ANNEX III : TURNAROUND COMMUNICATIONS
People see through empty propaganda, and baloney will not solve
corporate problems, but communications always matter, including in
turnarounds. In this Annex I am addressing mainly internal turnaround
communications. The principles governing external turnaround
communications are very similar. The objectives, in both cases, are to
prevent / end harmful rumors, to increase or to regain the target audiences'
confidence in the company's ability to survive and prosper and in the
ability of management to lead the company to safety and prosperity. The
ultimate objective is to obtain the cooperation and support of the target
audiences.
The first – and always the core – objective, is to gain strong
credibility for the company and its management. For obvious reasons,
usually the credibility of management is restored first. As everything
else in a turnaround, this has to be done in a special turnaround
environment.
Mutual trust and respect between the employees and top management can
go a long way in helping to solve the company's problems. By the time
the company is in serious trouble, this trust and respect are generally
in short supply. That in itself is a reason to bring in new management
blood. But in my opinion, not a sufficient reason. For one, responsible
management is not a popularity contest. Labor peace bought at a price of
excessive concessions has nothing to do with a climate of genuine trust
and respect. Having said that, it is also true, that the sooner this
climate of trust is established between the turnaround management and
the rest of the employees, the better the prospects are for the
turnaround.
The content and manner of internal turnaround communications,
particularly in the early phases, should be approved by the owner or the
board of directors.
An Important Early Message. One function of Turnaround
Communications is to foster a climate of cooperation. And here, as
everyone else, the turnaround leader has only one chance to make a good
first impression. The best way to start this process, I find, is for the
turnaround leader (after a rapid assessment of the situation) to give
the subordinate managers, at both senior and lower levels, the following
internal turnaround message to be also transmitted in words and deeds
down the ranks. This message should be given verbally to as many persons
as possible, in addition to issuing a written memo.
This message informs all managers and all staff that from that from
this moment on, a different and more practical standard of performance
is expected, because the company is in a decline that must be reversed.
This message says that some of the old company ways will be kept, and
that in addition many new ways must be found in order to save the
company and to make it prosper, and that everyone is invited to
contribute ideas. It goes on to say – ideally, with facts that the
audience will recognize – that new ways are already being implemented
because the first responsibility of top management is to prevent the
closing of the company. This message tells the audience – again
ideally, with facts that they will recognize – that top management's
overall priority is to rebuild the company, and that this work will
start (or better, has started) even before the hemorrhaging is stopped.
Ideally, the first turnaround message should also mention certain
spending, budgeting and operating practices that are no longer accepted,
and should mention certain new controls that from now, on will be applied.
The announcement of these new directives should encompass, as
appropriate, diverse activities related to work on the road, on the
telephone, at the office, and on the shop floor.
Obviously such specific messages require planning and preparation. If
it is not possible to issue such specific messages immediately when the
turnaround leader takes office, it should be done very soon after that,
within 2 weeks if possible, because the normal effect of such
communications is to arrest
negative rumors – by demonstrating to all staff the purpose
of actions taken. Nobody likes to tighten their belt or to increase
their workload for the same pay, but people respond much better to such
requests if they feel that the burden is shared by others fairly, if
they feel their input will be valued, and if they respect top
management.
Case #6
– Co-opting Support Through Fairness. During World War I, Bernard Baruch, the
"czar" of the US wartime economy, obtained cooperation of the
labor unions, then led by the famous Samuel Gompers, primarily by
demonstrating real fairness. The war effort called for sacrifices. In
this context, in a meeting of industry and union leaders,
presided by Baruch, some industrialists demanded that the workers be
drafted for the duration of the war for work in war plants and related
primary industries, such as mines an steel plants, without a right to
strike or change jobs. "Fine", said Baruch, "we
will also draft the capital – for the duration of the war you will
work without a profit". His statement convinced Gompers and
other union leaders that Baruch could be trusted, and they became
receptive to his requests.
It is a fact of life that in distressed companies employees are
frequently mistrustful and suspicious of management's motives
and its competence. In this situation, the inclusion of specific new
directives in early internal turnaround communications, demonstrates to employees that top management is doing its homework, that it really
means business, and most importantly, that this time it is for real and not another false start.
The communication of such facts and their acceptance by the staff serve to
rebuild confidence and make employees receptive to the challenges of
turnaround.
