Over 15 years ago, I accepted a position as Head of Marketing & Communications for a $29 billion multi-national real estate company. My wife, two teenaged sons and I moved overseas, and I could not have been more excited I was looking forward to the challenge of leading the team that was crafting the messaging and attracting investors for this complex organization led by a smart Executive Committee and a board comprised of some of the best and brightest in retail and real estate.
An Unexpected Saturday Summons
Six months into the role I was asked to come in on a Saturday morning to meet with the Board. At the meeting, I was informed that the company could not repay $1.3 billion mezzanine loans used to fund a $5 billion acquisition, and that we would need to prepare an announcement for the stock exchange for Monday morning. Having been through a similar situation at another company, I had more perspective than others in the room and worked to keep everyone focused on what needed to be done rather than panicking about the situation the company was in.
I knew that the announcement for the stock exchange was important, not only for the financial markets and the company's investors, but also for the thousands of company employees. The financial issues were corporate ones related to acquiring too much too fast, over-leveraging and the massive disruption in the lending markets. The underlying properties that the company and its funds owned were generally performing well, and it was vital to the company's survival that they continued to do so. To accomplish that, we needed employees to be focused on their jobs and to let Head Office worry about the debt and the financial markets.
Significant Impacts for Employees
The employee situation was complicated by the fact that a significant number of employees were also investors through a generous employee share program, and many of the senior executives had used margin loans against shares options to purchase homes. So, come Monday morning, many employees would not only see significant personal paper wealth evaporate, several of these would have margin loan calls that they would not be able to meet and which might force them to sell their homes quickly. Another exacerbating factor was the 14-hour time difference between the head offices in each country.
While the accountants and lawyers worked on the public announcement, I focused on audiences other than investors, most importantly, the employees. With the buy-in of the Chairman and CEO, I took the following steps:
Called all members of the Executive Committee into the office for a Sunday morning meeting.
Made a list of key messages targeted to employees that would be incorporated into:
The public announcement
Specific communication to employees following the public announcement
Teleconferences with groups of employees with their responsible Executive Committee member
Worked with the head of Human Resources to establish a single point for employees in each country - this contact person would answer the questions they could and ensure that other questions were promptly answered.
Outlined other audiences and key talking points for each - it was important the our team members at the properties knew what to tell their teams, tenants and suppliers - it was critical for the rental income to keep flowing and for vendors to continue to supply products and services.
Outlined a calendar of regular communications via email, teleconferences and the company's intranet to keep employees informed and engaged.
Shares Drop 85%
When Monday morning came, most of the Board, along with the CEO, CFO, General Counsel and I had not left the office in 48 hours other than to shower - certainly none of us had slept. The group looked shell-shocked. Things only got worse.
On the investor call following the issuance of the public announcement, one analyst kept announcing the latest low in the company's share price in real time. I was informed that the foremost receivers in the country were waiting in the lobby, the CFO collapsed and was taken away in an ambulance. The company's main shares dropped from a May high of $10.02 to $1.54 (an 85% drop) at the close of trading on announcement day (it had dropped as low as 42 cents during the day).
Employees = Key to the Future
I was determined that we had to show employees that we were moving forward. I marshalled members of the Executive Committee to speak with all of their employees; we asked Board members to stay around and make their presence felt through the office; we had teleconferences with all personnel in each country; we bolstered the investor services call center with additional staffing and made sure that senior people were available to deal with the most belligerent callers; and, we made sure that employees felt respected, informed and confident that they would continue to be paid.
Importantly, we never sugar-coated anything. Employees were told that the company's situation was dire and that changes would clearly have to be made. We committed to timely, transparent and honest communication.
The result was that we were able to keep employees focused on their work, engaged with the company and continuing to keep delivering results. Our ability to deliver results (and cash flow from the property level) were key factors in convincing the banks to continue working to achieve a resolution and not put the company into liquidation.
My key learning was that internal audiences are among the most, if not the most critical constituency. Employees are not only necessary to the success of any organization, they can also be its most ardent advocates in crisis situations when they feel respected. The effort will pay off in spades.
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