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The Rumor Mill Can Grind You Up

Are you familiar with the rumor mill at your business? You can kid yourself that there isn’t one, but trust me. Your employees know about it… listen to it… take part in it. The path to the rumor mill begins with employee uncertainty and lack of information. Once the rumor mill kicks in, it can be challenging to shut it down because your statements and protestations are viewed as spin or damage control. The economic situation we face today is an ideal one for cranking up the rumor mill. Talk of recession, cutbacks and layoffs are just the thing to get the rumor mill grinding.

A few months ago, while Bear Sterns executives went public to affirm that they did not have a liquidity crisis, the rumor mill said they did have a problem. Consequently, there was a run on the bank and a loss of market capitalization that eventually led to illiquidity. There is no doubt the situation was tight prior to the rumors, but the firm’s bankruptcy is as much a result of the rumor mill as it is unsound financial practices.

And the rumor mill is not limited to large companies. It exists in every organization. Rumors can be spread by malicious malcontents or by innocent employees simply wondering out loud. In both cases, a lack of real information from leadership contributes to their start. Different scenarios may be involved. One of them could apply to you:

#1 – It’s business as usual. Things are going well. But, employees may not know this. If they do know it, it is because managers have made it a practice to give them a state-of-the-union update every few months or so. Even in times of uncertainty, this information flow must continue. Management understands that their workers are entitled to know the status of the organization. And that, when people feel they’re being treated honestly and with respect, they’re more likely to stick around through the difficult period.

If employees don’t know the firm is doing well, it is because nobody has told them. This practice of withholding pertinent information from workers is not unusual--and it’s one of the primary causes of the rumor mill. Left to their own imaginations, employees will look at what is going on in the economy and extend this uncertainty to their place of employment, thus damaging morale, decreasing productivity, and potentially increasing turnover.

#2 – Business is tight, but it’s nothing too serious. In this scenario, managers think they there’s no need to reveal that things are less than rosy because, in the long run, everything will be alright. Yes, in the long run, things may be fine, but it is the short run that matters now. Many people are living paycheck to paycheck, and the idea of lost income is a powerful threat. So, although you may be okay in the long run, your workers want to know that their jobs will be preserved in the short run as well as the long run. Rather than not report at all, managers should update employees and reassure them that, although business is off a bit, their jobs are safe and there is no reason for concern.

#3 – Business is bad. Every day, we read in the papers of business bankruptcies. Unfortunately, that happens in good times as well as bad times. But a soft economy increases the number of failed enterprises. Some misguided managers tell themselves that “no news is good news” and bad news will only cause employees to leave. Wrong. “No news” is an opportunity for the rumor mill to grind on, and bad news is an opportunity for the company to rally and come to together to meet the crisis.

Managers who keep silent miss the opportunity to stop the rumor mill. Better to tell employees the truth and get them on your side than to tell them nothing and let the rumor mill push them out the door.

Even in the best of times, communication is one of the most neglected duties of leadership. Rarely is it as good as it could be. With this already weak foundation in place, we currently see firms doing less to disclose information in the face of economic uncertainty when they should be doing more. These conversations don’t need to be scripted, theatrical events--just honest, adult conversations about how the firm is doing and what employees can do to help. Do this and the rumor mill will not get a chance to crank up at your place. Don’t communicate, and it might grind you up.

Wally Adamchik is the President of FireStarter Speaking and Consulting, a national leadership consulting firm based in Raleigh, NC. You can visit the website at http://www.FireStarterSpeaking.com or email him at wally@beafirestarter.com. His book No Yelling (http://www.noyelling.net) was selected by Entrepreneur Magazine as one of the best business books of Summer 2007.

"I have attended quite a few leadership seminars, and have tried to gather and relate things from each of them, but yours hit all 3 of us with material that relates and for myself commands an internal level of accountability and responsibility in what I do at our company. "

Chris Larente
Construction Superintendent
Park Paving LTD.