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Lawyers need to communicate transparently with their clients and take care to tell them bad news

This article outlines the best practices for companies who must deliver bad news to their customers. When giving bad news, natural human instincts can result in a company trying to sugarcoat a crisis, postpone telling customers of the crisis, or omit facts from what it tells the public about the crisis. Each of these instincts, while easy to understand, can make the crisis worse, and runs counter to the best practices for delivering bad news. The piece explains why a company with bad news to give is best served by telling the truth early, telling it all, and telling it themself.

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How to Tell Customers Bad News

When managing a crisis, communication skills are often contradicted by the human instinct to put the best light on bad news. Specifically, there are three natural, human reactions that frequently guide how companies and organizations deliver bad news to customers. The first is that, instead of speaking in plain language, they will try to sugarcoat the bad news. Another natural human instinct is to postpone telling customers what the bad news is, hoping that maybe it will go away on its own. The third human reaction when delivering bad news is to selectively reveal details of the matter, so as to minimize the public impact of the crisis. 

Each of these instincts, while understandable from a human’s perspective, can all too often make bad news worse. Over the course of our careers in crisis management, we have learned that all of these instincts are counter to the three best practices for delivering bad news. Those rules can be summarized by the mantra regarding the truth, however tough the bad news is: Tell it early, tell it all, and tell it yourself.

The first step after receiving bad news that customers must be alerted to, is to gather all of the facts about what the bad news is. A company with bad news to give must anticipate every question it will receive from the media and all stakeholders: e.g., customers, employees, investors, suppliers, banks, or if the company is a listed public company, shareholders. Thus, the company must gather all the facts, including the bad ones, and formulate accurate responses to the questions about what happened, why, and especially, what the company intends to do to solve the problem.  

For example, suppose a company realizes one of its major products has serious defects and must be recalled. Think of all the different components of announcing that bad news. What is the defect? How did it occur? Why did it happen? What should consumers do? How immediate is the potential danger, if any? And most important, the company must find the underlying facts as to why the defect occurred and explain, credibly, why it won’t happen again. Without answers to each of these questions – and more – the company will be incapable of restoring consumer confidence. Or worse, if it waits too long to provide this information, some other potentially adverse entity, such as a competitor, will, and the company will lose control of the narrative to its detriment.

A second example might be a company suffering a major data breach. The company will have to develop a plan most importantly to inform all customers whose personal and private data might have been breached: gather information regarding how the breach occurred; what data was impacted; how the breach affects customers; whether privacy rights were violated; and how it plans on securing customers’ data. Each crisis brings its own set of facts, and a company announcing bad news must be sure it understands all of them.

Telling it early means that a company or organization in crisis must preemptively get their message out first. If it doesn’t, the company runs the risk of having the bad news leaked to the media or some other party. Should this happen, the news can get twisted and contorted to make its impact significantly more damaging. Though telling it early runs counter to the natural human instinct to delay delivering bad news as long as possible, the damage done by that news leaking can be severe and is a risk that must be avoided.

After gathering all of the facts, the question for crisis managers then becomes how bad news should be communicated. One critical step is for the crisis manager is to coordinate with the company delivering the news to write messaging that both parties are comfortable with. This is the message that will be shared with all of a company’s stakeholders, including customers, investors, and ultimately, the media. We almost always recommend issuing a press release and public statement, even though it seems counter to some who argue that bad news should not be announced yourself.  But that argument is based on the assumption that bad news will not eventually get out.

Our experience is that if it is bad enough, it will – but will often get out drip, drip, drip rather than all at once to get it over with. One device we have used is to contact one or two trusted reporters to see if they would be interested in writing one comprehensive story, telling the full narrative, all the facts, good and bad.  We call this a “predicate” story – meaning, once all is included, then we can direct other reporters to go to that story to get most of their questions answered. This further reduces the possibility the crisis will be depicted as worse than it is. One way or the other, bad news that impacts major companies or a large number of people will almost always get out. As a result of this, the company should tell it early and mitigate the possibility of the news being twisted by a third party.

Telling it all is another way of saying that when a company is giving bad news, it must inform the public of all the relevant facts, and not just the favorable ones. A crisis manager must comprehensively probe their client to understand all of the harmful risks they might not want to talk about. Inevitably, this will lead to a conversation with that client’s lawyer. Lawyers, usually, will say that should their client make bad news public, it could provoke a lawsuit, which would do even more damage. Therefore, telling it all will frequently come down to a debate between lawyers concerned about adverse legal consequences of volunteering bad facts, which is an understandable concern, versus the reputational harm to the company if the bad news is leaked out and distorted and made worse.  