Communicating the Cuts. As a rule, early internal turnaround
communications must also address significant cuts that almost always
have to be made in turnarounds. This includes shorter work hours,
temporary plant closings, layoffs and permanent reduction of staff, that have
to be made to stop the hemorrhaging. These cuts are announced frankly,
and are carried out as fairly and humanely as possible, including
outplacement assistance, but such cuts as a rule must be made because
the survival of the company must come first. These cuts are made for
economic reasons, and may be termed "no-fault cuts", as far as
performance of affected employees is concerned. The manner of
communicating these cuts depends on whether they are made directly or
through sale of certain business units.
In addition, internal turnaround communications must convey the sense
that everyone has to pull up their socks and that sleepers and
non-performers will have to go. At the same time, a clear message of a
turnaround must be that people who really contribute will be rapidly
promoted.
Internal turnaround communications convince employees that top
management considers their questions as teamwork,
that it considers those questions as a mark of initiative, that top
management believes that the company will be rebuilt by teamwork, and
that because of the turnaround, major opportunities are created for
capable employees.
Internal turnaround communications also inform employees that top
management recognizes they have the right to know what is expected of
them in the changed environment, that new procedures will tell them
that, but if they are not sure, they should ask. These communications
form an integral part of the management effort to instill disciplined
thinking and disciplined and timely action throughout the ranks, and to
foster initiative and a sense of purpose amongst all staff. Therefore
these communications must cultivate a climate in which employees accept that
improvements will always continue.
In this context, internal communications must convey the sense that
from now on, complacency is out, that old ways – no matter how long
established – have to be justified on cost-benefit basis, just like
new ways. The message is that this rule applies throughout the company
in all activities, i.e. in selling, buying, budgeting, production,
promotion and in other operating activities, including support services.
The message is also that sustained prosperity of the company requires a
continuous process improvement.
Some people do not feel comfortable in an environment characterized
by frequent changes. Some resist even continuous process improvement –
simply because they do not like change. In extreme cases, even the fairest treatment and the most open communications about changes that are
being implemented will not calm those persons, and they will want to leave. And
in those cases, by leaving they will be doing themselves and the company
a favor.
At the same time it is essential that turnaround communications
prevent misunderstandings with valuable employees about the nature of
changes – in order to obtain their best cooperation and to prevent
them from leaving.
For this reasons, as well as for productivity and financial reasons,
internal turnaround communications must also convey the sense that
practical suggestions are expected from everyone, particularly from
management and supervisory staff.
A full text and / or a summary of most internal turnaround messages
of a general nature, which are addressed by the turnaround leader to
managers of all ranks, should also be given to non-management employees.
In fact, I feel that no matter how busy the turnaround leader is, in
small or medium size companies, he or she should give employees an
opportunity to contact him or her directly.
I had developed special forms to help employees of all ranks,
particularly non-management and supervisory staff, to crystallize their
ideas and suggestions which they may wish to offer to top management.
And if a worker takes the trouble to put his ideas down for the company,
I certainly make myself available to discuss his or her ideas.
With managers of all levels I take a different approach. I simply ask
each of them to write down briefly what he or she would do as a
president of this company to bring about the turnaround and in general. In the past, I usually invited managers to make
such proposals in one-on-one meetings, but having recently read the
article by David N. James in Harvard Business Review of March 2002, I
will use group meetings for that purpose. If the existing senior
managers have good ideas for turning the company around, well that's
truly wonderful. Their ideas will be incorporated into the Turnaround
Concept. But if top or senior managers have little to offer when
the company is fighting for its life, that in itself is also valuable
information. Moreover such solicitations of ideas are very useful in
discovering hidden talents, particularly within the lower and middle
management ranks. Once discovered, these talents are put to use in the
turnaround process.
Constructive input from managers and the rest of the staff constitutes the other
part of internal turnaround communications. Except in situations
involving very militant unions which hold back cooperation by employees,
the quality and the quantity of such bottom-up input is in itself
indicative of the progress of a turnaround.
The best way to prevent a company from sliding back onto the Losing
Track is to transform its corporate culture from complacent to
inquisitive, evaluating and energetic, and internal communications can
play an important role in achieving this. In particular, it is very
useful to repeat the above energizing themes in various internal
communications, whenever an opportunity presents itself to support these
themes with new facts and especially with new achievements.
Internal Communications Versus New Blood. While in theory,
nothing prevents existing top management from soliciting
ideas from the rest of the staff,
experience shows that in distressed corporations, people generally
do not open up to old leaders.
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