Friday, March 12, 2010

Bankruptcy Communication: How NOT To Do It

Recently a private business club we belonged to, padlocked the doors after dinner hour on a Saturday evening, and Monday morning filed Chapter 7 Bankruptcy.

There had been rumors for three months that the member-owned organization was about to fail and would not survive beyond March, 2010, but there was no prior communication with the members, who purchased the operation a few years ago from a national business club management company.

The Board and management’s role in the demise of the club is a separate discussion. But the lesson for every other business and even some non-profit organizations is the subject for today’s post.

The Jefferson Club was a convenient and comfortable place for business men and women to meet for breakfast, lunch or dinner. The food was good, the service was marvelous, the environment pleasant and professional, and you could TALK and be HEARD in the dining room and meeting rooms.

And we particularly enjoyed using it for crisis management training that we offer here in Louisville, KY. We have clients from around the world fly in and spend two, three and sometimes more days in crisis communication and crisis management workshops and table top exercises and for media training and coaching.

It just so happened that I called the receptionist Monday at mid-morning to make a lunch reservation and got a recording inviting me to push “one” to make a reservation. I assumed the wonderful lady that normally answered the phone was on another call or helping a member. So I intended to wait a few minutes and call back.

Before I got around to calling back, I got a call from a friend asking if I had heard the club was “gone?” I tried the phone again and got the same recording inviting me to leave my reservation request. I went to the website, and it was gone – no information, just the logo and the words “Under Construction.”

I tried calling the business manager and got his voice mail inviting me to leave a message. I called the President of the Member Board of Directors. The temptation is great to name and embarrass him, needless to say, he was too busy to take my call, according to his assistant, and ignored my request for a call-back.

So, what should have happened? What should you do if your organization is faced with Chapter 7 or Chapter 11 bankruptcy?

There are some basic things. Let’s begin with Chapter 7 – the “end” of the organization with no possibility of reorganization. By the way, the things I’m going to outline here are the same for a Chapter 11 “reorganization” bankruptcy. There are just a few more things you will want to do if you’re going into Chapter 11.

First of all, identify all of your key audiences, and then plan a communication strategy. Bankruptcy doesn’t just come out of nowhere. There is almost always time to get ready.

Timing is critical. You should communicate to each of those key audiences, directly. They should not have to hear about your business failure from the media or the rumor mill. And they usually cannot be informed in advance.

But, the Jefferson Club should have:
1. Prepared a letter from the Board and mailed to members/owners on Saturday, so it would be delivered Monday, the day of the court filing.
2. Had a statement ready to activate on the website home page immediately after the filing was in the County Clerk’s hands.
3. Had a new message recorded and ready to activate on the answering system, explaining the club was not open and not going to reopen.
4. Invited employees to a meeting with a representative of the organization to answer questions and provide out-placement support and counseling.

That is the very least that should have been done.

If you’re facing Chapter 11 Bankruptcy, you have to be careful what you say – the lawyers will guide you – but you need to be prepared to explain what’s happening to employees, vendors, customers/clients and reassure those audiences that the purpose of the Chapter 11 filing is to help get the business back on its feet.

And, as much as is possible reassure the workforce that some or more will still have jobs during and after the reorganization and reassure customers that you plan to continue doing whatever it is you do – make widgets, provide a service, meet customer needs.

Heaven forbid you should ever face a business bankruptcy, but if you do, we can help.

1 comment:

  1. Larry:
    Boy, are you ever right. I was disgusted to hear about the club. I loved it there. And, as recently as the end of January, they were pressing me to make reservations for IABC luncheons there throughout the year. Thanks be to God, our new programs director scheduled the March meeting at the University Club, or we would have been in a real pickle.

    I understand members finally received a letter. I wonder if they are offering to refund your money through the end of the year. They should. Members have paid for a service they will now not receive. It's a real shame they couldn't have found a way to keep it open just as a downtown restaurant, sans memberships. It was a great place to go. I have to feel for their employees, too. Their staff was so sweet...I think the days of getting service like that are over.