The bankruptcies of the big automakers earlier this year may have captured most of the headlines, but thousands of smaller U.S. companies will also have gone the Chapter 11 route by the time 2009 mercifully comes to an end. And many more may follow next year before the economic recovery fully takes hold.
Is that bad news? Not necessarily, especially for cash-strapped but otherwise viable companies that can effectively communicate the opportunity Chapter 11 provides to address their underlying financial challenges and restructure, regroup, reposition and re-energize for the recovery.
When properly understood, bankruptcy no longer carries the stigma it once did. Chapter 11 is a tool that many well-respected corporations have used very effectively to implement their turnaround strategies.
Efforts to turn around companies with good products, services and people have become increasingly common in this unprecedented economic environment. In fact, the American Bankruptcy Institute reports that as conditions steadily declined in the first half of this year, Chapter 11 business reorganizations more than doubled over the same period a year earlier.
By shaping attitudes and driving behaviors among key audiences, effective communication -- before, during and after a Chapter 11 filing or other financial restructuring -- can be a key lever for engaging and maintaining the support of vital constituencies, and preserving the organization's value over time. Thus, a company's relationship with its various constituencies -- especially customers and employees -- has never been more critical.
Specifically, effective communication during periods of financial distress can:
- Align, motivate and retain employees
- Sustain and strengthen customer relationships
- Help direct and shape media coverage
- Encourage support from other influencers and situation-specific audiences such as vendors and suppliers
- Anticipate, minimize and/or mitigate potential opposition
An effective communication strategy should support the organization's legal and strategic goals and help drive the desired outcomes. Timing, responsibilities and tools should be carefully planned and thoroughly vetted well in advance of any filing.
Crisp, clear key messages should seek to build greater appreciation for the company's long-term strategy and viability, and to create better understanding that Chapter 11 will facilitate the restructuring process. Other communication tools may include a news release as well as audience-specific meeting scripts, e-mails, letters and frequently asked questions.
Want evidence of what effective communication can do to position a company? Consider Continental Airlines, which Fortune magazine has named as the world's most admired airline for the past six years in a row. Back in the early 1990s, Continental was in bankruptcy and some people were questioning whether it would even survive. And then there's Delta Air Lines, which exited bankruptcy two-and-a-half years ago flying to more destinations in more countries than any other airline, and has now become the world's largest airline.
While your goal may be to stay out of the headlines, communicating effectively can at least help to ensure that your key stakeholders hear the straight story.
If you'd like to talk about communicating on tough issues, please contact Matt Barkett at 216-241-3073 or firstname.lastname@example.org.