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IAI Actuarial Core Principles · Business Management · Communicating strategy; culture and structure in decision making; strategy case studies

A listed Indian insurer announces a restructuring that will merge two business units. Within the company, the HR head tells staff that no jobs will be lost, while the CFO tells analysts that cost savings of 12% will come mainly from headcount reduction. Which is the most significant problem arising from this situation?

The main problem is inconsistent messaging: staff are told no jobs will be lost while analysts are told savings come from headcount cuts. Messages may be tailored in detail for each audience but must not contradict, otherwise credibility is damaged and one group is misled.

  1. AThe announcement was made to analysts before the final legal documents were drafted
  2. BInconsistent messages to different stakeholders, which undermine credibility and may mislead one groupCorrect
  3. CThe CFO should not have discussed financial targets with external parties under any circumstances
  4. DThe HR head has a duty to disclose headcount decisions to the regulator before informing staff
  5. Staff are not a stakeholder group whose understanding of strategy is relevant

Explanation

Different audiences need tailored detail, but the core message must be consistent. Contradictory statements damage trust and may mislead staff or investors. Discussing targets with analysts is normal practice, and staff are important stakeholders.

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