it will be achieved. Explanation or expansion of point one.
- Supporting point #2 – reason why the thesis is true or way how it will be achieved. Explanation or expansion of point two.
Question – “Why does the margin in your specialty products division keep declining quarter after quarter?
Answer – “You’re right that we’ve seen declining margins in this division for the past three quarters. This reflects a corporate decision to invest in the long-term success of the division.
The declining margins you’ve referred to have been caused by two significant investments in its future success.
The first investment we’ve made has been in the development of new market segments – we believe this division offers products that differentiate us in the market place. In order for the division to realize its full potential, we need to create new markets for the products. To this end, we have invested in xxx marketing initiative.
The second investment has been in the repatriation of some of our production facilities. While this has squeezed the margins in the short-term, we believe the flexibility, supply security and quality control this move allows us will ensure the long-term viability of this important part of the business.”
So much about answering questions is about establishing trust and credibility. People are smart. We can tell when someone is avoiding answering, or providing a canned response, or worse, spin. The minute we smell avoidance, we mistrust the speaker and interpret the answer differently. We need to approach questions and challenges as opportunities, and then answer them directly and honestly. If we are well-prepared and answer in a well-structured, thoughtful manner, Q&As can be powerful leadership opportunities.