News and Views
Communicating in a downturn
13 October 2008
Communication: the good news and the bad news
No news is good news, so the saying goes. But that's no more than wishful thinking: when companies have bad news to deliver, it is always a great temptation not to communicate it at all.
Now that we're facing an unprecedented economic crisis and a slowing economy, there are plenty of companies that would like nothing more than to keep quiet about their troubles. Whether it's job cuts, profit downgrades, poor investor returns or stalled growth, there are going to be many unpleasant tales to tell in the coming months.
Yet the way companies communicate in a crisis defines them. Being open and transparent during a time of booming profits is easy; sharing negative news with shareholders, employees or customers is more difficult. But if done well, it's an effective way to protect and grow a reputation and to build trust among stakeholders.
Observe, for example, how many companies will cut their workforce over the coming months. Many will do it by stealth - a few here, a few there, a freeze on hiring, a cutback on temporary staff. This kind of behaviour may save the company from the spotlight in the short term, but the negative effects will nonetheless be felt right throughout the organisation.
When employees aren't sure about their future, and don't understand where the cuts are coming from or the rationale for decision-making, it creates a culture of fear and mistrust. Some employees - including the top talent - will leave pre-emptively, while others will develop a negative attitude that hampers performance.
The right thing to do in this context is to communicate openly. (And this doesn't mean a terse email to the company, announcing that a percentage of the workforce will be slashed this week).
It means explaining, in one-on-one or group meetings, what is happening, why and how. It means allowing employees to voice their fears and concerns, while creating a dialogue with both departing and remaining staff.
Then, and only then, should this be communicated to the media and external stakeholders, without any obfuscation. Explain the rationale, the process for downsizing and of course, what's being done to help those departing.
Reputations are notoriously difficult to build and easy to destroy, so don't expect anyone to forgive poor corporate citizenship just because times are tough. On the other hand, openness and transparency at the time when it's most difficult will be recognised and remembered when the good times return.