Communicating With Transparency During Times of Crisis

Lorne Hartman, Ph.D., Founding Principal, Psybase Network Inc.

Contact: Psybase Network Inc. | 905.764.2696

Case Study

Here’s the background scenario: I was helping a client (the North American operations of an automotive supply company with annual revenues of $800 Million US) plan their company’s first major downsizing (this was the early 1990s). Thirty percent of salaried employees had been "earmarked" for termination. Whereas those targeted for dismissal included some contract and part-time employees, most were poor performers identified through managers’ evaluations. The execution of the reduction-in-force (RIF) was scheduled to take place in two months. The client wanted my assistance with a post-downsizing renewal effort to re-engage the surviving staff in a go-forward proposition that would be meaningful and enlist their buy-in (and performance).

I was attending a planning meeting with the HR team along with another consultant from the outplacement firm that would be providing career transition services to dismissed employees. The HR team was worried about widespread gossip and rumor focused on the downsizing which had been fueled by leaked information. Employees were all talking about it, citing numbers and dates, and there was evidence that productivity was down. The HR group asked the two consultants whether there should be any interim communication before the event (still 6 or 7 weeks away) or if they should just say and do nothing until announcement day.

My response was: "By all means, tell people what you know—Here is what’s happening with the business. This is why we need to cut costs. Package the rationale statement in a simple yet compelling way (e.g., Our average revenues per employee are $250,000 whereas the industry average is $400,000). As a result, we are planning to reduce salaried staff by 30%. Some contract, some part-time and some manager-identified poor performers. It will happen in the first week in March and here are the major features of the severance packages that we will be providing to impacted employees."

The other consultant from the outplacement firm then stood up and offered an opposing view: "Definitely don’t say anything about the downsizing. Sure, tell people what’s happening with the business. But tell them that we’re exploring all our options—looking at a number of things. No decisions have been made yet. As soon as we have information, we will share it with you."

I was baffled. How could two professional advisors, albeit tracking into the same space from somewhat different directions, come to such radically different conclusions. And which of us was right?

Communicating the Downsizing

Let me share with you my reasoning.

The way you terminate determines what you are to become: a rumor-filled mass of people uncertain about what’s happening to them or a company that knows what it’s doing. The uncertainty surrounding a RIF is more destructive to employees and the company than the actual terminations. This means that communication can significantly lessen the pain from large-scale terminations.

How? Make certain employees understand what’s going on. In this atmosphere of fear and suspicion employees are desperate for particular information:

• How many people are going?

• What were the criteria for selecting them?

• When will the terminations happen?

• How much is the severance package?

Clearly, employees also deserve to be told why, but limit this to one sentence. A fact. And consistently use this one sentence, over and over, whenever the question arises.

Here are examples from three companies terminating employees:

• We are manufacturing product at a price 15% higher than our major competitors.

• Volumes are down 23% since 1998 but we have the same number of employees.

• Today the company generates 57 percent less output than in 1999.

The primary communication goal must be equipping supervisors with a basic understanding of how the RIF will work and a few essential facts underlying the severance package. And more than anything, your communication must give supervisors confidence—enough confidence for them to stop the rumors that will inevitably run wild on the front line.

I recommended that the HR group arrange seminars with managers and supervisors in small groups (of 10 or 15) lead by a senior manager involved in the termination planning. I suggested that they produce a booklet broken down into the key topics—who will go; how much money they will get; termination timetable; and, how to get more information. The booklet was used as a guide for the seminars, encouraging people to ask questions and write the answers in their own booklets.