Contradictory communication, corporate collapse

Enrique Sueiro. Professor. IE Business School

30 September 2014

Truth is increasingly valued on the stock exchange when it comes to business organizations’ intangible assets, and it just does not make sense to hide what everyone is going to find out sooner or later.

Peter Drucker said that 60% of companies’ problems are the result of bad communication. We could add to that that even the best communication does not make up for the worst type of management. The Gowex case offers a few lessons in this respect, as well as once again bringing up the question of why surprises in the case of business organizations tend to be negative ones.

“Shock” was the word Gowex employees used to describe how they felt. Just a few hours before the company’s dramatic situation was made public, they had heard the exact opposite from the mouth of the top director and the person best placed to know the truth.  A debacle of this kind can be announced suddenly and in the most soul-destroying way, but its essence had already been in existence for some time and has been kept hidden deliberately.

Just as communication and its semblance to action generates confidence, a total contradiction between what is said and what is fact undermines credibility, first in the company itself, and then in terms of its public image. Internal communication which starts with the ability to listen can alert management to financial or reputational crises in time.

The best thing to do is to keep one step ahead by means of preventative communication. Foresee the foreseeable and account for the accountable. It is what is known in the medical profession as the bearable truth and is very different to something we call a white lie.

Truth is increasingly valued on the stock exchange of intangible assets that best guarantee the future of any organization. The word bearable refers to the management’s skill of communicating bad news well, in such a way that there it does not increase the pain that that the situation already entails.

Luckily, lies sound glamorous for far less time, no matter how well they may be dressed up. Given that we do not appear to learn from history – often because we do not read about it. History whispers in the ears of those who are open to understanding that only the truth is sustainable. Once this basic premise has been taken on board, communication tools become effective.

Thanks to the immediacy of social networks and communication media, transparency tends to come in the form of instant verification. Even more reason not to insist on hiding something that will be common knowledge sooner or later. Contradictory communication and corporate collapse are increasingly synchronized and multiply exponentially their terrible effect in terms of compromise and reputation.

The behavior of a contradictory company is very similar to that of a person who suffers from schizophrenia, in terms of what they say (saying something and then denying it) and the way they act (saying something and doing something else). The case of wifi firm Gowex illustrates the initial reaction of its workers who, when the crisis exploded in a highly visible manner, were “convinced that the accusations were false.” It did not take long for them to realize that the falsehoods were not coming from the outside world, but rather from the very depths of the company. As always, what lay beneath came to the surface.

Hence there is demand to include the desirable combination of ethics, mathematics, words and numbers, business management and corporate communication in management education programs.  The resulting harmony, which is also the logical evolution in a natural growth process, prevents surprises, attracts talent and keeps it loyal, strengthens internal cohesion, and makes for a glowing public image.

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