Transparency gives Adidas CEO much-needed traction

Adidas 2014 profit warnings

Most of us associate wearing a pair of athletic shoes with comfort or leisure. For Adidas CEO, Herbert Hainer, shoes mean serious business. Hainer has managed metrics for the world’s second largest sporting goods company for 15 years. Last month, he retired and reflected on a pivotal year when metrics took a turn for the worse.

In 2014, economies where Adidas normally flourished began to lag. Product lines underperformed and expensive sponsorships put a strain on the bottom line. Hainer chose to reveal internal challenges and alert shareholders to a series of profit warnings.

I had to present profit warnings at ProLogis when I was CEO and they were never easy. When I first took over leadership of the company, our stock had fallen over 96 percent in 10 months! But I found that if I kept my focus on the goal of building trust, investors were much more receptive—even supportive.

What does building trust look like in profit warnings?

You must be open with everything

No one, of course, has all of the right answers in these situations. I recall an investor asking us when we thought the situation would turn around. The temptation to act like we had everything under control was immense. But we couldn’t. Too many things were going wrong. Investors knew it and so did we. So we told them we didn’t know when things would improve. Can you imagine the resulting effect on our stock performance? It plummeted even more. But it was the honest truth and we established trust long term as a result of our openness.

Ask questions

When investors are upset they fire a lot of arrows at you. The best way to deflect those arrows is to ask questions. A lot of them. Questions help clarify what the real concerns are and open the lines of communication. That’s critically important. They also buy you time to think. Heaven knows you need time to think when you are under siege. Nothing will make investors happy in the short run, but showing them you care through questions will restore their trust in the long run.

Actively Listen

Some of the best ideas came from our investors. You must actively listen to them. Be open to their views and process what they say. Listen not to flatter but to learn and affirm. And never think you are always right. Guess what? You’re not. In Stephen Covey’s Seven Habits of Highly Effective People, he talks about the importance of “seeking first to understand.” If you think of that approach, then you can genuinely respond to concerns and build trust in the process.

Hainer’s disclosures in 2014 opened the doors for his leadership team to make critical changes to regain investors’ support. The company successfully rekindled sales by pivoting more responsibility to brand managers and working more closely with retailers. Today, Adidas reports that sales are growing in all key markets, and the share price has more than doubled since last summer.

Adidas’ recovery is a good reminder of how much transparent leadership not only carried me through challenging financial times but also re-established trust with stakeholders. But you don’t have to lead an investors meeting to apply these observations. Think about board meetings, working partnerships or team projects where you can put these behaviors to the test.

You’ll find the trust you’ve built creates a culture you can count on
when you need it the most.
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