Good Business

Taking the lead: How to deliver bad news to good employees
by : 

Phillip M. Perry

March 1, 2011
Good Business

Bad news. Managers hate delivering it—and no wonder. It makes people feel terrible. And it’s too easy to make a mistake in tone that can infect the entire workplace with low morale.

Leaders face a special challenge when times are tough. How do you announce budget cuts, reduction in work hours, layoffs, pay decreases, or benefit reductions and still keep your employees motivated?

The answer is to deliver bad news in smarter ways. Here are some tips for doing just that.

Control the impact

“Leaders in tough times often don’t control the flow of information,” says Randy Anderson, president of E3 Professional Trainers ( “When there is bad news, you want to be the first one your employees hear it from, putting your perspective on things.”

When you deliver the news, you can do so in a way that explains the short-term pain in terms of long-term gain. Here’s one good approach: “We don’t expect this condition to last forever, but during the coming three months we have to make the following changes. We are all going to take a small knock now to avoid a big knock a year from now.”

You also can control the impact of bad news by engaging with those employees who influence others on your staff. You want to avoid letting these leaders interpret everything on the negative side, says Anderson. “People will start to look for the next person to be fired or the next customer to depart.”

Include your leaders in your strategy, suggests Anderson. Ask questions such as, “We are looking for a way to save $5,000. What are your ideas?” This approach has two benefits: “The naysayer has skin in the game and will be less likely to bad-mouth decisions. You also can test the waters to see if that person can be a leader in a new position at some point.”

Once you have engaged your leaders, get input from everyone. “It’s amazing the brainpower you have under your management that’s easy to overlook,” says Billy Arcement, a management consultant in Prairieville, La. (www.searching “You build an ownership in the organization when you let employees give birth to ideas, so give people a chance to contribute.”

It’s important to involve everyone in the process of seeking solutions. Put a problem on the table and ask, “What do you guys think?” Maybe you won’t be able to use many of their solutions, but keep asking anyway. “You have to challenge your employees to contribute rather than just coming to work and collecting their paychecks,” says Anderson. “Let them become part of the solution.”

Share your progress

Share the steps you are taking to resolve your store’s problems and move the business back to full health. To a large extent, that means revealing the numbers.

“Share your business income statement on a quarterly basis,” says Diane Amundson, a management consultant based in Winona, Minn. ( “Report your revenues and your bottom line and educate your staff on what those things mean. Let them know what you’re doing to turn the numbers around.”

Sharing financials will help bring about two good conditions: Your employees will understand why you need to make the painful changes you are making, and they will see how those changes are making a positive impact on the business as the months go by. The process builds trust in both your plan and your store’s future.

When it comes to maintaining a productive workforce, communication is king. “Companies that do employee satisfaction surveys invariably hear, ‘Communication needs to be improved,’” says Amundson. “I have never met a company that ‘over-communicates.’ Especially in a slower economy, people want to hear both good and bad news. Be honest about company and employee performance.”

Creative leadership is vital to success in any economic climate. When times are tough, though, a firm hand on the wheel is more important than ever. Keeping the ship afloat often means mastering the skill of delivering bad news in good ways.

Stay positive

Take positive, effective actions; always see the glass as half full. “As a leader you need to set the example for everyone,” says Amundson. “You need to find a balance between buying into the ‘doom and gloom’ of the economy and being in denial, pretending nothing is wrong.”

One approach is to say something like this: “We refuse to participate in this recession. However, some of our customers and vendors are participating, so we will have a few bumps. If everyone does their job exceptionally well, we will not only survive, but thrive.”

“Continue to notice what people do right and acknowledge that immediately,” says Amundson. “Employee surveys consistently show that people want to ‘do work that is meaningful’ and ‘feel appreciated.’ Focus on what is going well. This helps with burnout when people are being asked to do more.”

Tough Situation 1: You need to cut work hours across the board

“You can handle this problem in one of two ways,” says Randy Anderson, president of E3 Professional Trainers. “The first is to go to your thought leaders—those employees who tend to influence the thinking of the group—and tell them first. This has the advantage of investing them in your strategy and obtaining their input.” You can say something like, “I have something to tell the employees, and I want you to know it first.”

The second approach is to bring all the employees into one room and have a single announcement. This reduces the risk of information leaking out ahead of time. You can say, “I have something to share, and this will be frustrating to hear, but we’re in a real world situation. I understand this will cause uneasiness and frustration, but we will have to go about things differently now.”

Explain the problem your business faces and the new cuts that have to be made. But don’t stop there: Ask for feedback. Say something like, “I want to work with you in any way I can to get a workable structure so we are all more productive and we get back to where we want to be.”

Finding productive ways to work within your new parameters is critical, says Anderson. “The worst thing you can do is end up not getting all the work done that the company has to do. Then you have to start cutting people or product lines or commissions and you start losing customers. Ask for assistance from your employees in the form of new ways to get work done in fewer hours.”

Tough Situation 2: You need to reduce health insurance benefits for everyone

If you’ve been able to provide health care insurance to your employees, you probably are facing significant cost increases. Cutting this benefit (or any other significant benefit you offer) can be as painful to employees as a reduction in wages.

“This is a good example of how sharing financial information can help resolve a problem,” says management consultant Diane Amundson. “In your quarterly financial presentations you have been sharing how health care costs are going up. So when it comes time to have a tough talk, it’s not a surprise.”

You can say to your employees: “As you are aware, health care costs have been skyrocketing. We need to get costs under control so we can keep our jobs. Here are our options: We can increase deductibles or we can decrease benefits, but we cannot stay on our present path.”

And if you have not been having those critical quarterly talks? “Now is the perfect time to start sharing finances, if you haven’t already,” says Amundson.

Tough Situation 3: You need to lay off employees

“If you are going to do layoffs, you have to keep it on a personal level,” says management consultant Billy Arcement. “One company was considering emailing employees about layoffs. I love email, but that is impersonal and stupid. You have to look at people face to face, give them the truth, and tell them why.”

Give the terminated individuals the reasons their jobs are no longer needed. Communicate that the cut is being done for reasons other than fattening the bottom line. Explain why it was necessary that their positions be cut in the grand scheme of things.

“With an honest approach, even those laid off can understand the rationale,” says Arcement. “You can help people make their transitions by warning them ahead of time to be prepared in the event layoffs become official down the road.” You also can help them find new positions by providing referrals and references.

Doing this the right way is vital. “If you handle layoffs badly, there is a big impact on the employees who remain,” says Arcement. “People become disheartened and have a bad taste in their mouths about the company. Morale and productivity go down. They begin to wonder who will be next. They start to think ‘why should I stay, where should I go?’ Ultimately, this could lead to the demise of your business.”

Phillip M. Perry is a freelance business writer with more than 20 years of experience in workplace psychology, employment law, and marketing.