November's missive -- backed by the numbers -- was darker still: "The December sales forecast looks very dismal."
Thompson's warnings proved prescient. In December the company suffered its worst month in its 23-year history. However, its management was hard at work on a detailed memo titled Recessionary Strategies, outlining how the company would cut costs and tool up more quickly for new jobs to dig itself out once the economy turned up again. By doing so, Trans-Matic has thus far been able to avert layoffs.
Thompson sums up the recent difficult months this way: "I'll say this is a collegial atmosphere. There's empathy for management in a company that's willing to share that information in advance. By identifying the problem you have not done something to those employees. Instead, you've endured something with them."
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Sharing the bad news inevitably points to a core concern of worker and manager alike: credibility. Fragile even when the going is good, in bad times credibility often becomes the first workplace casualty. A factory floor can become a hothouse of rumors. Consider, then, what could happen in a small town dominated by a handful of enterprises.
Eufaula, Ala., with all of 14,000 souls, is home to Techsonic Industries Inc., a maker of sonar devices used by sport fishermen to locate fish. Not long ago, when business was booming, Techsonic was the town's second-leading employer. In 1988 sales peaked at $70 million -- a threefold increase in five years. Then came the crash.
In the past two years the company has reduced its work force three times, shrinking from 440 people to 235. "We're in a tailspin," says CEO Jim Balkcom, who admits in a somewhat shell-shocked tone, "I've never been through this before."
So how does he feel about laying that kind of self-doubt on his employees? "My perspective is, Share it all. " He reasoned that if he started sugarcoating the reality, fear and loathing would reverberate well beyond the factory parking lot. "We are in a small community, and I think the people in the community have understood."
Balkcom believes he had to be open, not only to shore up morale but to send a message to the town. He wanted people to know Techsonic was dealing in good faith and also wasn't going to disappear. "I wanted people to understand that there is a future here. The boat business is cyclical. It will come back someday."
As a result of bad times, Balkcom has emphasized "frequent and candid communication." In addition to weekly executive meetings and monthly company meetings, he has held a meeting every six months to elaborate on business conditions. "We had a special meeting after each of the reductions in the work force to tell people what was going on." At each meeting there came the inevitable question: So, is this it? "I told them, 'I don't know.' "
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Rick Wiand's experience was different -- and so, to a certain extent, was his response. His company, The Reiss Corp., a maker of several lines of women's clothing, operates in a community that has long been in economic flux -- Madison Heights, Mich., near Detroit. People there have been traumatized by years of uncertainty about the future.
The bad news broke last April, when Wiand's 50% partner in Reiss simply quit, unhappy with the business's performance. Wiand told his managers, and the word spread quickly to his work force.
Wiand knew that more setbacks would follow. He knew he had to downsize the company. Because the departing partner had been the company's primary designer, Wiand had to find a replacement, a difficult process that took about six months. During that half year the company suffered substantial losses, but, believing he could reverse that, Wiand saw no reason to alarm people. He chose to withhold details about how poorly the company was doing.
"I regret not telling them how bad things were, but there's no nice way to tell people that things are going to change." Change meant consolidating operations and farming out some of the work. As a result many employees would have to choose between being laid off or dealing with a longer commute. So when the changes happened, Wiand concedes, "they felt betrayed."
Wiand now admits he should have been more forthcoming "about the amount of losses," but he was afraid he would just end up spooking his employees -- at the company's expense. "My overriding concern was the survival of the company," he says. "I have no regrets about that."
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It was the lack of full disclosure that helped shape Glenn Smoak's thinking when he left Sky Courier Network, an air-courier company, to found a rival, Sterling Courier Systems Inc., in Herndon, Va., in 1985.
Smoak started his company determined not to repeat the fatal errors he saw management make at Sky Courier. There, in the early 1980s, Smoak had 110 people working for him. "The company was really feeling the recession, and at the same time inflation was still a big problem," he recalls. "People needed raises." And those raises weren't in the cards because the company was doing poorly.
That didn't keep Sky Courier's management from painting a rosy picture, claims Smoak. "They had no good news to share, but they would go out and pump people up," he says. "You can be positive while you're being negative, but you've got to be able to back it up with some connection to reality."
About a year after Smoak had left the company, one of Sky Courier's owners rented a theater and screened Hoosiers, an inspirational film about a small-town high school basketball team in Indiana making it to the state finals. Before the film he came out dribbling a basketball and proceeded to give a motivational speech. People who were there described to Smoak a scene of employees standing in the aisles, some with tears in their eyes, ready to go into battle for Sky Courier. "Ten days later this same guy was walking through the halls wearing a button that read, 'I don't work here anymore.' He had sold out."
