13 Dec 2004  Research & Ideas

Sharing News That Might Be Bad

We've all taken a vow of transparency, but how do you give employees news that is potentially bad—but extremely ambiguous? Harvard Management Update suggests that managers draw from negotiation strategy.

 

Editor's Note— This scenario, inspired by a Harvard Business School case, may ring familiar. It raises an increasingly prevalent, and difficult, management issue: how much information to share and when to share it.

You look up to find the concerned face of a key employee darkening your door. He's heard rumors that the division might be in trouble, that corporate support is wavering, and that potential buyers are lining up. He wants to know what you know.

Though the rumors are not altogether accurate, they do contain more than a few grains of truth. In spite of some recent unit successes, the company's board of directors recently gave the department mixed reviews: some directors are dubious about the unit's long-term prospects and are open to acquisition offers; others, however, continue to believe in the unit's promise and want to give it a couple more years to produce bigger things. The issue won't be settled for months.

How do you deal with it?

Like so many executives over the past few years, you have made a commitment to internal "transparency"—where not only the numbers but also the big picture is discussed candidly with employees. Your commitment to openness has been largely successful; it has engendered feelings of trust, empowerment, and commitment to both you and the company.

The right choice lies closer to blunt truth than to denial.

It hasn't always been easy: just as bad numbers can send people into states of unfounded pessimism, good data threatens to skyrocket them into false states of euphoria. But, by and large, you've been able to keep your people grounded by helping to develop their strategic and financial wherewithal, by sharing company news and data with a strong sense of the larger context, and by giving your teams a great deal of responsibility for making decisions based on the wealth of information they can now access.

But at this point the news is big and possibly threatening. Worst of all, it's vague. If not well managed, the message could have devastating effects. You've been sitting on what you know for weeks, not sure how or when to share it. You've considered simply waiting for something more definitive—but who knows when that will come? Now your hand has been forced. If one employee has heard rumblings, so have others—maybe customers have heard them, too. Any executive who has made the commitment to this kind of transparency will one day face this dilemma: How do you deal with developments that are utterly and wholly…ambiguous?

Living up to your standards

When you get right down to it, what choice do you have? You've made a commitment to openness and reaped substantial benefits by doing so, but now your reputation is on the line. If you don't take the offensive and word gets out on its own (and you know one day it will), you'll destroy all the trust and goodwill you've built.

"To secure the economic benefits of honesty, one must be perceived as being committed to honesty, which means viewing truth as something intrinsically good and not subject to reevaluation on a case-by-case basis," writes Harvard Business School professor Lynn Sharp Paine in Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (McGraw-Hill Trade, 2002). More important, she notes, "Divergences between ethics and financial self-interest that appear acute in the short-term can narrow or disappear if a longer-term perspective is taken."

True, Paine's big-picture purview may be a bit hard to swallow when the sharp horns of a dilemma are pressing on your gut, but history proves it time and again: diverge once from the public commitment you've made—especially on a significant issue—and the trust may disappear forever. But there's more to this than just living up to your commitments. If you don't take the offensive on delivering this news, you'll lose any opportunity to present it in the most constructive context.

"People aren't happy when the unexpected happens, but they are even unhappier if they find out you tried to hide it," says Bruce Patton, a partner at Boston-based Vantage Partners. "Given that something has happened and others will find out, most people judge you and decide what to do based on how you are responding. How clear is your thinking, persuasive your analysis, comprehensive your consideration of alternative explanations and options, and creative and risk-mitigating your response?"

So the big question is no longer what you do, but how you do it.

Take cues from negotiation strategy

With negative or ambiguous information, "the interests at stake are not necessarily an attempt to persuade or influence," says Danny Ertel, also a partner at Vantage. "They are about being able to manage a business effectively, about being able to make good decisions based on reliable information, about being treated fairly."

To find the right balance in presenting tricky information, Ertel suggests executives consider the following questions, which originate in the realm of negotiation strategy:

What are your key interests? In this case, the executive's interests are twofold: maintain a trust-based relationship with her reports and protect the integrity of the business.

What are the interests of the many audiences who will invariably hear at least some parts of the message? For the unit's managers—the executive's primary concern—the interests probably begin with the stability of their livelihood. They want to know what the future holds for them.

What are some options for meeting those interests? The options range, of course, from blunt truth-telling to some form of denial, with many variations involving what information is disclosed, to whom, when, and under what conditions. Though the most effective approach will vary by the particulars of the situation and individuals involved, one suspects the right choice lies closer to blunt truth than to denial.

If you don't take the offensive on delivering this news, you'll miss any opportunity to present it in the most constructive context.

What are some standards of legitimacy? Many possible standards can guide this dialogue: There are, for instance, regulatory requirements about information that can be shared without imposing corresponding obligations on the recipient; there are practices followed by privately held businesses, family businesses, and employee-owned businesses. Here's the lynchpin: If the answer you provide does not feel truthful and complete, you fail.

Seeking constructive legitimacy

In this case, the executive could fulfill her commitments and still protect the business by shifting the focus of the conversation to the future, says Heath Shackleford, manager of public relations at Nashville-based American Healthways.

"What the manager really wants to know is what must be done to keep his unit afloat," Shackleford says. "So, first acknowledge there are some concerns and that he is correct in sensing that everything isn't roses right now. Admitting this is safe enough because the manager wouldn't be at the door if he didn't already have a sense of that."

From here, focus on what you can do together to control your destiny and give your reports some ownership of the solution.

"If there are numbers to hit, improvements to make, etc., let him help you. Maybe you need him to help keep morale up in the short-term until the storm is over. Maybe you need him to motivate one of the departments under his watch."

If you send people out with some feeling of control over the outcome, Shackleford notes, "it won't matter so much that you couldn't specifically dole out everything you know about the situation."

Setting the Ground Rules for Transparency

by Paul Michelman

One way to help pave the road for dealing with the type of situation we present here is to set some well-communicated standards up front.

"There are obviously business and competitive reasons that a company can't fully disclose and be completely transparent with its staff," says Heath Shackleford of American Healthways. "But it is the leadership's job to both explain what those areas are and why they are limiting specifics related to those areas."

For example, notes Vantage's Danny Ertel, companies need to limit disclosure of "information that will give competitors a leg up or allow its suppliers to take advantage of a temporary situation."

Leaders should engage in a dialogue with their managers about the kind of information that is appropriate to disclose, Ertel says. "I don't think execs should make blanket commitments to be 'completely open'; I think they should commit carefully to things they can live up to, which may mean a somewhat more subtle approach to discussing information and its implications, at different points in time, with different groups under different ground rules." The dialogue with managers and employees is the critical part: it sets the expectations about what is responsible sharing of information and what is responsible use of that information.

About the author

Paul Michelman is editor of Harvard Management Update.

Reprinted with permission from "Methodology: How Much Information Can You Really Share?" Harvard Management Update, Vol. 9, No. 11, November 2004.

See a current issue of Harvard Management Update.