Beware of These Blunders

We've all heard the corporate-speak that typically accompanies bad news. "Orders fell off unexpectedly at the end of the quarter, but we fully expect that business will rebound." "The CEO has the full support and confidence of the board." "We anticipate no additional layoffs at this time." "The company is not for sale."

Here is the problem: At a time when the business outlook is unequivocally bleak, few executives know how to deliver bad news. We're a nation of optimists, so we look on the bright side. We fib a little and hope that employees and shareholders won't pay too close attention until the cycle turns up again. We live in fear of analyst downgrades. Basically, we want folks to like us.

To which Christopher Lochhead screams, "Bunk!" Lochhead, the excitable former chief marketing officer at Scient Corp., knows something about communicating under duress. During his tenure, Scient roared to prominence as the edgy leader among the pack of so-called Internet consultants -- and then crashed to Earth when its dotcom business soured.

Lochhead left Scient in December. He's now running his own consultancy -- called, simply, Lochhead -- that focuses on strategy, technology, and Internet TV. Based in Saratoga, California, near Silicon Valley, he's witnessing his share of calamity both in the Bay Area and among his clients. He also is seeing a lot of egregiously poor crisis marketing. In challenging times, he says, many companies fall victim to predictable and avoidable marketing errors. Here, Lochhead describes the 13 marketing blunders companies make in a downturn -- and tells what managers can do to steer clear.

Attempt "business as usual."

It won't be. When a company misses Wall Street expectations, institutes layoffs or closings, or announces some other bad news, it needs to rebuild lost confidence. Your brand has been damaged. Your stakeholders will look at you with a more critical eye. People will doubt you in ways they never used to. It will take time to rebuild.

You need to create an action plan that includes cost reductions and sales-execution improvement. That's the easy part. Then you need to figure out how to get aggressive. The shakeout in the economy is a big opportunity for those who can seize it. The time to hit the hardest is when the competition is capitulating.

Couple your progress in lowering costs and raising sales with a bold strategy and aggressive marketing, and you have a shot out of the hole. Once you have a plan on both of these fronts, you need to start communicating it. It's going to be tough. That's the bad news.

The good news is everyone loves a comeback kid.

Let the bad news trickle out over time.

This is akin to slow dental surgery with no anesthetic. Recently, dozens of corporations have given us a lesson in the damage wrought by slow disclosure of ongoing bad news. Nortel Networks has announced four different layoffs in the past 12 months, and its stock has fallen to a historic low. Revenue and stock prices erode as the market loses faith in management. Deal with the problem fast, and announce what you are doing. Take all the pain in one big shot. Only once you get all the bad news out can you begin the rebuilding process.

Promise "just one bad quarter."

This is almost never the case. It takes most companies time to recover from a misstep. You often have to cut deeper and make bigger changes than you think.

So do two things. Make all of your changes faster and bigger than you think you have to. And tell the outside world that you project rocky times for the foreseeable future. If you pull off the turnaround in one quarter, you'll look like a genius. If you don't, you will have told people the truth. Revising bad news with good news always works.

Lie, mislead, and otherwise obfuscate.

Lying never works. It sounds obvious, but companies and executives do it all the time. It can land you in jail or ruin your career. People hate delivering bad news, so they tell a "white lie," which they often rationalize as somehow doing good for others. Or, some people don't tell the whole truth. They only state the minimum they have to.

Be honest and direct about the facts. Brutally honest. It starts by being honest with yourself about the condition of the business and your role in what has happened. Get clear about this. Then you can decide how best to handle the situation.

Be honest with your stakeholders. If you are laying 25% of your people off, then say that's what you are doing. Don't say, "We are laying off 15% and expect some additional headcount reductions through normal attrition."