Kathleen M. Fitzgerald: Challenged To Communicate Bad News

“At Lucent Technologies, we had a good deal of less-than positive news to communicate in 2001. That included Lucent-specific issues:  we missed a product technology cycle; the Board ousted its Chairman and CEO; we considered a major merger with Alcatel; reported down earnings; and there was a revenue recognition issue that we went to the SEC with. In addition, our industry was in turmoil with our new customers declaring bankruptcy almost every week and our traditional customers announcing cuts in capital spending in response to a tough economy.

“After a while I think the press just got into the habit of kicking Lucent.  Obviously I learned a great deal during this struggle. I learned how to tell the negative news straight and build credibility. Our new Chairman, Henry Schacht, got on the front lines in dealing with the media. We have rebuilt a foundation of respect through him. And our new CEO, Pat Russo, is a credible, very candid executive.

“A changing economy forces communications executives—actually, all executives—to become very accessible and open. You have to make sure that there’s never a question you don’t answer. In bad times, you have to communicate proactively. When the news gets very bad, it can be hard to be so forthcoming, but you must never ever mislead. More than ever, that’s the time that your job becomes being able to stand up and be credible.  We have disclosed everything we’ve ever done. At Lucent, we know that if you don’t maintain your credibility you’ve lost the battle.

“What did I learn from this tough period? One thing is that the world out there doesn’t like to hear about layoffs. We didn’t take the pressure from this that some other companies did, but it took a major effort, both in terms of internal and external communications, to create an understanding of how layoffs enabled Lucent to survive. Here again, the key was to communicate, to make sure that everyone from employees to shareholders to members of the business press understood the story.

“I also learned that I would have handled some things differently. When Lucent was constantly receiving negative press, I think I should have come down stronger on making it clear that we were part of an industry trend. While there were Lucent-specific issues, the decline in stock price came as a result of broader industry phenomena.  Every telecommunications vendor was saddled with vendor finance issues. It wasn’t just Lucent.

“But ultimately, we got through it. I always remember one industry analyst session when the news was looking somewhat better. It was kind of a ‘We are here; we’ve survived,’ meeting and the analysts were saying, ‘We’re so glad you’re still here.’”

“We did survive. And I need to tell you, it takes a lot to upset me these days. But the key is that I never tried to paint a prettier picture than the picture we had. I wanted to put up a plaque up in my little conference room that said, ‘It is what it is.’ Sometimes that’s what corporate communications is all about.”

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© 2004 Heyman Associates, Inc.