Business leaders need to communicate ideas that may not always be simple to their audiences—be it for a one-on-one, leading a company meeting, or just trying to make sense of something themselves. Mitchell A. Petersen, a professor of finance at the Kellogg School of Management, Northwestern University, Illinois, US and an expert in empirical corporate finance, offers six tools to help leaders communicate complicated ideas.
Data provides detailed, and dispassionate, characterization of what has occurred previously. As such, data serves as the foundation for predictions about the future. Before financial experts began collecting daily data on stock prices, returns and dividends, for example, nobody had a sense of how typical stocks performed over time—and how they might be expected to perform going forward.
“The beauty of data is it tells us what happened in the past,” says Petersen. “It’s descriptive. Now, the disadvantage of data is it doesn’t necessarily tell you how variables are related. It is just the landscape without any underlying structure.”
In other words, all the raw data points in the world are not going to automatically provide you with a solid case for favouring one decision or prediction over another—which can be where logic comes in.
Logic is valuable in its own right—after all, if your audience struggles to follow the thread of your argument, it will be tough to convince them that the argument is sound. But logic also serves as a fruitful breeding ground for more rigorous analysis. “Equations are a way to boil complex relationships down into a small number of important levers.”
Equations allow you to make your case with precision and accuracy. Equations capture relationships between variables mathematically, so that those relationships can be mapped to actual data. Peterson says that it is rare for an equation to capture all the relationships among a complicated set of variables, so good equations also make a statement about the most important relationships.
Pictures or visuals offer your audience an invaluable way of remembering the relationships between different variables. The right visual offers an easy way to see, internalize, and later recall even complicated informational trends.
When presenting complex information to an audience, “I’ll put up the data in a table, because I want them to see the details,” says Petersen. “I also put up the picture, because it makes the concept much more persistent.”
Stories that summarize certain logics or relationships between variables are perhaps the most memorable all. “There are no cultures that I know of that don’t tell stories,” says Petersen. These stories can become memorable, almost tangible shorthand for even very abstract concepts. An elaborate story about a Coca-Cola investor swapping shares with first a Pepsi investor, then an orange juice investor, next a peanut butter investor, and finally a tractor investor, might vividly encapsulate the benefits of an otherwise nebulous concept like diversification.
Tools like data or equations or even stories are of limited value if an audience feels they can’t push back, disagree or ask for clarifications. The more senior your audience is, says Petersen, the more important it is to actively create pauses or other spaces where misunderstandings can be voiced. Want to know whether your audience is with you? Just stop and say, “Somebody please ask me a question,” Petersen advises.