Though we have witnessed a slew of Chapter 11 filings over the
past few years, the stigma of bankruptcy remains relatively
unchanged. Many Americans - and more reporters than you think -
still consider bankruptcy a corporate death sentence. PR
practitioners managing bankruptcy communications walk a perilous
tightrope, balancing the need to educate stakeholders with the risk
of making promises the company can't keep.
Education, in this case, often begins with disseminating the
most basic facts: Chapter 11 does not mean the demise of the
company or the interruption of services.
"The educational approach is to put Chapter 11 into real terms,
to focus on very nuts and bolts issues," says Diana Lueptow, VP
with Edward Howard & Co. Lueptow recently worked with a large
retail drugstore chain where one of the biggest concerns was among
customers who heard the announcement of the filing and wanted to
know if they could still get their prescriptions filled.
Like those drugstore customers, any stakeholder in a bankruptcy
filing is going to want quick answers, mandating a communications
plan that is carefully constructed well in advance of the filing
and announcement. The plan should anticipate the questions and
concerns various constituencies will have for the company, and PR
pros should work closely with senior management and IR pros to have
solid answers.
Many companies believe that by writing a good press release,
they'll be able to tackle all those questions, says Richard Mahony,
EVP and deputy GM of Edelman Financial. That's not the case,
especially since many reporters are just as unclear as employees or
business partners on bankruptcy.
Sure, the Wall Street Journal corporate finance reporter
probably has a pretty firm grasp of the technicalities. But even
some business reporters - especially given the turnover in the
media and the resulting beat changes recently - aren't as savvy
about bankruptcy as most PR professionals assume. "It's important
to remember that every reporter can be an ally or a foe," says
Chris Joy of Trinity Communications in Boston. The local daily's
article that reaches hundreds of your employees could have an even
greater impact on the success of your restructuring than the
Journal's coverage. Joy advises PR pros to take time to work with
reporters at any outlet. Walk the journalist through the process,
explaining Chapter 11. Then provide access to the CEO, CFO or IR
professionals who can give even more detailed information than you
can.
The role of the top executives is especially key in any
bankruptcy. Your communications plan should be developed in
conjunction with these executives, and you should plan to tap them
often as spokespeople. "For any major announcements about the
filing itself and other major updates, [stakeholders] will expect
to hear from the CEO," Mahony says.
Carol Dillin, corporate public affairs and communications
director for Portland General Electric, which is owned by Enron,
has felt the backlash from the parent company's disastrous
bankruptcy. PGE is in the process of a sale that will have to be
approved by Enron's creditors, but the utility itself is not
bankrupt. Nonetheless, bankruptcy communications has become a huge
part of Dillin's job, and she has leveraged the CEO to maintain
trust especially with employees. "We instituted a CEO voicemail
broadcast, and when we know we'll be in the news above the fold,
the CEO does a voicemail." This tactic has worked wonders in
reaching employees and helping to maintain communication, Dillin
says.
Covering All Constituencies
Employees, whether they're at the national headquarters or at a
satellite office, are one of the most important audiences for any
bankruptcy information. "One thing in communicating around a
bankruptcy is creating stability. It's critical for the turnaround
to operate successfully," says Edward Howard & Co.'s
Lueptow.
Mahony and his colleague John Dillard, VP and restructuring
specialist with Edelman Financial, advise one-on-one communications
with employees where possible, plus plenty of communication with
managers on what's happening within the organization and how to
filter it down to their direct reports.
"Set and communicate around specific milestones," Mahony says.
For example, establish a monthly communication so that employees
will know information is coming at a certain time.
It's also important to provide employees with training on how to
handle the inevitable questions from the audiences they deal with
directly on a daily basis. Customer service representatives and the
sales force, for example, should know exactly how to respond to
questions about the bankruptcy and how to pass customers and
business partners along to appropriate sources of more detailed
information, Lueptow says.
And customers, business partners and vendors will most
definitely have questions, so expect to address communications
directly to them, as well.
Most important when working with employees and other
constituencies is not to over-promise. While bankruptcy does not
mean the end of your organization, it may very well mean the
closing of operations in a specific location, the demise of certain
business lines, or a dramatic restructuring involving multiple
layoffs. Audiences need to understand this and the impact those
events would have for them, but there's a tendency for senior
management to be extremely optimistic - often overly so - at the
beginning of what could be a long and difficult restructuring. It's
critical for PR to mitigate this with honest communications about
the uncertainties that come with the territory.
Providing all your key audiences with consistent and candid
information can make all the difference in the success of your
restructuring. "The big danger," Dillard says, "is that a company
will erode because of the fear of what might happen. If a company
loses customers or key employees, it won't be around."
Delivery
One-on-one communication with employees, customers, partners,
investors, the media and other audiences is great where possible.
But for most companies, it's not a realistic expectation. Basic
questions can be tackled through your Web site. United Airlines
linked information like "Business As Usual During Bankruptcy" and
"Building a Stronger United" to its home page after its Chapter 11
filing (PRN, Dec. 16, 2002). The information clearly explained the
company's situation and assured customers that the bankruptcy
wasn't going to mean any changes in their travel. Carol Dillin,
corporate public affairs and communications director for Portland
General Electric, also has leveraged her organization's site to
provide an easy-to-use outlet for information on what parent
company Enron's bankruptcy means. A prominent link from the home
page includes straightforward answers about what Enron's bankruptcy
will bring, letters from the president and CEO and a series of ads
the company produced on its unchanged delivery of services. See
http://www.portlandgeneral.com.
Translating Chapter 11
If you're a multinational organization undergoing a bankruptcy
restructuring, communications will be even more critical, as
Chapter 11 is uniquely American. "In other countries," says Diana
Lueptow, VP with Edward Howard & Co., "bankruptcy is
liquidation under a trustee or a handing over to a bank."
It's crucial to explain the Chapter 11 process quickly and
coherently to multinational media and employees at international
locations who may assume that your company's bankruptcy means the
end of the their jobs.
Contacts: Lueptow, [email protected];
Mahony, [email protected];
Joy, [email protected];
Dillin, 503/464-8000; Dillard, [email protected]