A Down Economy Calls for Communicating Bad News Effectively and Honestly

Posted by Katie Noonan

It’s hard to turn on the TV or pick up a newspaper without hearing about major corporations being forced to slash jobs to stay afloat. Issuing bad news such as lay-offs, branch closings or company restructuring is one of the biggest challenges to a communications team dealing with both the public and the company’s concerned employees.

A great article by Sarah McAdams on Ragan Communications’ Web site provides corporate communications strategies to manage financial crises from Beth Haiken, Vice President of Corporate Communications at Providian Financial during its financial crisis prior to being sold to WaMu (now owned by JPMorgan Chase) in 2005.

Not only did Providian find itself in financial trouble, the company was also faced with a multi-million dollar class action suit from cardholders who claimed Providian had misled them about credit card fees and rates.

According to the Ragan Communications’ article, Providian was forced to downsize from 13,000 employees to 3,500 in about a year and a half. With a new management team in place, Providian issued a 5-point plan to restructure the company which was shared both internally and with the public. According to Haiken, management was frank about the need for downsizing. To effectively address employees’ concerns, the communications team coached managers extensively, providing talking points and Q&A, and training managers who were not experienced in giving employees bad news.

Here are just a few of Haiken’s suggestions from the Ragan article:

1. Never announce a problem without also announcing a solution. Employees and the public alike want to know that even though the company is struggling financially, the management team has a plan to turn things around. Using the Providian example as a framework, their 5-point plan acknowledged the problems that existed and provided a multi-faceted approach to address them.
2. Respond quickly. Even when the media beats you to releasing bad news, or plunging stock prices give you away, it’s important to respond quickly. It’s essential to regain control of the story and, if possible, place a positive spin on it. The longer it takes for the company to respond, the more time employees and the public have to speculate. Which leads to another important point -
3. Realize that employees are not stupid. At the very least, your employees deserve an explanation. They are capable of understanding business decisions, even difficult ones, and though they may be angry or worried, chances are they will respond better if they feel management is being truthful with them. Employee morale may suffer initially, but ultimately if employees feel management has a policy of openness, it will foster a more positive and trusting environment.
   

Read McAdam’s blog for more on corporate crisis communications.