Communicate on board to keep stakeholders

I'm an optimist by nature. I choose to believe that if you work hard and focus on the positive, good things will happen eventually. But ongoing economic uncertainty has given me pause.

Evidence of a turnaround is in short supply, and between the continual growth of government relief programs for financial services companies and cutbacks in virtually all industries, a lot of folks are troubled. That's for good reason. There are no real answers to the question, ``When will things get better?''

While I have no crystal ball, I have observed that certain practices during times of crisis can either alleviate or exacerbate morale problems.

Consider the following vicious cycle: Businesses in all industries succeed or fail based on the efforts of their employees. Contented employees are productive workers. When employees are worried, productivity suffers. Stress leads to injury or illness, which may spiral into claims. Claims drive costs. Businesses that struggle to balance expenses against revenues have difficult choices to make, usually resulting in lower morale and higher stress.

If that seems as plain to you as it does to me, take heart in a relatively simple solution that applies in good times and bad, but is especially true in tough times. Businesses can't communicate too frequently with stakeholders—be they employees, customers, suppliers or investors.

If there's no way to create certainty in uncertain times, what should the message be? The answer I offer is rooted in history, philosophy and anthropology.

Business practices, communication methods, climatic conditions, accounting standards all change—add to the list your sense of things that do not stay the same—but I contend that human nature itself fundamentally does not change. It's human nature to worry. It's human nature, in a crisis, to lose sight of positive experiences. It's human nature for imaginations to run wild, in the absence of information.

That is why businesses can't afford to operate in a vacuum. Doing so tends to let imagination paint a worse picture than the reality. Businesses need to communicate so stakeholders remain focused and want to stick around.


Let me offer an example. An insurance company reports a larger-than-expected loss, which widens over succeeding quarters. The insurer's stock takes a beating. Analysts downgrade credit and financial-strength ratings. That signals big problems to investors, customers, brokers placing business with the insurer and, far from least, employees. Without clear communication about what caused the problem, what the company is doing to fix it and why stakeholders shouldn't abandon ship, the affected company is issuing a tacit invitation for them to leave. If they do, what future does that company have? Not a pretty picture.

I can't unequivocally state that the economy will recover this year or next or in 2011. I can't offer assurances that major insurance industry companies won't become insolvent. But I have reason to believe that our economy is resilient, that the vast majority of insurance companies are well-regulated and well-capitalized, and that policyholders do not need to worry their insurers are in danger of collapsing. Therefore I remain hopeful. And I hope you can, too.

Worthy of note

Next week in Orlando, Fla., is the RIMS 2009 Annual Conference & Exhibition. I'm pleased to say that Business Insurance and RIMS will jointly present the Risk Manager of the Year award and induct three new members into the Risk Management Honor Roll.

The 2009 Risk Management Honor Roll comprises: Raymond J. Alletto of United Rentals Inc., Lori Jorgensen of Microsoft Corp. and Gary W. Langsdale of Pennsylvania State University. The 2009 Risk Manager of the Year is Fred O. Pachón of Select Staffing Inc. Read about their achievements in next Monday's issue and online at www.Business Insurance.com.