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Edition 6 - December 2004

Communication is the Key to Successful Corporate Change

A solid communications plan and flexibility are vital

Companies in the 21st century don’t stand still. With mergers, acquisitions and corporate reorganisation as rife in France as other European countries, communications specialists are learning some powerful lessons about the importance of solid internal and external communications at times of corporate change.

Strategic corporate change is almost always a delicate period for the management team. The primary reason for reorganisation is generally based on economy - cost cutting or improving productivity, for instance - but a badly managed reorganisation can, on the contrary, have a negative effect on the bottom line of the business.

Time after time we see company bosses focus their attention on the legal, logistical or financial aspects of change without taking into account the most crucial parameter for the success of such a project: the human one.

When a business is going through any kind of change, it’s not just those at the top who are affected. France is no different: employees wonder about the future of their jobs; shareholders fear that the cost of reorganisation may itself lead to lower profitability; clients may question the quality of the company's products or services; suppliers ask if the company will still continue to work with them; and local councillors worry about the impact on the local job market.

If the company can’t effectively explain its decision to reorganise, criticisms from all stakeholders will gather pace. Moreover, where there is uncertainty and a lack of transparency, rumours will be generated internally and externally. Competitors can encourage these rumours, and the media can spread them even further.

We have seen instances in France where a lack of communication with employees on salaries, for instance, has lead to loss of motivation, resistance to change, and finally a rejection of the project, which might be expressed by negative stories being told to public authorities or the press, strikes, and even acts of sabotage.

Externally, being vague about the future of the organisation can also have negative effects. If jobs are being lost, the media may focus exclusively on the social impact of change, and financial markets will voice their concerns about the ability of the company to keep its promises. Analysts may even regard the company as high risk if there is a lack of confidence in its strategy.

Our experience of working with companies in France has highlighted four golden rules of communication in a period of reorganisation. First, be proactive in communicating key messages through a variety of mechanisms including email, briefings and meetings.

Second, maintain the line between a solid communications plan and being flexible, depending on the situation. Don’t communicate externally without considering the internal impact of what you are saying. Stick to a clear and detailed communication plan and define in advance the appropriate contact person for each target audience. If the financial director is the spokesman for all financial communications, for example, he cannot also be the board member responsible for internal communication.

The third rule we have is to anticipate every possible reaction to the reorganisation to avoid a crisis. Sales teams must alert directors to reactions from clients and competitors, and department and regional directors must report any actions at a local level. Numerous companies in France no longer hesitate to provide a communication platform to address any questions that may be posed.

The fourth rule is to take regulation into account and strictly respect the law. In France it’s also essential to keep in mind that legally companies may not be able to communicate exactly as they would like. French law imposes a restriction on communicating externally during a reorganisation, particularly with the media, before discussions with employees' representatives have started. This law applies to the employees as well as the company itself.

As a result, it’s advisable to refer to a “project” rather than a decision, and to speak in conditional terms if consultation has not been concluded with the labour force.

When two organisations are merging, there is also a need for communications specialists to avoid a clash of cultures. As the merger of French retailers Carrefour and Promodès in 2001 showed, belonging to the same industry sector does not guarantee having an identical culture and values.

Employees from both companies were concerned about a number of issues, from an uncertain future and having to work with former “enemies”, to changing their work habits and using different software and hardware. Because of the different business models of the companies and a lack of transparent communications, employees simply did not believe the project would be a success. As a result, the merger was extremely difficult as well as costing shareholders: the value of the new entity is now three times less than in 1999.

During a merger, employees will feel especially uncertain about the objectives of the new group and their position within it. The business practices of the merging companies may be very different: a written or oral culture, centralised or non-centralised management, a vertical or horizontal organisation, hierarchy, an introverted company or a company that communicates, a sales or research-orientated culture. Even the dress code can highlight a cultural divide that will need to be bridged by sensitive communications.

In case of a trans-national merger, such as between Air France and KLM in the Netherlands, differences between organisation, cultures and the language barrier can constitute another obstacle which has to be managed internally through communications. Dutch and French companies operate very differently, from the sense of hierarchy and relationships within the company, to their approach to meetings. Differing approaches to social negotiations can also be an issue: in the Netherlands, relationships between management and the labour force are based on dialogue and ongoing research into the consensus. In France, relationships are more likely to be based on conflicts and power struggle.

For Jacques Pateau, a Professor at the Compiegne University specialising in cross-border mergers, 60% of such deals fail if the difference in communication styles is not taken into account.

It is therefore essential that employee representatives and communications teams work closely together. Including employees in the development of the company's new identity and values can ensure that everyone is satisfied, and this can be supported by regular evaluation of how the opinions of employees are evolving.

The overriding conclusion we have come to in our experience of helping French companies manage change is that successful implementation of a programme of reorganisation is dependent on communication being seen as a core function within the company.

By Arnaud Pochebonne, director of the corporate, crisis and public affairs practice, Weber Shandwick in France.

© 2004 Weber Shandwick