If the risk is too substantial, lawyers will often prevail and, at least for a while, the company will be reduced to a general statement explaining the crisis without too many facts. The worst choice of all, however, is simply to “decline to comment” – which to many people is tantamount to pleading guilty. If the comment Is only “decline to comment,” then if and when – usually when—the bad news is made public, the company has two problems on its hands. First, the crisis still exists in the first place. And second, if certain harmful facts are omitted from the public disclosure, the company will appear as if it is engaging in a cover-up. 

None of this is to say that legal risk should not be accounted for, there are of course exceptions to this rule. Should the penalty for telling the whole truth be as severe as a jail sentence for an employee, a different consideration must be made. That said, if the risk is that severe, the company will have to look for the support of criminal lawyers. 

Some lawyers are unaccustomed to being challenged when they say there’s a legal risk for their clients. In most companies, once the outside counsel says no, that’s the end of the discussion. They will make conservative decisions, for instance, omitting damaging facts from the public narrative, arguing that their company must do everything in its power to prevent a lawsuit. While it’s easy to understand why a company would strictly adhere to the advice of counsel, it’s not always the correct decision. 

Simply put, the debate must be more full-throated than a lawyer dictating to a company what should be done. Other parties must be in the room to argue the merit of the legal risk that would result from all of the facts of a crisis being made public. Under the almost universal system, especially in the case of a major outside law firm warning a client about risk, a company’s CEO will be incapable of standing up to that law firm. The law firm will make the decision, have the ability to veto decisions it disagrees with, and ultimately, control the future of the company. It is for this reason why it’s so important to have multiple voices contributing to the crisis decision-making process and the debate of legal risks versus media risks. These voices should include the CEO, management, lawyers, communications employees, and investor relations managers. Once the debate is had, the CEO and management will make the most informed decision possible. 

There is natural tension between lawyers and the legal risks they work to defend clients from and crisis managers and the reputational risks they work to defend clients against. Frequently, when pushing for a conservative crisis management strategy, lawyers follow the natural human instinct to be selective about what bad news gets revealed. This defensive judgment, however, can lead to severe consequences should it result in a company being accused of hiding information. As a result of this, in times of crisis, companies are best served by comprehensively debating the legal risks, and afterward, revealing all of the facts of the matter.

The question of who should be delivering a company’s bad news to the public is also a critical one. The most important voice in this sort of matter will always be the company itself. This implies that the company must not hide from the crisis, but rather, it must be direct and address bad news head-on. There is no excuse for refusing to answer a reporter’s question, and the phrase, “we can’t comment on that because the matter is under investigation,” should never be uttered. In fact, anyone who suggests such a response should be let go. 

If a company can’t comment on an issue because it is the subject of litigation, it should explain that it first has to gather all of the facts, precisely because it’s in litigation. The fundamental reason why, is that hiding behind an investigation or some other excuse amounts only to kicking down the road and prevents the company in question from delivering the news itself. It also reopens the risk of a third party delivering the news and twisting and contorting it to serve its own agenda. 

This process of telling bad news ones’ self runs counter to the human desire to sugarcoat it.  Companies, like everyone else, hate to be the bearer of bad news, but ultimately, doing so is in their best interest. Another reason why a company can’t hide behind an investigation is that inevitably, the public will not believe it can’t comment on the matter. And if the public won’t believe what a company is saying, it shouldn’t bother saying it all.

At the end of the day, when a company is handling a crisis, honesty is the best policy. Honesty, however, goes beyond just issuing a statement acknowledging the existence of a crisis and then moving forward. It means that the company has a responsibility to tell its own story, including all relevant facts, and that it has to do it quickly. 

Conclusion

As a set of rules, telling the bad news early, telling it all, and telling it yourself is not intuitive. Further, it is not difficult to understand why one might think that breaking these rules might serve them better in the long run. The fact of the matter, though, is that it seldom does. Trying to skirt these rules, while natural and human, results in a company losing control of its narrative, or having the crisis spiral out of control. The only way for a company to be sure it knows how bad news will be reported is if it directly confronts the crisis before anyone else can and without leaving any details off the table.