Lawsuits and the Need for Good Internal Communication

Being in business means occasionally facing lawsuits. When a customer sues your middle market company over a faulty product or a supplier takes you to court in a contract dispute, there's a clear risk to both your financial bottom line and your reputation. But lawsuits bring other sorts of risk to areas such as employee retention and recruiting efforts. Of course you will have a strategy, led by your legal advisers, to collect all data relevant to the particular litigation. You'll also likely interview all employees involved in the case. But this is just the beginning.

Communication during lawsuits needs to happen effectively on both the internal and external levels.

The Dangers of Ad Hoc Responses

Like it or not, your customers, suppliers and stakeholders will be asking your employees about the status of ongoing litigation. They may want to know, for example, whether you're settling the suit, going to court or admitting wrongdoing. What your employees tell others can damage your litigation defense and reputation. You have an advantage here over larger companies, who generally face more lawsuits and more public and media scrutiny. Middle market companies generally have a lower profile than behemoths such as Monsanto, BP, Bank of America and Exxon Mobil.

Your middle market company will need good litigation communication, part of which centers on internal communication. Successful internal communication is proactive rather than reactive. To protect your reputation, get out in front of lawsuits; don't be put on the defensive. A well-thought-out communication plan means your people won't get caught by surprise, or fumble the ball, as they try to think on their feet when answering lawsuit-related questions from suppliers or customers.

Litigation Communication: Internal and External

Lawsuits have a way of unsettling employee morale. As attorneys Brooke G. Welch and Lori Teranishi write in an article for San Francisco Attorney Magazine, "Employees at companies threatened with litigation ... worry about the possibility of layoffs, pay cuts and damaged corporate reputations. Kept in the dark, uninformed employees may easily and unwittingly spread rumors, misinformation and classified information." It's critical to be proactive when deciding which messages you want to transmit, and then to continually share updates with your employees. Explain what can be shared and designate one person, perhaps your legal director, or a team to respond to all litigation-related queries from anyone. Your employees should be told to refer all questions to this contact. Then they can simply get back to work.

As Patrick Proctor, vice president of operations at Stash Tea Company, writes in Entrepreneur magazine, "Communicate internally thoroughly and frequently. Team communication is key here, as your employees will either help or hinder your efforts with the public (even though you will have appointed a media spokesperson, the news media will talk to anyone on your team who will talk to them). If reporters have good information that's accurate and up to date, then that's what they'll communicate. If all they have is hearsay and assumptions, then that's what they'll report." In general, the dangers of undercommunicating internally are far greater than overcommunicating, so err on the side of continual contact.

If Needed, Get Help

If you lack sufficient resources in the area of internal communications, then you'll need to seek professional help. This investment will be far less costly than failing to communicate well internally, which could result in plummeting employee morale and an exodus of talent in your middle market company. The takeaway is clear: You'll need to develop a communications strategy around lawsuits not just for external stakeholders, such as the media and public, but for internal ones too. The price of potential confusion when your company speaks with multiple voices is simply too high. Develop one message, transmit it internally and consistently, and refer stakeholders to a single source of litigation-related information.

What are some first steps your company takes when faced with a lawsuit? Who crafts and distributes the bulk of the messaging? Let us know by commenting below.

Boston-based Chuck Leddy is an NCMM contributor and a freelance reporter who contributes regularly to The Boston Globe and Harvard Gazette. He also trains Fortune 500 executives in business-communication skills as an instructor for EF Education. Circle him on Google+.


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