This piece appeared in the print edition of The Scotsman on Monday 7th November, as the ‘Between the Lines’ business opinion column.
New data released by Grant Thornton this month revealed that a quarter of Scottish firms plan to restructure their operations as cost pressures mount.
We also learned recently that Scottish corporate insolvencies in Q2 were 28% higher than the same quarter last year, driven by more than double the number of compulsory liquidations.
These trends had been widely predicted given the withdrawal of Covid-19 support, turmoil in financial markets, rising interest rates, and spiralling costs.
Over half of all companies intend to raise additional finance to cover those escalating expenses. Investment expectations have also fallen in every category, most significantly in skills development (-27%), recruitment (-27%), research and development (-23%), and international growth (-21%).
Instead, money is being directed towards actions that will ultimately reduce costs, with over half the respondents having already invested – or planning to invest – in productivity, efficiency, and automation.
Given the obvious implications for employees, it is imperative that companies considering these changes communicate their actions with due care and sensitivity to those affected. It may seem an obvious point, but it is often overlooked and relegating comms to an afterthought is laden with risk.
Corporate restructuring activities range from straightforward strategic actions that can be executed in a short timeframe, to complicated transformation programmes that take years to work through, like the plan announced by Credit Suisse recently, to winding up a company or appointing administrators.
Whether simple or complex, management teams can become so focused on the structural, operational, and logistical reforms necessary that they forget those are often only half the challenge. The task of communicating those changes is equally important and can define reputations for good or ill.
Done well, it will enhance an organisation’s ability to deliver the changes necessary, smoothing the path to its goal by ensuring those inside and outside your organisation understand the rationale for the changes and feel motivated to help implement them.
Done badly, it will compromise the successful delivery of elements of those plans. At worst, it can jeopardise the whole exercise, undermining the reputation of an organisation, a brand, and the individuals who lead it.
Consider the statement issued by Worcester Warriors rugby club when it entered administration recently, effectively blaming supporters for not buying enough tickets and players for not accepting pay cuts.
Contrast that with Edinburgh’s Filmhouse Cinema. Its appointment of administrators came as a huge blow, but the admirable manner in which it was delivered spoke volumes about the charity’s trustees.
In less than two pages of text they set out clearly – and in refreshingly jargon-free, simple language – exactly what had happened, details of the various factors involved, and what this would mean for everyone involved.
They demonstrated a genuine appreciation and care for the employees, audiences and communities affected and it was evident how difficult the decision had been for them personally.
The fact that this stood out as an exceptional piece of communications in the most challenging of circumstances perhaps says more about the regularity with which organisations get it wrong.
Most people reading that statement would have felt informed, sympathetic and motivated to support the campaign to save the Filmhouse.
The equivalent announcement from Worcester Warriors engendered no such sense of sympathy but was no less memorable, which I expect those responsible will regret for years to come.