What an Internet Startup Can Teach the Corporate World About Crisis Communication


Paul Smith

By 1999, Andrew Moorfield had already spent a decade in banking and corporate finance for companies like Citibank and Diageo. But the tidal wave of opportunities the dot-com revolution presented was too much for someone with big ideas to resist, and  Andrew had big ideas. In June 2000, he left the corporate world and launched bfinance.co.uk, a London-based online lending platform for small businesses. “It was exhilarating and terrifying at the same time,” he admited. As with many small companies at start-up, there were periods of time he didn’t know if the company would make it. Cash flow was everything; and there were times when there wasn’t enough to pay the bills.

“The first time I couldn’t make payroll was the worst,” Andrew explained. “Having to choose which employees got paid and which didn’t was emotionally draining.” Most leaders trained in big-company environments would have handled it with the veiled finesse of a corporate lawyer. First, secretly decide how much each employee deserved to get, then talk to each employee, in private, and explain how much of their pay would be withheld until cash flow improved. Lastly, don’t tell anyone how much the other employees were getting. But a wink and a nod from the boss leads all of them to believe they were getting more than average. The secrecy would foment doubt. Maybe they were getting less than everyone else. The result is widespread suspicion, jealousy and complete lack of trust.

Fortunately for employees at bfinance, that’s not what Andrew did. Instead, he pulled all 25 employees into a conference room and explained the predicament in brutally honest terms. He wrote a number on the whiteboard and said, “That was our bank account balance at the beginning of the month.” Below that he wrote several other numbers, and explained, “Those are the revenues we expect to get this month and the expenses we have to pay to keep running the business.” After adding them all up, he wrote the result underneath. “That’s what we’ll have left at the end of the month to pay salaries,” and he circled the number. Just to the right of it, he wrote another number, and circled it. “That’s how much your monthly salaries add up to.” Andrew paused and let the audience assess the stark dilemma in front of them. The number on the right was much bigger than the number on the left. In fact, there was only enough money to pay about a third of the payroll. If anyone ever told a story using numbers more than words, Andrew was doing it.

Then he did something else unlikely to happen in a big company. He asked the employees—all 25 of them—what they thought he should do about it. He assumed the fairest thing to do was to pay everyone a third of their salary. But the team surprised him with a different suggestion. They thought a better method would be to pay a third of the employees all of their salary, and the other two thirds none. Andrew was horrified. How could he possibly choose which employees to pay and which not to pay? But the group surprised him a second time when they offered to help there as well. They would decide among themselves. Their criteria were based solely on who needed the money most urgently and who could wait a month or two to catch up. Andrew left the team to discuss the matter. When they delivered their decision, Andrew got his third surprise of the day. The people on the list to get paid were not the ones he expected. He thought the younger employees with the smaller salaries would be in the most desperate position. But among themselves they decided that the older ones—the ones with families to feed and mortgages to pay—had the most immediate commitments. Several of the younger ones still lived at home with their parents, or in an inexpensive apartment and had no family to support. They were the ones who volunteered to go without.

Andrew thanked them for their understanding and cooperation. He honored their decision and paid the employees accordingly.

Andrew learned a lesson from that experience he’s used to this day. When faced with a difficult decision that will result in someone being disappointed, do two things. First, be real, open and honest with them about the situation. Lay all the facts out in detail. Don’t shroud them in corporate secrecy or describe the situation in vague, opaque terms that might sound like this: “Unfortunately, the company’s current financial condition requires that we make adjustments to employee salaries and benefits for an indeterminate period of time. Management will meet with each employee individually and determine the appropriate temporary adjustment required. Compensation will return to normal levels when key balance sheet metrics are restored.” This glop of corporate speak is loaded with one vague abstraction after another. Exactly what financial condition are we in? What kind of “adjustments” are you making to our salaries—a raise or a pay cut? How will the appropriate adjustment be determined? Do I get a say in it? What balance sheet metrics have to return to normal for us to get paid right again?

Some corporate spokespeople (or their lawyers) prefer this kind of generalization. In the event the company does something different, it’s difficult or impossible to prove they didn’t follow the original plan, because the original plan lacked any real specificity. That keeps the company out of court. Unfortunately, the same lack of specificity that makes it legally defensible also makes it frustratingly devoid of real content for the audience of employees. Fortunately for the employees of bfinance, Andrew Moorfield disliked corporate weasel words as much as they did.

The second lesson Andrew learned was to ask the affected parties how they would decide if it was up to them. In Andrew’s case, they suggested a solution that he wouldn’t have thought of. But even if that doesn’t happen, when asked to put themselves in your shoes, with all the facts at their disposal, nine times out of ten they’ll probably come to the same decision you did. At that point, it’s far easier for you to deliver the decision and them to accept it.

Andrew’s startup eventually succeeded. Ownership of the business changed twice since that first year. And Andrew has since returned to the more stable harbors of the banking world, where he is managing director at Scotia Bank in London. But bfinance.co.uk is still going strong. Today it is one of the largest asset management services in Europe. He shares this story when someone on his team is facing a tough decision or needs to deliver bad news to a client. Not many people have had to face a decision as tough as which employees to pay and which not to. Andrew’s story let’s them experience the situation almost firsthand, and learn the lesson he learned. For a banker, explaining to a client that they won’t be getting the loan or line of credit they applied for is almost as difficult. Following his advice, their clients are more likely to take the news well, because they appreciate the reality of the situation and the transparency of their banker. As a result, they continue to stay a satisfied customer of Scotia Bank, and Andrew Moorfield never has to decide which employees not to pay.

In addition to being a lesson about the power of transparency, this story hopefully illustrates one more idea critical to any leader: often the best way to make a compelling point in the workplace is not by issuing a memo, but by telling a story. If you want to be a great leader, regardless of your functional discipline, develop your skills as a storyteller. 
 

Paul Smith is Director of Consumer and Communication Research at The Procter & Gamble Company in Cincinnati, Ohio, and the author of Lead with a Story: A Guide to Crafting Business Narratives That Captivate, Convince, and Inspire, which this piece was adapted from.  

 




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