CS Insights: Communicating with Employees During a Restructuring

While the details always differ and the strategies must be tailored, the dynamics around communicating during a restructuring have similar contours from case to case. The company tries to convey a bright outlook, assure customers that it will be able to continue to service their needs and assure suppliers that it has the necessary financing available to pay invoices – all while maintaining credibility against a backdrop of distress.

One group that often does not get the attention they need is perhaps the most important group for a successful restructuring: the employees. The reasons for this are not malicious — “employees” can contain many differently-situated groups, and many financial restructurings contain an aspect of operational restructuring, which can mean job losses. That leads to a tricky proposition: since the scope of that operational restructuring may not be known at the onset of the financial restructuring, companies often attempt to skirt the issue and handle employee concerns either by routing them through HR or by preparing anodyne talking points that use a lot of words to say as little as possible.

This is a mistake. Whatever the eventual details of a restructuring may be, a significant portion of the employee base will play a role in the next chapter of the company’s story. Communicating with employees early, keeping them apprised of developments and treating them as the vitally important constituency they are gives the company the best chance of maintaining a focused, dedicated workforce committed to building a bridge to the post-restructuring world.

But how do you do this? A few key principles should guide:

Be as optimistic as possible, but not more so

Helping companies get a fresh start is perhaps the key attribute of the American chapter 11 process. Companies should not be shy about communicating their positive vision for the future and the role employees will play in it. This is easier the more purely financial the restructuring is, but in almost every case, management has an optimistic view about life after emergence, and it should state that view with confidence. Just be mindful that no one knows the company better than the employees; if there are real problems that need to be resolved, pretending that they don’t exist will serve only to damage management’s credibility at a critical juncture. So be realistic, but don’t be afraid to convey excitement about the future.

Provide details when it’s possible and honesty when it’s not

If management has a view on job cuts, location closures, relocations or any other employee-focused restructuring items, it should deliver that view and provide as much specificity as it can as early as it can (factoring in legal, jurisdictional and other related considerations). This often gets delayed due to a fear that employees will race for the exits, but that delay can be short-sighted. Employees are probably already looking at alternatives, and management will get no credit for delaying the delivery of bad news. Instead, by being clear and open on the topic, management will convey that employees are not an afterthought and may help slow the runaway gossip train that often develops in a vacuum. This is true even if there are not yet many details to share; the key is to make sure employees know that management is thinking about them as it draws up the plan for the future of the company.

Communicate with empathy

It is often said that employees only care about “what’s in it for them.” While this is, of course, true for every stakeholder group, it is also true that a prospective job loss is somewhat more existential than an unpaid receivable or a bad mark on a debt security. Employee communications should acknowledge that. Plain language and a more-frequent-than-usual communications cadence are useful in this regard, as is the offer of additional services for employees. HR can be a useful tool here, but should be used in support of the communications plan, not as an alternative to having one. Remaining employees will also feel the impact of any restructuring, and it is important not to take for granted the people who will be responsible for the company’s success post-restructuring.

Developing a communications plan based on these principles is straightforward, but that is not the same thing as “easy.” It requires the focus and buy-in of senior management. It requires treating employees as partners in the enterprise, rather than as mere production inputs. And it requires continuous effort and refinement throughout the organization. But it is worth it; nailing employee communications during a restructuring greatly enhances the chances that the company will emerge from the restructuring with the lifeblood of the organization intact and primed to contribute to its future success.