Teamwork Smooths Road from Bankruptcy

By Myers, Mary; Jacobson, Fruman | Public Relations Journal, February 1993 | Go to article overview

Teamwork Smooths Road from Bankruptcy


Myers, Mary, Jacobson, Fruman, Public Relations Journal


Professional communicators and lawyers traditionally have been at odds in handling information regarding court cases. While communicators yearn to get the word out, lawyers typically prefer to divulge little or nothing until a case is fully resolved. Communicators opt for simple prose; lawyers feel more comfortable within the coils of their usual legal language.

Nowhere are these differences more glaring than in a bankruptcy case, where a troubled company's very survival depends on both its legal actions and its communications with key constituencies--including lenders, vendors, customers and employees. The lawyers need to negotiate with these constituencies in order to develop a plan for the company's reorganization. But the legal logistics, in turn, rely upon non-legal communications that reassure key players about the company's future and help to ensure their cooperation as the company tries to reorganize.

Despite their differences, a team approach between professional communicators and bankruptcy lawyers can contribute significantly to the successful outcome of a bankruptcy case. Working as a team, public relations professionals and attorneys can implement an effective communications plan that supports a bankrupt company's legal strategy by demonstrating that the company's management knows what it's doing and has a viable plan.

A bankrupt company's need for effective communications is especially acute because doubts about the organization's future can thwart its chances to emerge from bankruptcy. While there now is greater awareness that companies do survive bankruptcy proceedings, bankruptcy remains a somewhat alarming and uncertain proposition that may cause people to believe the worst--and act accordingly--unless convinced otherwise.

To avoid an exodus of employees, vendors or customers, a bankrupt company must take steps to counteract the natural anxiety and uncertainty of these groups. This uncertainty may be exacerbated by competitors, who typically seize on any negative news to distort perceptions about the company.

While specific strategies vary from case to case, the goal of effective communications is to maintain credibility with all key audiences while assuring them that the company has a future.

The communications always should include the following elements:

* a straightforward acknowledgment of the company's problems and how they came about, with a forthright discussion of what management is doing to address the problems;

* an appeal to work with the company in a team effort;

* an indication of when further communications will be forthcoming; and

* an invitation encouraging communication of any concerns to company management.

A financially troubled company can lose credibility quickly. To maintain credibility, it's crucial to be accurate and scrupulously honest. Diverging from what is factual, or failing to follow through on promises, assures that credibility will be seriously damaged, if not lost forever. For example, it's better to promise vendors quarterly updates, and stick to that promise, than to create more ambitious expectations that cannot be met.

Credibility also can collapse if a company's communications fail to reflect the reality of its situation. Realistically, a company can't predict the outcome of matters before a court, and it shouldn't presume to do so. At the same time, a bankrupt company's communications should mirror its overall sensitivity to cost controls. While an organization's communications should be designed to fully meet the information needs of all intended audiences, glitz or anything else that might be construed by the court or creditors as a waste of money should be avoided.

Structuring communications

Another key to maintaining credibility is the content and style of organizational communications. This is the point at which a team approach between the lawyers and the communicators is especially important.

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