NFIB

Communicating Financial Difficulties with Employees
03/ 27/ 2002


Many employers are reluctant to inform employees about financial difficulties that the company may be having, fearing that the news may cause employees to become disheartened or immediately start looking for new jobs. In today's Workshop, Jeffrey Moses discusses ways to handle this situation.

When a company is having financial difficulties - due to slow sales, unexpected expenses, or operational shortcomings - employers may fear that if employees are informed, everyone would immediately assume the worst and fear for their jobs. While there is some truth to this, experience has shown that how employees respond is determined by the manner in which the news is delivered.

The most detrimental way for employees to find out about their company's troubles is through the "grapevine." Rumors and gossip are almost certain to contain inaccuracies, with unfounded speculation about what the financial problems will mean for employees. For this reason, it's almost always best for the company's managers to inform employees directly, either in a single large group or in smaller more informal gatherings.

If employees are informed at a large, all-company meeting, managers (or the owners) should be completely honest about the nature and extent of the problems. Attempts to mislead employees about the seriousness or extent of the problems can come back to haunt the company when the full truth ultimately comes out. Also, employees appreciate being thought important enough to share in the company's concerns.

At the time of a large group meeting, management should be prepared to outline precise steps that need to be taken to overcome the difficulties - especially if these include new guidelines or initiatives that involve the employees. All individuals at a company are much more likely to pitch in and work overtime- or whatever else is needed - when they know exactly what needs to be done, and if they feel like they can be a direct part of the solution. By the same token, not including employees in the solution, management may be limiting the possibility of ultimately solving the company's problems.

When meeting with employees in smaller groups, or when meeting with individuals, all the above guidelines should be followed. In addition, specific suggestions or instructions should be prepared to give to individual employees. Without blaming anyone, managers need to make everyone feel as though they can be part of the solution.

If salaries, benefits or perks need to be trimmed as a result of the company's problems, these should be announced as far in advance of implementation as possible. Nothing is more demoralizing for employees than to hear about salary reductions the day before paychecks are given out. This gives employees no time to make arrangements for meeting ongoing bills.

After an announcement is made about the problems, management needs to work closely with all employees to keep morale up. Some employees will be more anxious than others, and these individuals must be counseled to make sure that they do not instill too much undue worry in others. By the same token, some employees will immediately start sending out resumes - but it is vital to the success of the company that they remain attentive to their jobs. When management determines that an employee is spending time interviewing with other companies, a one-on-one meeting with the employee is mandatory.

Regular updates should be given after the first announcement is made. The owner and managers shouldn't let months go by without giving employees accurate updated information about the company's progress.

For a small business, in particular, the best way to handle company problems is to treat employees as mature, responsible individuals. Don't hold back information, or give out misleading reports in hopes of falsely raising spirits. Always assume that employees will go the extra mile. When they do, and when the company's sales pick up and profitability is again reached, everyone will feel more valued than before - and will realize that their activities directly helped the company come through a difficult and trying period.

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