Why Honesty is Best Policy When Delivering Bad News

Published: May 13, 2009 in Knowledge@Emory

Whether it’s the recent announcement of yet more layoffs at Microsoft or word of the machinations to save bankrupt automaker Chrysler, corporate leaders are finding it hard to go a day without delivering bad news to their staff. Certainly, the economic downturn and financial crisis are necessitating belt-tightening efforts at many U.S. firms, says Nikki Graves, assistant professor in the practice of management communication at Emory University's Goizueta Business School. The best way to deliver even the most painful information is to face it head-on, she says, with employers speaking in the most open and honest terms when communicating with staff.

Graves admits that often managers “do not have all the answers,” but when employees approach them with questions, managers do need to be frank in their response. “In these times, it’s best not to hide out, or pretend that you have all of the answers,” she says. “Give as much information as needs to be communicated, and when the situation is unclear, it’s okay to admit that you are unsure of how it will play out.” The worst thing for managers to do is to create a “climate of ambiguity,” says Graves.

She notes that managers need to expect and accept that employees will be angry about picking up the slack for laid off staff. Executives will also need to deal with individuals who are being laid off, as their reaction to the news could be quite emotional, especially if they have put in considerable time with the company. “There is a certain amount of emotional labor involved in being a manager,” observes Graves, “and while it’s great to be empathetic, managers must stay focused on the larger goals, and on making sure that the remaining employees stay aligned with the organization’s mission and values.”

But once the news is communicated and staff downsized, the business does need to move forward. Often, by making sure the given situation is clear to employees, leadership can then get back to focusing on work and getting the company back on track. “Management needs to recognize the importance of having employees be a committed part of any organizational realignment,” says Graves.

Timing is everything

Knowing when to communicate the news of a corporate reorganization or strategy shift can sometimes be just as hard as delivering news of a layoff. According to Brandon Smith, senior lecturer in the practice of management communication at Goizueta Business School and principal at Core Growth Partners, a growth strategy and executive development consulting firm based in Roswell, Georgia, timing the announcement is key. “If you plan on engaging your workforce and getting a buy-in on a major initiative,” he says, “you simply can’t deliver this sort of information when you are in mass layoff mode, for instance.”

Smith notes that employees used to “business as usual” will find it difficult to shift gears to some new effort. And, for those “left behind” after a mass layoff, they will need time to process other structural changes at the company. “You really have to think about how to reengage people,” he adds. It can be especially difficult for those asked to work harder, especially if they are thinking about their friends and associates who have been let go from the company. This is when skillful leadership is important. Work has to continue, says Smith, but the operation most certainly will be a “leaner and meaner” one.

But when the time is set for layoffs, Smith agrees with Graves’s assessment, noting that it is important for managers to be decisive and not to “beat around the proverbial bush.” When the door shuts and it’s time to give the bad news, he notes that it is best to be frank and upfront with the employee. Smith adds that it often helps to give an employee a chance to process the information. Then, invite the employee back into your office again to discuss the very real situation of moving on by providing detailed information on such things as access to unemployment benefits, COBRA, and outplacement services post-layoff.

The benefit of signaling

However, employees do need mental preparation time to understand and process that a strategy shift, pay cut or layoff might be on the horizon. “The worst thing is for a downsizing to come too quickly and serve as a major shock to the system,” says Smith. Employees should receive some sort of signal or advance notice, and management needs to put a transparent process in place that allows for two-way communication and conversations with employees.

Daphne Schechter, a lecturer in the practice of management communication at Goizueta Business School and a principal at Schechter Consulting, a leadership and management-training consultancy based in Dunwoody, Georgia, agrees that the adage of honesty being the best policy does apply to delivering bad news in the corporate world. “Don't sugarcoat it,” she adds. “Give out all the facts you can and be as straightforward as possible. Allow people to vent feelings and frustrations.” But being in a management post does require taking a hard stance, and so Schechter notes that executives need to be prepared to stand firm and not offer excuses for pay cuts or layoffs.

She reminds managers to employ verbal and non-verbal signals to get the message across. “Verbal reinforcement could be simple things like noting “yes” or “that makes sense,” she says. Schechter warns managers to avoid saying “I understand” when delivering really bad news. “You really can’t understand how a person is feeling in a situation like that.” She does note that non-verbal signs also can be useful. Managers should make eye contact whenever possible. They can choose to be silent when an employee needs to vent, or they can offer a head nod to acknowledge a comment at an appropriate time. Affirmation of the employee’s feelings is essential, she notes.

Digesting news of a pay cut

For many companies, surviving the economic downturn means instituting pay freezes and wage cuts. Whether it is the auto industry looking for concessions or the newspaper industry negotiating with unionized workers, many companies are looking to employ significant cost-cutting measures. Salary cuts are the quick way to trim expenses in desperate times. Automakers cite the slowdown in the car buying market as the reason for the move, while the newspaper industry points to the significant drop in ad sales as motivation to cut salaries.

GM management is considering filing for bankruptcy, while top brass continues to meet with union reps to push for cuts to staff, pay and retirement benefits. Bankrupt Chrysler negotiated concessions with the United Auto Workers in April. The story wasn’t much different for newspapers. On May 5, Chicago Sun-Times newsroom employees accepted a temporary 9 percent salary cut to help the paper and its parent company, Sun-Times Media Group. The parent company is currently operating under Chapter 11 bankruptcy protection. While reports suggest that the Boston Globe is facing closure, their largest union tentatively agreed to pay and benefit cuts on May 6 in an effort to save the ailing paper. The New York Times unionized workers accepted a 5 percent pay trim on May 4. The Times Co. owns both papers.

Schechter notes, “Although pay cuts are very much bad news, managers will couch it in terms of the situation being better than the prospect of laying off employees.” And given the difficult environment for finding a new position, many would prefer a salary freeze or pay cut to the news of a firing, she notes.

Sharing the burden

When cost-cutting measures are essential, the pain needs to be divided up equally, says Schechter. Entry level staff and middle management might get the sense that those in the C-suite are not doing their part, especially if top executives continue to rack up the tab on their expense accounts, refuse to take a bigger pay cut on very large earnings, or hold on to an exorbitant bonus at a financially troubled firm. Once again, Schechter notes that signaling, or the message sent to employees, is essential to keeping your staff focused on work.

Schechter refers to the recent example of the November 19, 2008 meeting between the CEOs of the Big 3 American automakers and the members of the U.S. House Financial Services Committee in Washington, D.C. The trio received a lambasting in the media for opting to use expensive corporate jets to fly to the Congressional meeting to plead for bailout funds. She notes, “Senior leaders must walk the walk and join the man on the street.”

Some firms are trying to do just that, says Schechter, including FedEx, which cut CEO Frederick Smith’s pay by 20 percent this year. He is also forgoing a multi-million dollar bonus, as the express delivery and logistics company seeks to regroup from a disappointing year. FedEx’s salaried staff took a pay cut and reductions to retirement benefits in 2009. While no one will be happy from the news, Schechter says that the message that “we are all in this together” does send the right signal to employees, helping to keep the operation moving at a time when it is the most critical.

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