Communicating Through a Corporate Restructuring
By Denton’s…
Just before Thanksgiving last year, the owner of a furniture company in Ohio texted and emailed all of his almost 3,000 employees during the night, informing them that their services were no longer required and the company was going bankrupt. He then flew to Paris for a holiday. No one knew where he was, he did not return any calls, he did not respond to messages.
The impact was immediate: social media exploded with employee outrage, old-school media – from red-tops to financial outlets and platforms – picked up on it and had a field day. People were scathing, and rightly so. Irrespective of the operational and legal outcome of the bankruptcy, the reputational damage to the owner, his family and his company is irreparable. The event will become a case study at American business schools of how not to handle a crisis.
We will not examine the clearly very poor moral choices that were made, nor will we discuss the legal options that would have been available to the company. What we do argue, however, is that communications during such a crisis is absolutely crucial, can make or break corporate and personal reputations, reduce or intensify human suffering, facilitate or impair resolutions, limit monetary costs or cause them to skyrocket. How communications is conducted during a crisis – any crisis – is as important as the strategic, operational, financial and legal decisions made to resolve it.
Any formal corporate restructuring process is a crisis, and we will use the term ‘restructuring’ loosely to cover insolvency, bankruptcy or financial restructuring. Importantly, and helpfully, these legal processes are somewhat more predictable than many other types of crisis. Longer-term preparation is possible because, typically, restructurings can be seen weeks or even months ahead of time.
The challenge from a communications perspective in any crisis is that a wide range of interested parties need to be addressed as early as possible, at a time when many aspects of the process itself are subject to uncertainty, as is the ultimate outcome. This may in some cases be before a formal restructuring announcement is made, as rumours need to be addressed, worried employees reassured and business partners calmed down.
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