I'm Lyft's former head of PR. I'm surprised earnings blunders don't happen at more big companies.

Publish date: 2024-07-15
2024-02-15T21:49:53Z

Forty-eight hours later, it seems Lyft's earnings mistake has reached meme level in business circles. And, since I was Lyft's head of communications from early 2016 through the end of 2019, it's not a shock several people have reached out on the topic, mostly asking some version of "WTF."

My immediate thought was probably the same as most people when I heard the news: oof, that's a really, really bad mistake. Next: my heart broke for a company I still love.

My biggest reaction? It's amazing that something like this doesn't happen much more often.

Since 2008, I've held the pen on 30+ earnings scripts for the likes of Visa, Pandora, Lyft, and several clients at Valentine Advisors. I know firsthand the extreme level of complexity and precision required to birth an earnings report every three months. It involves countless hours from several parts of the organization, including top execs, investor relations, finance, legal, communications. In fact, in my Visa days, my wife and twin toddlers would decamp to grandma's house for two weeks because we knew I'd be fully consumed with the earnings process.

And — amazingly — the overwhelming majority of earnings cycles for thousands of companies go off without a hitch. In fact, it seems like the earnings process has reached a "five nines" level of success, where we've grown to reasonably expect flawless execution each time, akin to the highest standards of reliability and availability seen in sectors like telecommunications and cloud services.

To be clear, this is not a critique of Lyft at all. Their mistake was a very big one, but it's surprising it doesn't happen more often to other companies. That's why this Lyft example stands out.

But, when you're in the boiler room on an earnings cycle, it often doesn't feel so smooth. Humans are, well, human, and mistakes get made. It occasionally feels like important balls are on the verge of being dropped.

So — coming from somebody who's been around the earnings block a few times — here are my three suggestions for anybody playing a leadership role in any earnings process, all in the spirit of helping your company avoid becoming a meme on this topic.

1. Obsess over the process

For something with the potential to swing billions of dollars in value, it's astonishing how rarely companies examine their internal systems driving an earnings report. Instead, that process often unfolds organically based on habit, and too often, it's little more than a basic calendar.

Earnings should be reviewed like any critical system, rigorously examined with a bird's-eye view of who does what, when, why, and how. This is especially necessary given how frequently executives and contributors can change in an organization.

My advice: I always encourage companies to take a comprehensive look at their entire earnings system down to exquisite detail at least every 24 months, and ideally every 12.

2. Set a "pens down" rule for 48 hours before release

More times than I can count, a CEO or CFO has introduced a new direction for the script the evening before the earnings release is scheduled to go out. Reasons vary widely but can include boundless CEO creativity or last-minute input from a board member.

While creativity and perfect wording are valuable, last-minute changes can be killers. The benefits of these changes do not outweigh the incremental risk created by last-second scrambles.

So my advice to public company CEOs and CFOs is to establish and adhere to a strict "pens down" rule 48 hours before your release is set to go out, both for the script and release. This gives all other key components of your earnings system (IR, finance, legal, comms, and others) time to ensure every detail is perfect, helping you avoid problems like those encountered by Lyft.

"While creativity and perfect wording are valuable, last-minute changes can be killers. The benefits of these changes do not outweigh the incremental risk created by last-second scrambles."

3. Shrink the room

This tip is mostly directed at newly public companies on the block, but it's crucial to keep the number of people involved in the earnings process as lean as possible. Similar to the IPO process, you may find many employees eager to get involved with the earnings process, attracted by its significance as a new, important priority within the company.

While their intentions are almost always positive, it's essential to avoid team bloat in the earnings process. My advice is to shrink the room: You need an incredible amount of attention, precision, and focus from a small core group. Remove any unnecessary participants and distractions as quickly as possible.

The bottom line

In the high-stakes world of earnings reports, the margin for error is razor-thin. By prioritizing a meticulous approach to the process, companies can transform earnings season from a high-risk ordeal into a showcase of reliability and precision.

Final thought: Before anyone asks, I have zero idea why this mistake happened at Lyft or if any of the issues I'm raising played a role. I have friends at the organization, and they're very good at what they do. While the business has encountered its share of challenges in the past few years, the people at Lyft are great. It's a company near and dear to my heart. I wish them all the best and cheer loudly for their long-term success.

Will Valentine is the founder and principal of Valentine Advisors and publisher of The Repute.

This article originally appeared on The Repute newsletter and was reprinted with permission.

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