Building Trust: A Strategic Guide to Restructuring Communications

By Alex Goss, Director

While restructuring work is focused on financial adjustments to address balance sheet issues and make cash flow improvements, communications are just as critical because the process profoundly impacts employee morale, corporate reputation and stakeholder trust. During these moments of transition, a lack of communication or, even worse, miscommunication, can lead to labor issues, customer and partner rifts, and negative media coverage that can exacerbate existing financial challenges and add new ones.

Communication is an essential lifeline during restructuring, and not just the remit of traditional public relations or human resources functions. Companies that integrate communication into core strategic planning from the outset are more likely to achieve a smooth process, strengthen employee relations and preserve stakeholder trust.

There are a few key principles companies should follow when building a successful restructuring communications program.

1. Identify & Engage All Stakeholder Audiences

Restructurings impact many stakeholders, each with their own interests and concerns. To address these effectively, start by segmenting your audiences – employees, investors, creditors, customers, suppliers, and regulators, to name a few. Large stakeholder groups may need to be further segmented based on geography, potential impact, expectations, and other factors. For example, suppose a company is planning to shut down a specific facility (e.g., a warehouse). In that case, these employees will need their own communication and, if there are enough of them, may need separate WARN notices required by employment law.

The next step is to begin creating messaging for each segment. While this may seem like a lot of work, addressing the needs of each group can help cultivate a sense of belonging and being heard – crucial for securing engagement and buy-in. Internal communications should emphasize personal impact and future opportunities for employees, while external communications should concentrate on broader business strategies and market positioning.

2. Begin With Transparency & Act Early

Maintaining your credibility during a restructuring is essential, and the easiest way to lose it is by failing to be open and transparent. Employees need to understand the rationale to engage positively with future communications. Clearly articulate the reasons for the restructuring by explaining the “why” behind the changes, outlining the goals and expected outcomes.

Delivering significant negative news comprehensively at once, rather than allowing information to “dribble out,” helps to counter rumors, prevent misinformation and reduce confusion. While it might be tempting to wait until more details are set in stone, highlighting what is known and what remains uncertain, as well as acknowledging people’s anxieties, helps build trust. Proactive transparency can serve as a powerful demonstration of integrity and accountability; both are critical for rebuilding and sustaining trust across all stakeholder groups.

3. Establish A Clear & Consistent Narrative

Tailoring messaging too heavily without a consistent foundational narrative can add complexity and the potential for conflicting narratives. Developing a core narrative with some key messages and facts for different audiences is crucial and should be reviewed and updated as the restructuring situation progresses.

With this language ready, you can quickly create and deploy accurate, tailored communications to a wide range of audiences. This narrative should also be used for formal communications with the public via the media and on social media channels to help build understanding and awareness among reporters and their readers.

4. Provide Frequent Updates with Consistent Messaging

Managing the rumor mill throughout the restructuring process is never easy. A critical component of this is ensuring that employees don’t learn about updates from external sources before they hear from you. Both employees and the media are likely to interpret a lack of news from a company as bad news.

While this is not always possible, creating and sticking to a clear schedule and providing updates to communicate key milestones (e.g., a bankruptcy filing) as they are reached is key. Frequent and consistent communication reinforces key messages, allows you to address potential issues proactively and is another way to demonstrate honesty and accountability. It also helps to reduce anxiety and uncertainty, preventing misinformation from taking root and spreading.

According to the marketing “Rule of Seven,” audiences must hear a message seven times before they retain the information. Providing frequent updates also allows leaders to reinforce their core narrative and cut through the noise along the way as they progress with the restructuring.

5. Establish Channels for a Dialogue

Communication during a financial restructuring must evolve into a two-way dialogue, actively encouraging feedback, input and participation from all stakeholders. This involves establishing and promoting platforms for open questions and feedback, such as town hall meetings, dedicated Q&A sessions, and mechanisms for feedback.

It is essential to practice active listening to understand concerns and objections, ensuring timely follow-up to questions as they are raised. Managers and leaders should acknowledge employee concerns on an individual basis to build trust and demonstrate genuine care. Getting insights and feedback from employees can occasionally also provide critical intelligence that can inform and adapt the restructuring plan itself.

In conclusion, while a restructuring is rarely plain sailing and some key stakeholders are likely to be disgruntled somewhere along the way, adhering to these principles early can help smooth the path toward achieving the most beneficial outcome for all. Learn more about our restructuring communications capabilities here: https://stantonprm.com/capability/bankruptcy-restructuring-communications/