Monday, November 17, 2008

For employers, a quandary: speak of economic troubles or wait?

Some excellent advice to all employers suffering in the current economic crisis
. . . keep your employees apprised. -jim

Drivers for DHL Express recently learned they would be losing their jobs next year, but many of them didn't learn it from their employer. They heard the news while dropping off packages in the Boston area.

"You know how a lot of our members found out what's happening?" asked Sean O'Brien, president of Local 25 of the International Brotherhood of Teamsters in Charlestown, which represents DHL drivers. "They found out from their customers. The company told customers they were terminating their accounts."

At a time when the financial outlook has darkened for businesses large and small, employees are anxious to know what the intensifying economic downturn will mean for their companies and their jobs. But in many cases, they are hearing only silence.

Fifty-four percent of American workers said they've heard nothing from their employers about the economy and how it is affecting business, and 71 percent said they want to hear more from the top in this moment of uncertainty, according to a national survey conducted last month by the global public relations firm Weber Shandwick. The vast majority, 70 percent, think the deteriorating environment will weaken their companies in the coming year.

Many workers say they would prefer candor from their bosses, even if the outlook is bleak, so they can prepare for tough times.

"Workers have a sense that things are in bad shape, but the companies aren't talking about it," said Warren Pepicelli, manager of the New England joint council board for the labor union Unite Here, which represents textile and hotel workers across the region. "I don't see much of an effort by employers to communicate with their workers about the broad economy and the effect it has on individual shops."

But for employers, an economic meltdown presents a quandary. While they'd like to be reassuring, they are reluctant to send out hopeful messages that might have to be retracted in the event things take a turn. On the other hand, they don't want to scare workers with bad news unless they're sure it's true.

"If you don't know what kind of cost-cutting might be taken, you don't want to alarm people unnecessarily," said Bob Eubank, executive director of the Northeast Human Resources Association in Waltham. "When you have the facts, you should communicate them. When it's speculation, you might be doing more harm than good."

Eubank said many executives in the region and around the nation are currently rebudgeting and tearing up their business forecasts in light of worsening economic conditions. "The difficulty is that the data is still coming in," he said. "Even if they know they have to cut back, they might not wish to reveal it right away because of the impact on people and the organizational disruption. It's a fine line they have to walk."

Some companies are opening up. Managers at General Electric Aircraft Engines hold annual December briefings with labor officials at GE's plant in Lynn, in which they offer their assessment of business prospects for the coming year. In most cases, though, the companies that give advance notice when jobs are going to be cut or shifted out of state are required to do so by labor contracts or state laws. The companies that aren't compelled to give warnings typically don't, workers and union leaders complain.

Publicly traded companies are legally obligated to make any disclosure that could have a "material" effect on their share price to all stockholders at the same time, and thus aren't able to give employees advance notice, said Michele Nadeem, vice president of corporate affairs at DHL Express in Plantation, Fla.

DHL said it will be closing more than 300 shipping and receiving stations around the United States, scrapping its domestic business, and eliminating 9,500 jobs nationwide, including hundreds in Massachusetts. The company disclosed the plan on Monday, "about 10 minutes" after it was approved by the supervisory board of its corporate parent, Deutsche Post World Net in Bonn, said Nadeem.

"We could not communicate it until then because it was material," Nadeem said. "The company was forthright about this."

Some executives have stepped up communications as the economy has soured, though they tend to be from companies that remain financially solid. One is Iron Mountain Inc., the Boston data protection and storage services company, where chief executive Bob Brennan this fall sought to calm the fears of employees, known as "Mountaineers," through a newsletter, videotaped question-and-answer sessions, and a personal memo to workers around the globe.

"Iron Mountain is a very strong company in good times and bad," Brennan wrote in his memo last month. "I realize the economy and the markets are in bad shape and that those conditions hurt you and those around you in many different ways. I'm sorry you're going through that and want you to realize that conditions will improve with time." The memo ended with an exhortation to "Enjoy your weekend."

In an interview, Brennan said it's important for leaders to increase the frequency of communications in distressed times.

"I'd rather come out and tell them, 'I don't know what to say,' than to go in a hole," Brennan maintained. "You have to acknowledge employees' concerns. There's a lot of bad news out there, and we all know it can be contagious. From the lowest-paid workers to the highest, everyone's been hurt, and it's very important to be empathetic."

Bob Weiler, chief executive at Phase Forward Inc., a Waltham firm that helps drug companies manage data for clinical trials, similarly e-mailed employees last month. He tried to put the sagging economy in context, stressing that the credit crisis is squeezing financial institutions more than Phase Forward's customers. "Fortunately, we sell to the pharmaceutical industry, which is cash rich and not dependent on credit to continue its mission of bringing drugs to market," he wrote.

Executives can't talk about their company's performance or anything else these days without acknowledging the financial market turmoil and the economic uncertainty, said Russ Campanello, the Phase Forward senior vice president for human resources.

"My experience is most employees appreciate honesty and transparency," Campanello said. He recalled that, at a Halloween party shortly after Weiler sent his e-mail, "it was remarkable how many employees and employees' spouses stopped Bob and me and talked about how relieved they were to hear a message like that."

By Robert Weisman, The Globe


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