Your company missed its profit estimate. Or a production snag at an overseas supplier threatens to crimp holiday sales. Or the miracle drug that was supposed to cure cancer doesn't. You've got a problem — but not an impossible task. Knowing how to deliver bad news can be the difference between brand meltdown and more-loyal customers. Dave Stein, a corporate strategist and author of How Winners Sell (Dearborn Publishing, 2004), says the best approach is to "communicate, confess, conciliate, and close." Done right, it's like ripping the bandage quickly off a skinned knee: It'll hurt, but not for long.
- Feel your customer's pain. Demonstrating empathy, Stein says, makes you more believable. Imagine you're a doctor giving a bleak prognosis: "[Patients] tend to hear what they want to hear and shut down," says Erica Friedman at Mount Sinai School of Medicine. "It's important to understand who the patient is to put it in the context of their life."
- Spinning is for tops. Tell the truth. Period. It shows you have integrity, which encourages customers and shareholders to trust you as you work through the problem. Ford Motor Co. was censured for its clumsy handling of the Firestone debacle in 2000. Now, a spokesperson says, "Sugar coating only undermines the communication process."
- Timing is everything. When to break the news? Public companies have to play by disclosure rules, but "with any crisis, you have to be the first to shape the story," says Karen Batra, director of public affairs for the National Cattlemen's Beef Association, which acted early when evidence of mad cow disease was discovered in late 2003.
- Own up. Say "I'm sorry." An apology can defuse a difficult situation, Stein says. Standing before 2,000 claimants from a 1991 oil spill in Los Angeles, defense attorney Sidney Kanazawa apologized — and ultimately settled all claims. "We were taking responsibility," he says, "not because we had to but because we wanted to make things right."
- End the bad-news cycle. It helps to have something positive to say, too. What, for example, will you do to prevent future shocks? "Follow bad news with good if possible," says Howard Rubenstein, front-man for Donald Trump and George Steinbrenner. "Patch it up, and try to reestablish a relationship where your client can trust you."
A version of this article appeared in the February 2005 issue of Fast Company magazine.