In over 35 years’ advising distressed businesses it has become very much a reality of my role to deliver ‘the bad news’ to business owners. While it’s an unenviable task, it is also a very important one, as it is often a key moment in helping a client move forward both commercially and personally.
Here are some of the key principles that I’ve learned for ensuring those conversations are as constructive as possible.
The first is to acknowledge the gravity of the message and its impact on the client. In my position I am constantly confronted with loss-making ventures of varying numbers of 000’s. However, whether losses are $10 million or $100 thousand the emotions felt by my clients are the same and it is important to empathise with what they are feeling and what it may mean for them: the risk of losing the family home, being unable to pay the school fees, or even unemployment. This is certainly not an everyday experience for them and must be treated sensitively every time.
The second is to be honest and straight talking. Time and again I work with clients who have gone to the wall because they have been in denial about the trajectory of their business. Months’ of excuses such as a difficult economy, seasonality, or an underperforming sales team are generally just shrouding much more fundamental issues that have needed to be addressed. Therefore, at this point it is important to be able to cut through these distractions and get straight to the core issues. For example, revenues no longer covering fixed costs is an irrefutable fact that a charismatic proprietor cannot talk their way around. Helping the client appreciate that their financial predicament is serious and is not going to go away is a key step in enabling them to move forward.
Thirdly, after delivering bad news it is imperative that we then offer hope. Once we have delivered the reality check, and acknowledged what it is likely to mean for the business owner we are then in a position to offer them solutions, or at very least a clear course of action. The client must leave the conversation with a clear focus on what they need to do in the short to medium term to move beyond their present difficulties. Even if it means starting from scratch, business owners are more often than not relieved to be offered the prospect of drawing a line under a traumatic period and breaking out into clear skies again.
I have strived to engender in my staff a culture of respectfully helping people navigate through difficult times. I believe this respect for our clients can be clearly observed when these three principles for delivering bad news are implemented: being empathetic, being honest and casting hope.
Bruce Mulvaney is a Fellow Chartered Accountant and Turnaround and Insolvency Practitioner operating from Melbourne's eastern suburbs. He is a past State Chairman and National Board Member of the Institute of Chartered Accountants in Australia.
He is freely available to business groups and industry associations for speaking engagements.