Toys 'R' Us announced late Monday that it has filed for Chapter 11 bankruptcy protection, as the retail chain struggles under the weight of nearly $5 billion in debt.
While those financial burdens present an existential threat, an equally sizable challenge comes from within: how to keep its nearly 64,000 employees informed while also calming fears of massive layoffs.
The company released a statement late Monday that sought to put a sunny face on the news, thanking its employees while stressing that it's business as usual for the company's 1,600 Toys 'R' Us and Babies 'R' Us stores.
"As the holiday season ramps up, our physical and web stores are open for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces," said Dave Brandon, the company's chairman and CEO. "We thank our team members in advance for their hard work and dedication to serving the millions of customers who will shop with us this holiday.”
The key with employee communications in situations like these is transparency, credibility and trust, according to Michael Rubin, a senior vice president with Washington, D.C.-based agency LEVICK.
"Employees need to be convinced that you are telling them the whole story and being forthright about other shoes that may drop," says Rubin. "If they don’t believe management is sharing everything it can, productivity will fall off a cliff and good employees will leave—two things a company fighting for its survival can’t withstand."
News of the bankruptcy filing was expected by industry watchers for months—in February, the company laid off nearly 250 high-level positions in its Wayne, N.J. home office. But now that it has taken the plunge into Chapter 11, leadership will need to minimize disruption while building confidence in a transformation plan.
"The critical thing for leadership is to back up bold vision statements with transparent and achievable milestones," says Sam Huxley, a senior vice president of risk and business strategy at LEVICK. "Give the entire employee base tangible goalposts so they feel like players, not spectators."
That's no easy task. In Huxley's view, the messaging needs to be measured, equal parts reassurance and the promise of change. If leadership emphasizes that everything is fine,"you risk being perceived as complacent and just setting yourself for another fall," he says. But if the messaging swings too far to the concept of change, "there’s a risk of alienating employees who have invested years in the previous strategy.”
A PR representative for Toys 'R' Us was unavailable for comment.
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