Managing Bad News: How to Communicate Challenges to Your Board
Build trust through transparency, timing, and solutions-oriented communication.
Key Takeaways
- •Communicate early—never surprise board members in a meeting
- •Lead with the issue, then explain context and action plan
- •Boards expect problems; they judge you on how you handle them
- •Follow through on commitments and provide regular updates
Every company faces challenges—missed quarters, key customer losses, operational failures, market shifts. How you communicate these challenges to your board often matters more than the challenges themselves. Boards can handle bad news; what they can't handle is surprises and lack of transparency.
This guide covers how to communicate effectively when things aren't going as planned.
Timing: Early and Often
The single most important principle: communicate challenges early. Board members should never learn about a significant issue for the first time in a board meeting.
When to Communicate
The Pre-Meeting Call
For any significant challenge, call the board chair before the board meeting. Brief key members individually if appropriate. This allows them to process the information, prepare thoughtful questions, and come to the meeting ready to problem-solve rather than react emotionally.
The Communication Framework
Use a consistent structure when communicating challenges. This builds credibility and ensures you cover what board members need to know.
Bad News Communication Structure
1. State the Issue Clearly
Lead with what happened—don't bury it in context. Be direct.
2. Explain the Root Cause
Why did this happen? What factors contributed?
3. Quantify the Impact
Financial impact, operational impact, timeline. Be specific.
4. Present the Action Plan
What are you doing about it? What's the timeline?
5. Request Input
Where do you need board guidance or approval?
Example Communication
"I need to inform you that we lost the Acme Corp account this week. They represented $1.2M in annual revenue, about 8% of total revenue. The decision came down to pricing— a competitor undercut us by 25%. We've evaluated our cost position and believe we cannot match that price profitably. The impact on this year's revenue is $400K. Our plan is to accelerate pipeline activity and we've already identified three prospects that could offset half of this loss by Q4. I'd welcome the board's input on our pricing strategy in light of competitive pressure."
What to Do and What to Avoid
Do This
- • Be direct and factual
- • Take responsibility where appropriate
- • Present a clear action plan
- • Quantify impact with specifics
- • Acknowledge uncertainty honestly
- • Ask for help when needed
- • Follow up on commitments
Avoid This
- • Burying bad news in good news
- • Blaming others excessively
- • Minimizing or sugarcoating
- • Being defensive
- • Making excuses without solutions
- • Promising what you can't deliver
- • Going silent after the disclosure
The Credibility Test
How you handle one piece of bad news affects how the board perceives all future communication. If you try to hide problems or spin them, board members will question everything you say. If you're direct and solutions-oriented, you build trust that carries through future challenges.
Communicating Common Challenges
Different types of challenges require different emphasis in communication.
Missing Financial Targets
- Explain: Revenue miss vs. margin miss vs. timing
- Quantify: How much and impact on full year
- Contextualize: One-time vs. structural issue
- Plan: Catch-up strategy or revised expectations
Key Customer Loss
- Explain: Why they left (price, service, competition)
- Quantify: Revenue impact and margin impact
- Contextualize: Customer concentration risk
- Plan: Replacement pipeline and retention review
Executive Departure
- Explain: Reason for departure (resigned, terminated, circumstances)
- Quantify: Impact on operations and initiatives
- Contextualize: Bench strength and interim coverage
- Plan: Search timeline and process
Covenant Concerns
- Explain: Which covenant and current trajectory
- Quantify: How close, when would breach occur
- Contextualize: Bank relationship status
- Plan: Remediation options (operational, amendment, equity cure)
Follow-Through and Updates
Communicating the challenge is just the beginning. Follow-through is what builds lasting credibility.
Follow-Through Checklist
The Status Update
For significant challenges, include a status update in each subsequent board package until resolved. Even a one-line "Acme replacement pipeline now at 75% of lost revenue" shows you're tracking and making progress.
Building Trust Over Time
How you handle challenges over time builds or erodes board trust. Consistency matters.
- Be consistently direct: Board members should know they'll always get the straight story from you
- Calibrate appropriately: Don't cry wolf on minor issues or underplay major ones
- Own mistakes: Taking responsibility builds more trust than defending
- Deliver on commitments: If you say you'll do something, do it
- Improve over time: Show that you learn from challenges and prevent recurrence
The CFO as Truth-Teller
Board members often look to the CFO as the objective voice in the room. While the CEO may be optimistic about opportunities, the CFO is expected to provide balanced perspective on risks and challenges. Embrace this role—it's how you add value beyond the numbers.
Related Resources
Board Reporting Guide
Complete overview of board communication
Board Meeting Prep
CFO's monthly preparation checklist
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