Selling a New Strategy

It's always hard, but what do you do when your strategy calls for more pain?

First came the good news. At the July 26 interim results presentation at his company's swanky new headquarters in London's Canary Wharf, David Grigson, CFO of Reuters, Europe's largest financial news and data company, told shareholders that he would be returning �1 billion ($1.8 billion) following the sale of its electronic brokerage unit Instinet. Meanwhile, his charts and graphs showed positive net sales for every month in the first half of 2005. What's more, underlying recurring revenue — its most closely watched metric — was up 0.4 percent, the first time since 2001 that it hadn't declined. Grigson also highlighted group sales for the six months to June 30, which beat analysts' expectations despite falling from �1.17 billion to �1.14 billion.

Then Grigson and CEO Tom Glocer hit investors with the details of the long-awaited growth strategy, dubbed "Core Plus." Reuters, they said, will have to make hefty investments to try to improve the way business lines are run, to help migrate products and services to internet-based technologies, and to build up businesses in places like China and India. The aim is to turn the steep revenue decline of the past five years into growth rates of between 5 percent and 7 percent by 2008. But Reuters's bottom line will have to take a big hit from another �170 million of restructuring costs, starting in 2006. Profitability will have to wait. Shareholders weren't impressed. "How many times has Reuters promised growth was around the corner?" one investor grumbled to the Financial Times. "Every time, they seem to have some sort of restructuring cost or reorganization cost to fall back on."

Let's face it. We all know that corporations need to focus on long-term growth. We all know that it's bad business to pump things up in the short-term if you are sacrificing your long-term growth. But people still do it. There are still tons of investors and managers that are going to judge you by quarterly results, so there is a lot of pressure to give them what they want. So if your plan calls for a temporary hit to the bottom line, how do you sell it?