Living two blocks from the Federal Reserve building in Downtown Manhattan and witnessing the unfolding drama among the global banking leaders so closely is not the only reason I will remember the last weekend forever. Rather, I'll remember it for the speed at which the fate of hundreds of years old financial institutions got decided in a couple days and the impact it had on the rest of the global economies. That Wall Street is on its way for a historic transformation is not a surprise now. Lehman Brothers collapsed after failing to find a suitable buyer to rescue it, meanwhile Merill Lynch grabbed the opportunity of selling itself to Bank of America before history repeated itself for Merill, like Lehman. Though the Fed did not change the much anticipated interest rates, it decided to extend $85 billion to AIG to bail it out.
As a communications professional, I believe this is a FASCINATING time to really check in real time the value of powerful communications in restoring a company's reputation. Going into the historic weekend, the overall sentiment among everyone on Wall Street was that Lehman will have to be bailed out either by Fed or will be bought out by someone (most likely by Bank of America or Barclays) and thus be saved. Come Sunday, Lehman announced liquidation and Bank of America announced it is buying Merill Lynch. If you were an employee at Lehman or Merill, what would your reaction to the news be? You might be shocked and grieved and wait to hear from some official word from the top management of your company. In Lehman's case, the employees are still waiting. Richard Fuld, the widely popular chief excecutive of Lehman did not address its employees--not after filing the Chapter 11 bankruptcy, not after sending out the release, not the next day morning, not the next day evening.........not at all perhaps. Media reported Fuld's huge painting in front of Lehman building signed by various employees and on-lookers with hate messages. For someone who's worked his way up from an intern to a CEO at Lehman, led the company through difficult times like 9/11 and done some great things for Lehman, this must have been the final nail in the coffin. In two short days, Fuld lost all respect that he might have earned by working hard throughout his life.
Whereas Merill and Bank of America acted quickly. The CEOs appeared jointly in a press conference the next day, convincing the world how strategically perfect their combination was and the synergies that the two businesses achieved because of the merger. Merill website was updated with the announcement. Chances are, the employees at these companies were also communicated in some fashion about the merger.
One can only imagine what would the emotions and sentiments among employees and everyone on the Wall Street be right now. The confidence is tremendously shaken, the morale is low, there is fear, anger, anxiety and uncertainity about what's next. Is the worst over? What is more to come? Timely and effective communications in such turbulent, difficult times can address these questions, if not answer them fully. For the big financial institutions, it is important that they keep serving clients, keep getting more business and keep working together through this crisis. But for that, they need to communicate honestly and timely to their stakeholders--employees, clients, shareholders, customers, Government and media. Bank of America might have to assure employees of the process of integration with Merill and what it means to them. Merill might have to communicate with its clients and employees what this merger would do for them. And of course, Lehman should do what it has not done at all! Speak up, accept the reality, provide an explanation and the future of its employees atleast, if not all stakeholders. Chapter 11 bankruptcy does not mean that the business will be shut down, it only means orderly disposing of assets to pay off bad debts etc. So if the business has to keep running, start afresh and hopefully get back on track, doesn't Lehman need its employees, clients, counter-parties, shareholders...in short, everyone whom it affects? It's a sorry sight to watch employees on national television pack boxes and take their stuff from the Lehman office at night, when they probably don't know why and what's next.
It is said that the real task of a leader is to define reality. And reality is defined cleary with honesty, character, integrity and clear communication. Even if communications cannot change the fate of a company, it certainly can promise to get business back on track, which is of tremendous value in such times. And, like Lehman, if you are going down, why not go down with dignity? For those like AIG who are still surviving, isn't it important to communicate your key stakeholders what's going on, what you are going to do about it, and what are they expected to do?
The leaders of major financial institutions have a herculean task ahead of them--to motivate employees to continue working with a focus on the future, to assure Government that it is doing all it can to help the entire industry and to retain and calm the investors and clients whose confidence have shaken. But in the end, mutual respect, unity and trust among all stakeholders is what might save a company in such times and only candid and timely communication can help achieve it.