Posted: 06 Jul, 2020
It is estimated that, on average, a business will face a crisis every four to five years. But how business leaders respond to a crisis varies immensely and the instinct of many is to keep the fact that there is a crisis quiet, perhaps believing they will lose authority or respect if they’re honest about it.
In reality, it is often hard to hide the fact that a crisis has occurred and so making decisions behind closed doors only serves to foster unease and distrust among employees and stakeholders. Being transparent about what is going on can be the best course of action and has numerous advantages.
1. It allows for understanding
Perhaps the most important thing to be gained by being transparent is understanding. Sharing the fact that you’re dealing with a crisis allows customers, employees, stakeholders and creditors to understand why some tough decisions may have to be made.
This is especially important when dealing with creditors in a crisis. If you know you will default on a payment or need to ask for extended payment terms, being honest about why and realistic about how and when you can make payments will go a long way to reassuring your creditors that you are confronting problems and dealing with them rather than ignoring them and hoping they will go away. Most creditors will be more than willing to work with you as long as you’ve been honest about your situation ahead of time and come up with a realistic solution.
The same is also true of customers. Over the last 3 months, many suppliers have struggled to meet the high volumes of online orders they have received, but most have been honest about their limited ability to meet the demand and have told consumers that fulfilling their orders could take several weeks longer than usual. In letting customers know this up-front, they have been rewarded with patience and understanding. It is all about setting and managing expectations.
2. It shows respect
While business leaders might think that being honest about a crisis will lose them respect, what it actually does is to show respect to employees, customers, stakeholders and creditors. It also conveys a level of character and self-respect as most people are aware of a crisis, but it takes a strength of character to take responsibility for dealing with it.
3. It builds relationships
Transparency fosters trust where trust is arguably the most important component in any relationship, including those between companies and their employees, customers and stakeholders.
And while trust is crucial to all relationships, it’s particularly important to a business’ relationship with its creditors and stakeholders. During a crisis, it’s best to be proactive about communicating what’s happening with creditors and stakeholders to reassure them that you’re not hiding from the problem or hiding it from them.
Your reward will be improved relationships with creditors and stakeholders who trust you to treat them fairly and may give you leeway in future crises because they know how you deal with them.
4. It creates a lasting reputation for integrity
Reputation must be seen as a long-term game and while a business’ reputation can take a hit from the release of bad news, in the long-term, people will trust what you say and will know that you run your business with integrity.
How a business responds to a crisis will be remembered far longer than how it behaves in good times and being transparent with employees, customers, stakeholders and creditors will not only help in the short term but will build trust for years to come.
TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist in these unprecedented times. If you need assistance, please contact our helpline on 0844 804 0116
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