Corporate Silence Is Far From Golden
September 29, 2022
When a sensitive situation unfolds, many managers opt to limit communications to their inner circle. They fear that providing partial information in a rapidly developing environment will confuse and unsettle their wider group of stakeholders. They don’t manage expectations, and they’re not transparent.
The result? Employees, customers and shareholders are left to imagine the worst.
If you’ve ever been on the receiving end of a merger, acquisition, major layoff, restructuring, price hike, or business delay, you know what’s it like to be out of the loop.
Unfortunately, these are not isolated incidents. They happen all the time and in every realm. A few examples:
M&A thrusts employees into limbo
: Company S was being acquired, and, as is typical, the main thrust of activities -- from initial exploration to the final deal -- went on behind closed doors. None of the employees knew until three months before D-Day whether they would retain or lose their jobs.
The upshot? The most talented employees quickly started job hunting, secured new positions and promptly left. That’s an unintended and undesirable effect of corporate silence.
What’s the best way forward? A report by KPMG on navigating complex mergers and acquisitions recommends “five practical moves to improve your odds of success." Among them: “Adopt a people strategy for the times.”
Financial services volatility freaks out retail investors:
When markets are in flux, those with an absentee financial advisor likely think the sky is falling. Investors have greater trust in an advisor who calls them -- even with bad news -- to discuss the economic context, their portfolio and how to hedge for the future.
Silence can be costly to relationships and portfolios. Markets typically pull back three times per year. Declines occur every few years, and severe ones over a longer timeframe.
So, what’s the downside of an advisor remaining hush? Investors react impulsively to reduce their discomfort and cut their losses, but more often than not sabotage achieving their underlying goals. In other words, it’s bad for business all around.
Condo management reticence muddies the works:
The building needed seven figures to pay for overdue repairs. The elevator was out of service for two years and then some, and scaffolding for the required once-in-a-decade façade inspection was up for months longer than promised.
Rather than address the situation, the management company skulked in the background. It sent only two messages to residents about the elevator, creating frustration and unmet timelines for completion. It sent one scaffolding update with an estimate of several months, which took three times longer. Lack of candor and accurate information created ill will and lack of trust in the management company.
Furniture company shenanigans leave customers in the lurch:
Customers ordered a dining set from Norway with an eight-week delivery estimate. It arrived NINE MONTHS later. After the initial period passed, the customer was told the furniture was on a cargo ship waiting to dock and would then need to go through proper customs channels. A few months later, the furniture company changed the story and reported that the type of tree -- rosewood -- used for this piece could only be harvested once each year. Seriously?
The moral of these stories? If we do our jobs correctly, we educate our clients that change and upheavals are part of life. Communicate information judiciously. Be upfront and forthright. Give those in your orbit the benefit of your knowledge and respect. It’s not always easy, but it makes for better outcomes, and for a better night’s sleep for everyone involved.