Learning from A Bankruptcy Crisis: Trust and Transparency

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CONTRIBUTOR / Jennifer Thompson

INDEPENDENT CONSULTANT; FORMER EXECUTIVE VICE PRESIDENT, CHICAGO LEAD, CRISIS AND RISK PRACTICE, EDELMAN
Public Relations

The new leaders of a senior-living facility needed to declare bankruptcy to restore its financial stability, but they worried about the fallout among residents, who already distrusted them. High turnover rates among past management had created a toxic environment. The new management team pursued a policy of complete transparency, and in a town-hall meeting, the CEO laid out the company’s bankruptcy plans and made herself available for questions and discussion. Her willingness to make herself vulnerable, and her effort to create open lines of communication, helped repair the broken bond of trust.

Transcript

I worked with a client that was in a senior-living facility in a very populated metropolitan area who had gone through a number of leadership changes in the past couple of years.

There was suspicion and there was a basic lack of trust amongst “management” for this organization. One of the things that the new management team and the CEO realized quite quickly was that the financial situation of this organization was such that they needed to declare bankruptcy in order to restructure their financial agreements and get themselves out of the rut.

And in doing so, they were quite concerned how the term “bankruptcy” would go over with their residents, senior citizens.

So, our goal in working with the management team and the CEO was to create a situation, which, first, built some trust amongst residents and other stakeholders, and then, second, conveyed the facts about the bankruptcy filing and the new financial structure going forward in a way that would not cause residents to flee in droves and would continue the stability of maintaining majority occupancy of this particular center.

Previously, other management teams had had a fairly generic approach to communication, sending out form letters and such to residents but not really taking the time to engage individually with residents and others that matter.

So, we sat down and I worked with the CEO to map out the universe of folks that “mattered” in this regard — not just the residents but their families, the media, certainly the investors and financial community, and then, to some degree as well, other governmental organizations that may or may not play a role in the bankruptcy filing going forward.

But certainly, first and foremost, were the residents and their families. It was interesting because we found that their families were a key constituency who hadn’t been communicated with prior to this particular engagement.

So, we led up to a town hall meeting, which then served as sort of the anchor to state the path forward, again, conveying facts, first and foremost. The CEO herself delivered the message, stayed available for questions and commentary and interaction with the residents afterwards.

And there was some hesitation at first, but the fact that the CEO was willing to lay everything on the line and put herself in a little bit of a vulnerable position helped the residents and the stakeholders build their trust in her because they say that she was really trying to do the right thing and be open and forthright about everything that was going on with them and would be available to be communicating with them about every step in the process along the way.

The first thing folks are often concerned about is, “Let’s get the press release right, and let’s reach out to our consumers,” potentially, and then the investors, of course, as well.

But oftentimes, as you say, when you dig a little deeper, there are other stakeholder groups out there that can be tremendously influential in helping build and foster the trust that you have with your core constituencies.

Those are relationships that companies and institutions should be building, of course, before the crisis hits because you want to have those relationships in place — and those trusted advisors that can speak on your behalf — before you need them.

For the management company of this organization, I think they came through the experience learning three or four really valuable lessons. First of those is that communication with their residents and other stakeholder groups that is tailored to the specific group is imperative for building trust.

They couldn’t just come in and have a blanket, one-size-fits-all approach to communications in general, which was what previous leadership had done.

The second thing that they learned was that being tremendously transparent, conveying facts, and being open and honest was a way that was very important for them to build and gain trust with their stakeholder groups.

The third thing they learned was that they needed a communication strategy that wasn’t just focused on the bankruptcy filing itself and the immediate days surrounding that event, a communication strategy that continued weeks and months into the future to continually engage with their stakeholder groups.