Six Tools for Communicating Complex Ideas
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Leadership Finance & Accounting Sep 7, 2016

Six Tools for Communicating Complex Ideas

Business leaders need to know how to make their information stick.

A business leader communicates complex ideas to a circle of employees.

Michael Meier

Based on insights from

Mitchell A. Petersen

Every business leader is, in a sense, a teacher.

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Not in the sense that their job descrip­tion says Teacher”; not in the sense that they stand up in front of a lec­ture hall,” says Mitchell Petersen. But their job will entail com­mu­ni­cat­ing ideas to oth­ers, con­vinc­ing them the ideas are right — con­vinc­ing them that this is the right way to think about a problem.”

As a pro­fes­sor of finance at the Kel­logg School and an expert in empir­i­cal cor­po­rate finance, Petersen spends a lot of his time try­ing to con­vince peo­ple about how to think about problems.

He offers up these six tools to help you com­mu­ni­cate com­pli­cat­ed ideas to audi­ences — whether you are sit­ting down for a one-on-one, lead­ing a com­pa­ny all-hands meet­ing, or just try­ing to make sense of some­thing yourself.

1. Data

Data pro­vide a detailed, and dis­pas­sion­ate, char­ac­ter­i­za­tion of what has occurred pre­vi­ous­ly. As such, data serve 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 thus 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 favor­ing one deci­sion or pre­dic­tion over anoth­er — which can be where log­ic comes in.

2. Log­ic

Some­times, casu­al obser­va­tion or even sim­ple intu­ition can offer the ini­tial struc­ture you need to wres­tle with a com­plex prob­lem. Just as you have a men­tal mod­el of how grav­i­ty oper­ates on objects, you may over time devel­op a notion about why some stocks are riski­er than oth­ers, or why cer­tain firms ought to employ more or less leverage.

Quite often you have an idea of how two vari­ables are relat­ed,” says Petersen. That’s logic.”

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.”

3. Equa­tions

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.

How exact­ly do two vari­ables move in rela­tion to one anoth­er? It’s one thing to say the more debt a firm has, the high­er its expect­ed return on equi­ty — but is that a small change or a big change?” asks Petersen.

It is rare for an equa­tion to cap­ture every rela­tion­ship among a com­pli­cat­ed set of vari­ables, so good equa­tions also make a state­ment about the most impor­tant rela­tion­ships. They offer a way to boil com­plex rela­tion­ships down into a small num­ber of impor­tant levers,” Petersen says.

The equa­tions are always a sim­pli­fi­ca­tion of real­i­ty, so they nev­er fit per­fect­ly. The ques­tion is: Is the fit sort of close, or is it way off?”

4. Pic­tures

Pic­tures or visu­als offer your audi­ence an invalu­able way of remem­ber­ing the rela­tion­ships between dif­fer­ent vari­ables. Con­sid­er how easy it is to pic­ture the tra­jec­to­ry of a rock rolling down a hill or the rip­ples it cre­ates as it splash­es into a pond. Like­wise, 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.”

5. Sto­ries

Sto­ries that sum­ma­rize cer­tain log­ics or rela­tion­ships between vari­ables are per­haps stick­i­est of all. There are no cul­tures that I know of that don’t tell sto­ries,” says Petersen. It’s fun­da­men­tal­ly part of what it means to be human.”

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.

When think­ing up sto­ries, do not be afraid to chan­nel the ridicu­lous. The dopi­er the sto­ry, the more peo­ple may groan — but years lat­er they remem­ber it,” says Petersen. I will meet peo­ple 5, 10, 15 years after [pre­sent­ing infor­ma­tion] and they do not remem­ber the spe­cif­ic data, but that stu­pid sto­ry I told them years ago has root­ed itself in their brain.”

It helps also to keep in mind that sto­ries are not just for your audi­ence. By telling that sto­ry to our­selves, it’s a way for us to under­stand the world and cement it in our memory.”

6. Par­tic­i­pa­tion

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 clar­i­fi­ca­tion. 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? Con­sid­er a straight­for­ward approach. I’ll just stop and say, Some­body please ask me a ques­tion,’” he says.

And as you answer, use your body lan­guage to com­mu­ni­cate that you gen­uine­ly wel­come the oppor­tu­ni­ty to clar­i­fy. Do you lean for­ward? Do you lean back­wards? Do you nod? Do you shake your head?” he asks.

Above all, do not assume that the brave ques­tion­er is the only one confused.

Watch the expres­sions of the three peo­ple sit­ting behind them. Their bod­ies all of a sud­den relax. What effec­tive­ly they’re say­ing is: I was lost but I didn’t want to ask,’ or I was lost and I couldn’t artic­u­late the ques­tion. Amanda’s ques­tion actu­al­ly sort­ed it out. Now I under­stand what I don’t understand.’”

Featured Faculty

Mitchell A. Petersen

Glen Vasel Professor of Finance and Director of the Heizer Center for Private Equity and Venture Capital

About the Writer

Gretchen Kalwinski is a freelance writer based in Chicago.

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