What’s The Best Way To Let Your Team Know About Really Bad News?

“What happens if we don’t get a term sheet in the next six weeks?” One of my employees asked me during our company meeting.

I had just let the team know that everyone in the company was going to minimum wage for the next six weeks. During our board meeting the previous day, one of our investors told us he wanted to shut the company down.

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The request to shut the company down totally came from left field. We were doing well, and our fundraising was going well too.

We already had one term sheet, and we had several other investors who appeared close to giving us another term sheet. In fact, we had just presented to the full partnership of a fund two days prior, and we were expecting them to give us a term sheet (they did).

So, I suggested to our investors that we put everyone on minimum wage for the next six weeks, so we could play the hand out. It was a Hail Mary pass that I didn’t expect them to agree to, but they did.

The hard part was what should I tell our employees.

You need to be fully transparent when things aren’t going well.

I fully expected that we would get at least one more term sheet. But that wasn’t the point.

You have an obligation to tell your team exactly where things stand at all times. We had been sharing the good news and the bad news with our team throughout the company’s life.

My answer to the employee’s question of what would happen if we didn’t get a term sheet in the next six weeks was honesty:

“Assume the company will not exist if we don’t get a term sheet in the next six weeks,” I said. It was a tough and sober message.

Now you’d think telling your team that you may not exist in six weeks would cause a panic. It didn’t. We didn’t lose a single employee during the following six weeks.

And we ended up getting three terms sheets.

You build loyalty by being transparent throughout the company’s life.

One of the big mistakes that you make as a first time CEO is being afraid to share the bad news with your team and your investors. Your investors are expecting bad news to happen, so in some ways it’s safer and easier to share bad news with your investors.

But what about your team? Aren’t they just expecting the company to succeed?

The key is just be transparent from day one. Share the good news and the bad news. Answer your team’s questions, so they are educated on what’s going on with the company.

You want to be steady at the wheel from day one with your team.

In other words, be somewhat restrained when sharing the good news with your team, Just as importantly be honest, but don’t overdramatize the bad news you share with your team.

Your team takes its queues from you. So if you’re not overreacting then they will be less likely to overreact too.

If you do this well, you’ll end up with a loyal team that will support you during the tough times. And I guarantee you there will be tough times.

That’s the payoff. That’s why we didn’t lose a single employee during our six week crisis. You’ll find you’ll get the same loyalty from your team too if you’re honest all the way through your journey.

For more, read: How Should You Tell Your Team The Results Of Your Board Meeting?

I work with startup CEOs to help them grow their businesses . I built several businesses from $0 to >$100M. Learn more at www.brettjfox.com

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