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Sharing the Bad News with Employee Owners

Cathy Ivancic

September 1999

In a thriving ownership culture each person understands how their actions--like customer service, productivity, teamwork, and cost savings--creates value and shared rewards. But what about when the news is bad? What happens when there are no rewards to share?

When performance is bad in a traditional environment, it makes sense to keep it secret. After all if employees can't affect results, poor performance is a reason to look for a new job. An ownership culture assumes that employees can have an impact on performance, can help each other, and they can learn to adjust to the things that they can't control. Poor performance results are an opportunity for learning. However, sharing bad news can be difficult for leaders who have not had practice in teaching people about the business. Below are some tips for leaders on getting the most out of bad performance news in an emerging ownership culture.

Get Your Own Head on Straight About the Poor Results

Before talking to employees about poor performance, get yourself ready to communicate it. Below are the common phases people go through when dealing with poor performance. Let yourself experience these stages before communicating with employees.

Accept that it happened. If you find yourself saying "it couldn't have happened" or "it must be the way accounting put the final numbers together," you may be in denial. If you don't believe the numbers reflect real performance, find numbers you do believe.
Find a place to express your disappointment. Let's face it, poor performance means that something happened that we did not or could not control. Some leaders may blame themselves, some blame outside forces, and others blame their employees. Being angry and blaming is a normal stage in dealing with poor performance. However as a leader, you won't be able to help employees learn if you are angry when you talk with them. Placing blame or taking blame will not help people think like business people. In fact, it will just make it easier for them to avoid taking shared responsibility. Some leaders make use of a peer group, coach, board member or a professional advisor to help them move beyond the disappointment stage. You need to able to see this as a positive opportunity to teach employees and make change to be effective.
Identify what the company can do differently or what you have learned. Poor performance is a learning opportunity. The difference between what we thought would happen and what actually happened tells us a lot about our business. What do the poor results tell you about . . . your customers, suppliers, employees, the business process, your strategies, or your position in the market? As a leader, pick one or two things that employees can learn from the results. These key learning points should focus on either 1) something everyone needs to understand about your business or 2) actions that people can take to avoid or minimize these results in the future. Performance results are usually due to a variety of factors. Be ready to talk frankly about all factors and emphasize those that people can affect.

Make Tracking Performance Information as Common as a Lunch Break

If the only time people hear about business performance is when things are very bad or very good, employees will not learn to link the activities of daily work to performance. The drivers of performance will be a mystery and employees will not know how to change it. People are frightened by bad news when they feel powerless to control it or adjust to it.

The more frequently you communicate about performance--whether it be production information, customer service feedback or financial results--the more likely people will be able to learn what affects the results and adjust accordingly. If you have protected people from the bad information in the past, they will need to gain some perspective and they will need more specific guidance on what they can do to change the situation.

Create a Setting Where Employees Can Practice Thinking Like Owners

Employees will go through the same stages of adjustment to poor results. Below are some ideas on helping employees learn more as they move through the adjustment.

Accept that it happened. Employees may initially deny that the results are true. They may think that the numbers are fictional or that another agenda is at work here. That's a common response. Instead of taking this as an attack on your integrity, understand that they are in denial. Regularized tracking can help people move from denial more quickly.
Create a place to express disappointment. Ask people what they think caused the poor performance. Don't share your ideas until employees have shared their ideas. Typically employees will blame others first. They may blame other departments, the customer, the industry or even you. The leader needs to be ready to hear a laundry list of excuses and wild guesses. Hidden in the excuses is the path people will take to understand what they can do differently.. People will need to be heard before they will be ready to listen to your ideas. You don't need to agree or argue with the excuses, just let them be expressed. Afterward, you can ask people to refocus on what they can control from their jobs.
Identify what can be different or what employees can learn from this. In beginning of building an ownership culture, this is when the leader teaches people the key learning points they have culled from the performance results. As leaders gain more skill, they learn to help people discover those key learning points through the questions they ask. In more mature ownership cultures these conversations about performance are an opportunity to gather information for group problem solving and planning.

Develop a Plan for Improved Performance

Bad news is part of business. Things never go exactly as planned because businesses operate in a constantly changing environment. Employees who think like owners have learned this and use this to their advantage. Healthy ownership cultures have a free flow of relevant information, both good and bad.

After you identify what you can learn from poor performance, the next step is to develop a plan to adjust and track progress in getting there. Creating a two-way conversation about poor performance--even if it is difficult to do at first -- accelerates how fast people learn their contribution to performance. This is how employees learn to think and act like owners.

Cathy Ivancic is a consultant and co-owner at Workplace Development Inc. Since 1985, she has helped more than 100 ESOP companies enhance ESOP communications and develop an ownership culture. She is active in national organizations that promote shared ownership and has served on the NCEO's board of directors and as an officer of the Ohio chapter of the ESOP Association.She can be reached at civancic@workplacedevelopment.com.

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