The solution is to adopt a multistakeholder approach to communications, with a different plan for each audience. This includes not just the media but all internal, commercial, financial, political and regulatory audiences. Failure to identify and address the communications issues on a multistakeholder basis can potentially cause immense damage to a business. Competitors and the media may wish to create drama, driving customers to take their orders elsewhere, suppliers to change their terms of business and nervous investors to dump their shares.
Whatever the exact situation, it is crucial to maintain confidence and trust in a business throughout the turnaround process. The challenge is for the communications strategy, working hand-in-hand with the turnaround work of the restructuring professionals, to negate the risks that arise from a corporate crisis – the communications agenda needs to be set, control demonstrated and change managed.
Early planning ahead of an anticipated problem helps significantly, although this is often not possible as the restructuring process may have already started. While all businesses need to understand the importance of effective communication in helping companies maintain ‘business as usual,’ the process differs slightly based on a company’s market status.
Publicly-listed companies have to comply with the relevant rules of their respective stock exchanges regarding the disclosure of material information to the market. While there is usually little discretion over the timing and level of disclosure, it is necessary to consider the impact of public announcements on each stakeholder group and examine whether there is a particular need to reach out to each audience to provide additional clarity or stability. Examples might include calling a company’s significant trade creditors to explain the impact of the turnaround or presenting the challenges facing the business to the staff and giving them an opportunity to have their questions addressed by the company’s management.
In the case of private companies undergoing a restructuring, there is more flexibility to determine the exact level of disclosure and timings with each stakeholder. Even when a decision is made not to disclose an event or milestone, there is a still a need to prepare a contingency plan which will give the business a clear course of action should there be a leak.
Remember that in a vacuum people will draw their own conclusions. So companies in turnaround situations should strive to manage the messages and communicate where possible. This will help to avoid the panic that often accompanies uncertainty and, in particular, will tackle the appetite of the media for conflict and crisis. If an organization can demonstrate clarity and control though its communications as it undergoes change, then it stands a much better chance of preserving confidence in the business and, ultimately, protecting its value.
Giles Sanderson is a founder of the European Restructuring & Recapitalization Communications practice at FD, the strategic communications segment of FTI.