How Startup Founders Can Break Bad News to Their Teams

After a difficult pandemic, 2022 was seen as the year of economic revival. However, the lingering effect of the pandemic, the Ukraine war, supply chain disruptions, and other problems have compounded this long-awaited economic recovery. Global growth is expected to drop from 5.7% in 2021 to 2.9% in 2022 and this trend is expected to continue over 2023-24 as well.

In addition, in India, we are seeing what’s being called a ‘funding winter’, marked by increased caution on the part of current and prospective investors. The tightening of funds has caused many startups to have put their expansion plans on hold. As a result, many startup ventures have shut down operations or downsized their teams. Around 10,000 workers have been laid off in the past few months.

While the current phase is understandably hard for employees of startups, it’s also posed certain challenges for startup founders, many of whom have had to take hard business decisions like downsizing their teams, closing their offices, or shelving their capital spending or expansion plans. This has necessitated difficult conversations with their teams — about putting in extra hours during the slowdown, postponing or reducing their annual salary hikes, or not hiring additional resources as planned.

Every founder and leader dreads delivering bad news to their team. But while it’s no easy task, being transparent and fair are the real hallmarks of good leadership during a crisis. Here are some tips on how to break bad news to your employees.

How to Break Bad News to Your Team - Tips for Leaders

Gather all the details

Before you break the decision to the employees, ensure you have all the details like the reason behind the decision, who was responsible for the decision, the other possibilities discussed, etc. Also, be prepared for the questions that might come your way from the team or employee you are addressing.

Rehearse what you’re going to say

If you are planning to break bad news to your team, rehearse your conversation with a friend or family. Encourage them to give you feedback so that you can make sure your words convey the message with sensitivity and frankness.

Be clear and direct

Your employees will accept the bad news better if it is delivered directly and clearly. It is important to watch your body language here. Avoiding eye contact, slumping shoulders or fidgeting is a strict ‘no’. It’s also important to never sugarcoat the bad news; that makes it even more difficult for people to absorb it.

Demonstrate the fairness of your decision

Studies suggest that people will be okay with accepting bad news if they believe the decision-making behind it is accurate. In business terms, this is called "procedural fairness." Once you share the news, explain who made the decision. Further, provide them with relevant information and context. It is okay to show your empathy to the team and employees, but ensure you stand by the decision.

Give them time to respond

Give them time to get a grip on the decision and express their concern. Give space for venting, but don’t let it turn into a debate. Make it clear that your decision was taken after considerable thought into the welfare of both, your business and your people.

Tell them what's in store next

Once you have delivered the message and heard them out, it is time to help your people move forward. Offer any guidance or advice with specific steps or actions to make a positive change.

Other Principles to Remember

• Take responsibility: If there were mistakes on your (or your management team’s) part that led to the current situation, admit it and take responsibility.
• Be discreet: The only thing worse than receiving bad news is receiving it in front of co-workers. Hence, only convey the information to the people who are directly involved or affected in your decision.
• Be kind: Acknowledge the impact of the decision on your people and offer to assist them in whatever way you can - for e.g., by facilitating outplacement or psychological counselling in case of downsizing.
• Do it at the right time: Don't deliver the news too early without having all details in hand, as this can cause confusion. At the same time, delaying the news will also increase uncertainty and rumours. Hence, choose the time wisely.
• Don't overload them with data: While providing data is good, do not overload your audience with a lot of information. Explain in simple words what the decision means for them and for the organisation.

Start-up founders must understand that although delivering bad news is uncomfortable, it is a critical part of being a leader. You may not like giving bad news, and your employees might not like receiving them. But in the long run, what matters is how transparent, understanding, and fair you were with them.