Change at the Top: Internal Communication Is Key to Bringing Employees on Board

June 1, 2017

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In today’s business environment, CEOs come and go frequently. Last year, 58 companies in the Standard & Poor’s 500 index installed a new chief executive, the highest number of transitions since 2007. CEOs are leaving their positions for reasons that include mergers, resignations and retirements.

During the high-stakes period of a CEO transition, especially when that turnover is unexpected or poorly handled, investors and customers are usually the company’s first concerns.

According to a 2011 study on CEO transitions conducted by FTI Consulting, investors want to know about the new leader’s experience and track record — and after an appropriate planning period, about his or her vision for the future and strategy to achieve it. Such information helps investors decide how much confidence they will place in the company under its new leadership, which will eventually affect the company’s enterprise value.

Employee concerns

When a new CEO takes the helm, employees have the same questions as investors. Who is this person? Why is he or she the best choice to take the organization forward? Do they know our industry well and understand what makes us who we are? How will they lead?

As time goes on and change begins to appear on the horizon, their need for information grows more urgent.

But during the first 100 days of a CEO transition, companies usually dedicate a higher amount of energy and resources to communicating with investors than to helping build employee confidence. Leaders say “employees already know” important information about new CEOs, or that “it doesn’t affect their daily work,” or that “our employees don’t care” about those details. These scenarios are rarely true.

In actuality, employee confidence affects enterprise value as directly as the confidence of external stakeholders. Ideally, the new CEO will make changes that better serve customers and shareholders. Employees must implement, anchor and sustain those changes. Their belief in the new leader’s vision and strategy matters.

Yet, according to the FTI Global Employee Confidence Study conducted in January 2016, only 34 percent of employees say they are “very confident” in their CEO and leaders and only 27 percent are “very confident” in their company’s business strategy.

The study showed that effective internal communication is the top driver of confidence among employees, which they say enables them to master change (95 percent), better understand their role (93 percent) and gain confidence in future success (90 percent).

Therefore, it is imperative for a new CEO to win the confidence of this most critical audience quickly, so they can help impart the confidence to customers and investors that directly affects the bottom line.

Internal communication

Here are seven guiding principles for communicating with employees during a leadership transition:

  1. Reach out to them first. They will be impacted more quickly than customers and must support business continuity. Employees read news and participate in social media, and establishing their trust requires that they hear from you before other stakeholders do.
  2. Inform senior leaders before a companywide announcement of a new CEO. Respect their positions by empowering them to be confident in front of their employees and carry the message effectively.
  3. Talk with staff. Face-to-face communication (or at least live communication, if there are multiple company locations) with employees within the first week is critical for building trust and confidence. You don’t need to have all the answers immediately — just provide venues in which employees can ask questions.
  4. Understand the employee mindset. In different ways, they know both more and less than you might think. They know the business and are tuned into internal politics. At the same time, employees live within the realm of their individual jobs, and don’t know everything that senior management knows.
  5. Act quickly. Employees will expect (and hope for) change and want to know where the new CEO intends to lead the business. Take advantage of the window of opportunity not only to formulate and share a vision, but to address critical issues quickly so the organization can move forward.
  6. Engage employees in designing necessary changes. They know the company and want to help, and most of them will want to start moving toward the future.
  7. Keep everyone on track. As change starts to happen, provide regular updates to employees through channels they can access.

     

From their first day on the job, CEOs can build trust and confidence in employees by communicating early, often and with transparency, and engaging their people in the process.

After all, if employees aren’t engaged, leaders may struggle to realize their ambitions for the organization over the long term.
 

Angie Gorman

Angie Gorman is a managing director and Americas head for employee engagement and change management at FTI Consulting. She previously served in leadership roles with Office Max and Solo Cup Company.
 

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