Companies in financial trouble get a second chance when filing Chapter 11. New York businesses have used this lifeline to restructure debt and get a struggling organization back on its feet. At some point however, the company faces the grim prospect of delivering the news to employees. If this step is done wrong, it can lead to mass resignations which can endangers the company’s recovery plan.
What Should Be Done First?
When announcing Chapter 11, New York businesses should be careful not to jump the gun. Don’t hint at problems or release early information. Premature communication will simply feed wild rumors.
The announcement should not be made until the bankruptcy has been filed. Confirm the filing with your New York bankruptcy law firm so that you don’t announce before everything is in place. As part of this process, you will have a financial plan for recovery and this plan is an important part of the announcement.
Prepare a written statement that includes all pertinent information. Don’t be tempted to speak off-script in the initial announcement. You need to get your point across immediately before any questions come.
What Should You Tell Them?
The announcement should first be made to managers in smaller meetings then announced in a companywide meeting shortly thereafter. Try to keep all announcement meetings as close together as possible to minimize the amount of misinformation.
Read the announcement from the prepared statement, being honest and straightforward about the company’s current condition. When announcing Chapter 11, New York companies don’t do themselves favors by trying to hedge or obscure information. If you show employees respect by being honest, they will accept the news more easily.
Tell them the plan for recovery. Explain that by filing Chapter 11, New York organizations can recover from adversity. Emphasize that this is not liquidation but just a step in the evolution of the business. Ask employees for their support in this difficult time.
Promise open communication and future updates on the process, and live up to those promises. Take questions after the announcement, but don’t speculate or make promises you can’t keep.
Keep Communication Going
Employees will be afraid after an announcement of Chapter 11. New York businesses that maintain open communications over the months that follow will help allay that fear and retain valuable personnel. If workers feel like part of the process rather than helpless pawns to boardroom operations, they will weather the process better and are less likely to seek employment elsewhere.
Release regular updates on the company’s progress toward financial health. While some of the news will be troubling it should never be suppressed. Emphasize positive news, but give employees a full picture of the organization’s development.
By maintaining control over communications but keeping them open and honest, a business is far more likely to recover from a bankruptcy.