Learn an unconventional approach to crisis communication. See how the founder and CEO of finance online bank in London brilliantly handled a cash flow crisis the first time he couldn't make payroll, by 1) being brutally open and transparent about the problem, and 2) asking every employee what they would do about it.
- In June of 2000, Andrew Moorfield started an online bank to help make loans to small businesses. But as with a lot of companies at start-up, there were times when there wasn't enough cash to pay the bills. In fact, he told me, "The first time I couldn't make payroll was the worst." Right? Having to choose who got paid and who didn't was emotionally draining. Now most leaders in big companies would've handled a situation like that by issuing a vague company-wide memo saying something like, unfortunately, the company's current financial condition requires that we make adjustments to employee salaries and benefits for an indeterminate period of time.
Compensation will return to normal levels when key balance-sheet metrics are restored. Now, there might be times when that kind of management speak is necessary, but you at least have to admit that communication practices like that, especially during a time of crisis, create more questions than answers. Well, how big of an adjustment? Is my adjustment more or less than everyone else's? And what's wrong with our financial condition anyway? All right? The result would be widespread suspicion, and jealousy, and complete lack of trust.
Well, fortunately, that's not what Andrew did. Here's what he did instead. He pulled all 25 employees into a conference room, and then he wrote a number at the top of the whiteboard, and he said, "That was our bank account balance "at the beginning of the month." And then just below that, he wrote two other numbers, and he said, "Those are the revenues "we expect to get this month, "and the expenses that we have to pay "to keep running the business." And then he drew a line, and he added them all up. Now, he wrote the answer underneath, and he said, "That's what we'll have left "at the end of the month to pay your salaries." And then he circled that number.
And then just to the right of it, he wrote another number, and he circled it, and then he said, "That's how much your monthly salaries add up to." And then he just paused. And he let the audience assess the stark dilemma in front of them, because the number on the right was three times the size of the number on the left. And then he did something else rather unusual. He asked all of the employees, all 25 of them, what they thought he should do about it. Now, he assumed, of course, the fairest thing to do would be to pay everyone 1/3 of their salary, but the team surprised him with a different suggestion.
They thought a better method would be to pay 1/3 of the employees all of their salary, and the other 2/3 none. Well, Andrew was horrified. I mean, how could he possibly choose who to pay, and who not to pay. But they surprised him a second time when they offered to help there as well. They told him that they would decide among themselves. So Andrew left the room so they could talk in private. And when they called him back in, Andrew got his third surprise of the day. The people on the list to get paid weren't the ones he expected.
And he thought the younger employees with the smaller salaries would be in the most desperate position. But among themselves, they decided that the older and more senior employees had the most immediate commitments. One of the younger employees explained it this way. She said, "You know, most of us are single, "and just rent a small flat downtown. "We don't have a lot of bills. "And I can even move back in with my parents if I have to. "But the senior folks, "they have families to feed, mortgages to pay." So the younger employees volunteered to go without.
So Andrew learned two lessons from that experience for how to respond when faced with a difficult decision that will result in someone being disappointed. All right, first, be real, open, and honest about the situation, all right? Lay all the facts out in plain view. Don't shroud them in corporate secrecy, or describe the situation in vague terms. All right, second, ask the affected parties how they would respond if it was up to them. All right, and nine times out of 10, they'll come to the same conclusion that you did.
And at that point, it's far easier for them to accept your decision because they recommended it. And occasionally, as in Andrew's case, they might even suggest a better solution that wouldn't have even occurred to you, all right? Now, Andrew's start-up eventually succeeded, and everyone got caught up in their pay. But he continues to heed the lessons he learned that first time that he couldn't make payroll, all right? How will you handle things the next time your organization finds itself in a crisis?
- Leading change
- Creativity and innovation
- Getting results
- Collaboration and teamwork
- Managing during crisis
- Giving and receiving performance feedback
- Increasing engagement