Magazine article Communication World

The Secrecy Trap: Keeping Employees in the Dark Can Doom a Company's Plans for Major Change

Magazine article Communication World

The Secrecy Trap: Keeping Employees in the Dark Can Doom a Company's Plans for Major Change

Article excerpt


When planning big changes such as outsourcing, downsizing, mergers of restructuring, executives typically try to keep such moves a secret. This is a mistake.

For one thing, the secret always spills out. But more important, the futile attempt at secrecy damages the company's ability to implement the change. This happens because employees, drowning in a sea of rumors, expect their leaders to say something--to lead. Instead, they get silence. That leads to anger and frustration--and a potentially hostile response when the change is officially announced.

Secrecy's damage

Big changes have big failure rates. Consider:

* 40 percent of enterprise initiatives (such as enterprise resource planning, supply chain management and customer relationship management) did not yield tangible financial results, according to a 2000 survey of executives by Boston Consulting Group.

* Nearly SO percent of joint ventures fail, according to a 2004 Harvard Business Review article, "Launching a World-Class Joint Venture."

* In 66 percent of IT outsourcing attempts, business benefits were only partially realized or not realized at all, according to a 2003 report by PA Consulting Group.

* Only 10 percent of cost-cutting initiatives maintain cost reductions after three years, according to a 2005 McKinsey Quarterly article.

* 64 percent of mergers fail, according to a 2001 McKinsey Quarterly article, "Why Mergers Fail."

* Two-thirds of spin-offs under-perform on the stock market, according to a 2002 Booz Allen Hamilton report.

How much of this high failure rate can be attributed to poor employee communication? About 25 percent, according to a 1999 study by Rutgers University professor Laurie Lewis. Furthermore, a 2005 article in the Harvard Business Review by Michael C. Mankins and Richard Sted states that executives believe poor employee communication is the second-biggest cause of failed implementation (the biggest cause is insufficient funding).

And what is the most destructive part of poor communication? Rumors. In a study of 43 companies communicating major change, professor Larry Smeltzer of Arizona State University found that inaccurate rumors were the largest differentiator between successful and unsuccessful change communication.

Rumors happen because secrecy during the planning phase fails (see "Don't Plan on Secrecy," opposite page). Employees get a hint that something big is being planned, so they go to their managers, asking, "Hey, what's happening? We're hearing lots of rumors about X." And what does the manager say? "I don't know. The company doesn't tell me anything." Or worse, "I know, but I can't tell you." Once managers respond with either of these, the company is on the fast track to a failed implementation.

Managers are the most credible sources of information for changes affecting the local work area--twice as credible as senior executives. After the managers say, "I don't know" or "It's a secret," any Tom, Dick or Harriet is free to come up with any crazy scenario. The vacuum created by managers' silence is filled with speculation by the union, press, competitors--anyone. With the most credible source out of the picture, it's a communication free-for-all.

At a time when employees need leaders the most, they are nowhere to be found. They conclude that the senior executives are cowards, too afraid to release anything about the change. Executive silence proves they are spineless, and the change is really as bad as the worst rumors say. In a study of 65 mergers by Sylvia Devoge of the employee engagement firm Hay Group, employee confidence in management dropped by almost half from the beginning of merger planning to the eventual merger implementation.

Implementation cannot happen without massive employee support, but any attempt at secrecy so angers the workforce that cooperation is impossible. …

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