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Gini Dietrich

Corporate Transparency: Communicating Changes

By: Gini Dietrich | August 17, 2009 | 
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zappos-culture

When the Zappos/Amazon deal went through on July 22, my friend Travis Dudfield asked my opinion on the communication to Zappos employees. I told him to let the media storm die down and I would write a blog post about it.

So here it is!

There was A LOT of criticism about how Tony Hsieh communicated the sale to his employees, beginning with the fact that he told everyone they still have their jobs and that he used email, video, and Twitter to spread the message.

I’m not there every day, and I don’t know what it is he is legally allowed to say, or what he’s not allowed to say, but I will tell you that in his letter (see it here) he is as transparent as he can be with an acquisition of this size. And using the social networks to spread the words goes to what he believes in and the core values of the company. So why would he do it any differently?

Let me tell you something that happened at Arment Dietrich at the beginning of this year. Before Thanksgiving last year, there were some insecurities among my colleagues that there might be lay-offs. The rumors were not warranted and I put the kibosh on them, telling all in a staff meeting that there were not going to be lay-offs.

But on Christmas Eve (Christmas EVE!), I received a certified letter from a client stating that, because of the ecomomy, they were terminating our contract effective immediately. Then, right after Christmas, but before the new year started, I received another letter in the overnight mail stating that our largest client was cutting their budget by 65 percent.

I got through the holidays without further incident, but went  back into the office right after the first of the year and knew something had to change or we wouldn’t be able to make payroll by the end of February.

So we laid off. We cut deeper than we probably needed to, but I wanted to be sure the business was in a position to survive any more cuts so we didn’t have to go through that again and so my colleagues could focus on the job at hand and not worry about lay-offs later in the year.

It was not fun. And I got a lot of flack for telling everyone before Thanksgiving that we weren’t going to have lay-offs. Some even called me a liar.

The fact of the matter is that, before Thanksgiving, I was transparent and honest and gave them all of the information I had at the time. No one considered I went through the entire holiday season knowing I was going to have to make a hard business choice after the new year because some of our clients were inconsiderate about the timing of their decisions (even though I understood they needed to happen before year’s end).

I didn’t lie. I didn’t withhold information. I was transparent with all of the information I had at the time.

So even though I’m not in Tony Hseih’s shoes, and my situation was not a major and public acquistion, based on what I know about him and the culture he’s built, the information provided in his communication is what he knows now and can legally tell his employees.

Will they lay off? Maybe.

Will the culture change? Maybe.

Will Tony, Fred, or Alfred leave? Maybe.

Did he share all of the information he could within legal boundaries, as soon as he could? I think he did.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

7 comments
Heidi Goldstein-Sidley
Heidi Goldstein-Sidley

Gini,The following was reprinted by Vistage around that same time in 2008. As many members were either initiating or contemplating layoffs . While I don't agree with every detail I think it gives a broad roadmap to follow. We were in your very shoes and we followed most of this advice and our layoffs in january went as best as they could have.

The important things to remember are:
• Everyone is affected... those who are laid off & those who remain,
• Plan & script,
• Over communicate.

The following is the reprint.
___________________________________________________________

I have been involved in many turnarounds and offer the following:

1. Don’t do the across the board cut. A 10% cut to the lower paid employees is devastating to them and their families and their constant worry negatively affects their work performance.
2. Take the opportunity to weed out the poor performers and the positions that are less valuable to the organization (Be sure to think this through with respect to all constituents – customers, suppliers, employees, investors)
3. Invest in equipment/services that will make the remaining employees more productive. Get your managers involved because they will be living with these decisions.
4. Make all the cuts at once -- I have used the following approach and have been thanked and told by both terminated employees and the remaining employees that this was the best layoff they had ever been through! It is critical for those who remain, who suffer from what I call the Viet Nam syndrome (Why not me? What if it were me?) that they see that those who were let go were treated with respect and appreciated.

Do this on a Monday at 10am before lunch. This gives the laid off employees several hours to be by themselves if they want before they have to go home and face their families. This gives the opportunity for the president to have a lunch meeting with the remaining employees to discuss the strategy and mission, the afternoon and next days to discuss action plans and the days following to gauge the morale and act accordingly. (You don’t want people stewing at home over a weekend with no opportunity to communicate with them.

At 10:00am Meeting

Bring all the employees who are being let go together for a meeting in a conference room. (It is comforting for them to go through this together)
As soon as this meeting starts, make an announcement to all the remaining employees to meet in another area in 15 minutes.

The president then announces to the lay off group that:

This is no longer business as usual, that we are in need of an overhaul and a restructure is necessary. Several jobs have been eliminated and the jobs that have been eliminated are yours. Please understand that this is not a performance issue. You have all been very dedicated and loyal to the company and everything you have contributed is sincerely appreciated.

After this meeting, you will be able to get your things together and go home before noon. The other employees are learning about this restructure while you are in this meeting. Their meeting will continue at noon after you have gone home. Feel free to say your goodbyes or to not do so, whatever is your preference.

To assist you, we will schedule your payments over time to help maximize your unemployment and we will cover your health care benefits through_______________. ______________ (the HR person/benefits person) will pass out letters explaining this to you and be available to answer any questions.

Do you have any questions for me? (They have never had a question. Everyone is in shock)

I understand the difficulty in being hit with this news. In many ways, this is like a death. You will grieve, even be angry. Allow yourself to do this, but try not to hang on to it. Then take advantage of the opportunity for a change.

On behalf of all of the employees we wish you success.

President leaves to go to the other meeting.

The HR Person and another executive remains and provides the termination letter, explains when the last day is, the severance formula, when accrued vacation and holiday is being accrued through, when benefits are paid through, eligibility for COBRA etc. Reminds them that they can say their goodbyes or leave if they want and make an appointment to return to clear out desk etc. after hours over the next week.

