Messages of doom don’t mean the end of the world

Financial Times - 18th April, 2009

Business challenges

It's important not to make bad news any worse when communicating with staff, writes Jonathan Moules

Entrepreneurs are by nature very positive people, so breaking bad news does not come easily to them. In the current economic troubles, this can create a problem.

Claire Owen, founder of Richmond-based marketing and HR recruitment business SG Group, was proud about the fact that she had never had a redundancy in 16 years of trading. All that changed suddenly last November. "Business fell off a cliff," she says.

She called all her 100 employees together for a meeting and broke the news that 15 would have to be made redundant."I had written out what I wanted to share with every¬body because I wanted to make sure that everyone was aware of the place that we had found ourselves in," she says.

"It was important that everybody heard the story and they heard it from me."Owen then promised to meet everyone personally the following Monday morning and set up an appointments board where people could choose their five-minute slot.

"It meant that groups of peo¬ple could come in around the same time.

"This is recognised good practice. Rupert Merson has advised entrepreneurs on this issue in his role as a partner at BDO Stoy Hay-ward. "Absolute honesty wins every time," he says.

It is vital to give proper thought to how you break bad news, says Martin Hennessey, founder of The Writer, a communications consultancy, who advises on the subject.

The biggest mistake entrepreneurs tend to make is spending too much time on the factual content of their message and not enough time on the way they tell it," he explains. "Often it's the tone of the message that people will read the most into.

"Unlike many small businesses, SG Group has a human resources team of three, though their job titles are employee relationship management (ERM) because Owen hates the term HR.

None of them was made redundant when the jobs axe fell. "The reason we didn't lose them was because I think that our company is only as good as the people we employ." Owen explains.

She admits that she underestimated the impact of the redundancies on the survivors. Owen stresses that she made deep enough cuts to ensure that she would not have to do it again in the foreseeable future, but admits that it is difficult to make people believe this.

The presence of the ERM team gave employees an outlet to express their fears about future job security. "A problem shared is a problem halved," Owen claims.

David Glassman, a business coach, claims that you can soften the impact of bad news by following three simple steps.

First, ask the other party what has worked. "This is a positive and neutral opening statement that gives each party the opportunity to feel proud of their contribution," Glassman explains. Then ask what has not worked. Finally, ask what will be done differently. "Of course, each party will answer the questions differently but both will know that an agreement will come from what has been revealed," Glassman says.

At SG, Owen has made physical changes to the layout of the office, ensuring that there are no longer gaps between desks. Some may view this as cynical management exercise, but Owen claims that it has helped revive the workplace "buzz".

She has also instigated more staff training because the economic downturn and subsequent rise in unemployment has changed SG's role as a recruiter. "It is just understanding that we have to change the way that we work," Owen says. "If we don't get as much business through the door, we have to be better at business development."

SG's challenge was straightforward. Many businesses are having to communicate bad news on multiple fronts, telling suppliers that they cannot pay so quickly, and customers that they must stump up more cash and faster.

The sharp decline in sterling's value against other currencies has meant that Lingo24, an Aberdeen-based online translation service, had to cut rates for the thousands of overseas translators it uses and raise prices for UK-based customers.

In both cases, the company chose to personalise the messages and found a way to present the bad news as a positive development for all, according to Christian Arno, Lingo24's founder.

For customers, the price increases were presented as a sign of the premium quality of Lingo24's service. “It gave clients flexibility," Arno says. “If pricing was an issue, they could go to a different service level.

"He notes that the business spoke specifically to its 100 largest clients and has not lost one. In fact, last month saw the company's best revenue figures since it was founded almost eight years ago.

Communicating with staff was potentially more complex. Lingo24 has 100 full-time employees, but uses the services of more than 3,000 translators, 80 per cent of whom live outside the UK.

Arno got his communications head to draft a single e-mail explaining that pay rates were being cut by 10 per cent and outlining the reasons for doing this. Each project manager would then personalise this for the translators under his or her jurisdiction. “We made sure, where we could, we found a benefit for the translator," Arno explains.

Like other freelancers, translators value the volume of work more highly than the hourly rate, so Lingo24 tried to offer a guaranteed quantity of work each month. In some cases, it was also able to offer faster payment.

Arno admits that he was lucky to have other people in his company to communicate his message. "The entrepreneurs I know are generally quite good at ideas but not very good at execution," he says.

"What was really fortunate for us was that I wasn't actually doing this process and the guys that took it on were very sensitive to the people they were talking to."

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