10:15 am meeting

The other meeting begins at 10:15am and takes about 15 minutes (Do not be afraid to show your sadness. Oddly enough, it helps everyone to know you’re suffering too and that you’re all in this together)

Explains that today is going to be a very stressful day. It is no longer business as usual and we are in need of an overhaul and a restructure is necessary. Several jobs have been eliminated and the jobs that have been eliminated are (name the names) They are in a meeting going on right now and they will be leaving us this morning.

Tell this group exactly what you said to the other group.

This is difficult news to hear. So let’s all go and digest it and come back at noon and say our goodbyes. Please be sure to wish your co-workers well and thank them for a job well done. Please understand that some will want to say their goodbyes today and others will want to leave right away.

We will reconvene this meeting at noon today for lunch.

From 10:30 to noon, there is a lot of crying and a lot of hugging and a lot of stunned silence. It’s a necessary process.

From Noon to 2:00

Eat first

I said earlier that today is going to be a very stressful day. It is no longer business as usual and we are in need of an overhaul and a restructure is necessary. Several jobs have been eliminated; therefore some activities will be changing.

List the changes.
Discuss the Company’s strategy and plans
Explain that cash is critical.
Explain that while they may think this is the worst of times, there is an opportunity for success if we all work together to implement change.
Explain that you are committed to make this organization one that is exciting and fun to be a part of.
Explain that you want each of them to help make the organization the best it can be.

Go over a schedule of meetings for the rest of the day and the next day – meetings to firm up job responsibilities, what customers, suppliers, investors will be told about the restructure (prepare scripts for the employees to use when talking to customers, suppliers and investors)

Tell your people what you expect – You want them to be change agents, to empower themselves, keep a positive attitude, raise the bar, be risk takers, be supportive, take care of your “me” issues, tell the truth, communicate, protect quality and customer service, keep your sense of humor and be a leader. Ask them to seize the opportunity.

Take questions. If you don’t know the answer, say you’ll get back to them and then do.

Over communicate

It’s important then to get the company together for weekly communications meetings to keep them posted on what’s happening and what’s not happening. Even if you have nothing to report, tell them that. After a months, monthly meetings is sufficient, then quarterly.

Get all of the managers of all of the functional areas together frequently to discuss cash flow and make cash outlay decisions. If you don’t, there is a lot of pointing and blaming about how cash is being spent. If the manager’s work together on the cash and understand the inflow and outflow, they will, as a group, decide on what is truly best for the company even if it negatively impacts their individual departments.

Plan and script

The tendency is to hurry the process and get it over with. In this case, patience brings results.You will be far better off taking the time to plan this whole process – it could take a day or a week, depending on the company.

This is a tremendous opportunity to achieve horrible results (with no planning) or to improve the culture, to improve performance and achieve greatness.

Dave Van de Walle
Dave Van de Walle

I once worked for a guy who took over our department and said, in as many words: "There will be turbulence. We will also work together to get through the turbulence. That's what I know right now."

He set the bar at the right height; not too low nor too high.

Turbulence was probably the right word, too -- he had access to all the instruments, altimeters, cabin pressure, etc. Unless the plane was going down and we needed to brace for a crash, we'll never know how bad or good it was at the front of the cabin.

So kudos to you for handling your situation as best as you can.

Kendall
Kendall

I love transparency but would hardly call this an example of transparency! Honesty about firing, executive moves, etc are non restricted by any law. What I find totally disingenuous is that EVERY company I have worked for in an acquisition says the same nonsense even while they all know privately what is going down. It is uncanny how often that is the case. I have assisted or drafted docs for 20+ acquisitions and this sort of release was drafted for each of them. So yes, when someone comes out and does not even ACKNOWLEDGE that changes WILL happen, it feels more like managing employees/spin than it does an authenticate communication.

Do I think he is acting different from everyone else? No. Do I think that he is being dishonest and is aware of changes but is trying to hide these facts to avoid a major meltdown or morale issues? Yes. Would I expect anything more from him? Not at all.

In sum, I think he is doing exactly what everyone else does--the "no changes" spin and deceit before the pink slips arrive. If I were an employee at Zappos, I would be dusting off my resume...and I certainly would not give him Kudos for his "transparency". Transparent he is not.

Molly Fulton
Molly Fulton

Great post, Gini.Going through a somewhat turbulent and uncertain time at work myself, I totally get this dilemma. It brings to mind some trite but true sayings like: "Hindsight is 20/20" and "When you know better, you do better". The desire for transparency is often tempered with uncertainty and the desire not to be either alarming or careless. A tough balancing act indeed!

Laura
Laura

Hi Gini- I enjoyed your post. Typically, people see the side of things they want to see - their side - and often disregard the other side of things. I think it's just human nature. But if we all tried to do that a little bit more, things would be smoother.

Brad Farris
Brad Farris

Gini:

I 100% agree with you. I was confused by the flack he got at the time, and thought he did a great job being transparent, but also complying with all the things his legal advisors were telling him.

Being transparent means not just telling what it is (no layoffs) but also why. (I'm building a business and as long as our clients hang in there with us, I'm planning to take an earnings hit to continue growth, but if the revenue changes, up or down, we will have to react to that when it happens. Right now, I don't foresee changes.)

I think this is hard for team members to understand, they more often want certainty (no layoffs period). But part of being in an entrepreneurial company, that values transparency is that you get to share the uncertainty too.

The questions for the CEO are. What am I doing to establish context around my everyday business decisions so that my team understands them? How am I preparing their business knowledge so that they will be on board with me as I am making those decisions? If there are surprises or disagreements, what information do I have that they need? What do they have that I need?

This is a hard road, being transparent. That's why we need this discussion.