What if it gets really tough? The topic of insolvency

What if dealing with the operational consequences of the global pandemic is suddenly the least of your problems?

In the midst of the coronavirus crisis, Wirecard is certainly one of the most spectacular white-collar crimes of the post-war period.

Anyone who has experienced this from the inside is certainly shaped for life. Annegret Jansen held a leading position in HR at Wirecard – we at Breitenstein Consulting were working with Wirecard on a project at the time.

Here is a look at HR in the ultimate crisis situation and a few very specific lessons.

The ultimate horror scenario

With the global pandemic and the subsequent economic impact, some companies are suddenly confronted with the “final boss” of insolvency. In the last few decades, this was more of a horror scenario that HR professionals knew about in theory, but very few had actually experienced themselves. Insolvency usually announces itself in some way – the numbers are bad, you hear rumors, the mood in the company changes, employees sense that something is wrong. The press often adds to the speculation, the rumor mill then literally explodes, managing directors deny, but there are suspicious ‚hedging‘ activities, employees have all their antennas out – there is hardly any focus on any other topic in the company.

Then comes the shock: in most cases, you first learn about it from the external media: bankruptcy has been filed for and your own board of directors is in prison. Confusion, no real statements from the responsible decision-makers on which one could orient oneself – a leadership vacuum becomes noticeable. Every statement from top management is now legally delicate. Initial panic reactions, some also demonstratively play at being normal – a sign of denial of reality. On the one hand, there are colleagues who are completely shocked, unable to think clearly, and those who hope that they are just dreaming it all. Or there are colleagues who immediately send out 20 applications at random.

Employees are looking for the way to the human resources department. Who represents the company when no one else is there? Who can you talk to about the questions that are now on everyone’s mind? In this situation, there are two types of managers: those who take the initiative, gather their people around them, and do their best and fight – and then there are managers who are so overwhelmed by their own frustration and fear that they hardly care about their team or the business anymore. Those run the risk of forgetting their role as employer representatives.

Insolvency affects EVERYONE in the company. HR is one of the first points of contact in the company. So how do you react when you, as an HR professional, have no information yourself? The top priority is to stay calm and spread the word. Become aware of your own emotions, reflect and listen, be approachable for colleagues and managers.

Questions will undoubtedly arise and even if they cannot be answered immediately, they should be demonstratively received. Wirecard, for example, quickly set up a special email inbox for this purpose. This allowed questions to be professionally received, structured, sorted and channeled. Typical questions are: Will we get paid? What will happen to my vacation days? What will happen next?

Many things are obvious from an employment law perspective. The important thing now is to build trust. This is done by communicating openly and frequently, being honest, not glossing over anything but also not spreading panic. Don’t talk things to death, just be present, show empathy, keep your composure.

The insolvency machine starts up

If the application for insolvency is granted, a preliminary insolvency administrator is appointed who takes control from that point on. Their main task is to “scan” the company and raise as much money as possible so that creditors receive their outstanding payments and further damage to the remaining parts of the business is avoided. The activities of the insolvency administrator are not always transparent – this creates further mistrust. But they are also initially in the interest of the employees as the primary creditors. The insolvency administrator tries to save as much as possible so that operations can be maintained. However, many employees simply do not know this – he or she is perceived as an opponent. It is important to make it clear that this is not the case. An insolvency administrator often doesn’t have much time to communicate – this is where HR can take on a very important fiduciary role: coordinating FAQs and informing employees, showing empathy and, once again, demonstratively maintaining composure.

HR also has a very formal main task in this phase: providing and processing data in a wide variety of forms and depths for the insolvency administrator. A dilemma arises that can be perceived as very stressful: On the one hand, like everyone else in the company, you are affected by all the consequences of an insolvency, but on the other hand, you have to ensure that the insolvency process is orderly and structured. You ask yourself the question: am I still getting paid for the work I’m doing now? Shouldn’t I be taking care of my personal concerns instead of working night shifts and processing data records? These questions take up space and leave no room for your own emotions and fears.

After the initial shock, anger and aggression arise among the workforce. Blame is cast in all directions. Why are managers so helpless, so uninformed? Why isn’t HR better informed? Frustration is growing. For some employee groups, specific questions arise: for example, foreign colleagues who have to fear for their visas if they lose their jobs. Or employees on parental leave who report to work and are unsure about their future. Many individual cases now need to be dealt with. The days are characterized by spontaneous data queries, employees handing in their notice, and countless calls and emails with detailed questions about the individual situations of employees. The insolvency administrator tends not to provide any satisfactory answers regarding the desired future and it becomes clear that insolvency law is a complex universe that does not provide any clarity regarding one’s own future. It’s like an unclear medical diagnosis: Googling doesn’t help a layperson at first and can even increase frustration. That’s why it’s so important to proactively answer the questions that you can answer. Every little piece of clarity about a process, next steps or a further appointment creates a sense of psychological security. Openly accessible FAQs have proven useful for bundling recurring questions and regularly adding to them when new information becomes available. It is best to do this on the intranet, but it can also be proactively sent to everyone by email if employees have been released or have already resigned (note: coordinate all communication with the insolvency administrator). Here, too, speed counts, by surfing before the wave of rumors (instead of being buried by it)!

Activity against feelings of insecurity

Participation creates self-efficacy and generates security. Many are familiar with the effect of rafting: when you are drifting down a river in an inflatable boat, you have to row to be faster than the water and to be able to steer the boat. This activity must also be coordinated. In the process, people develop a sense of belonging that strengthens and makes each individual feel safe. This old change formula also applies here: activate people. There is a great deal of administrative work to be done, especially in the event of insolvency proceedings. Whether internally or externally in the direction of the market, customers, suppliers. People who use their pent-up adrenaline for activities are less aggressive and more secure than those who brood at their workplace. This energy needs to be harnessed. That means going through a to-do list with the insolvency administrator and then finding and delegating “manpower” and motivating people! Even if you can’t give customers and suppliers satisfactory answers, it’s important to maintain contact and be available to listen, in order to exemplify the empathy that you yourself would like to receive in this situation. Experience shows that such behavior increases understanding and tolerance in the company’s environment.

Retain key skills – hold managers to account

One thing is clear to everyone: in this situation, nothing can be guaranteed. This applies to both the immediate and the long-term future. Even in a crisis, top performers are quick to find new jobs and are usually approached quickly by headhunters. Luring away a critical expert can often seal the fate of a company. Insolvency proceedings protect many vulnerable areas in a company, but not this one. It is an important task for HR to bring a little relief here, because these top performers are also very important motivators for the rest of the workforce. In concrete terms, this means identifying the holders of key know-how. These people are not always managers. A plan needs to be made for these people: who talks to them – who maintains contact? Managers need to be made aware of this role and, if necessary, supported in how they can talk to their teams and what they can and cannot say. The goal must be to prevent panic or blind actionism from breaking out. An important argument against flight movements is to make it clear that the good opportunities on the labor market will not be gone anytime soon. That a caesura like this can perhaps be used for self-reflection. And that it may be worthwhile to fight for the company and that this can pay off individually later on. In a crisis, strong characters with leadership potential often emerge. An important message!

A test for HR as a team, too

Insolvency proceedings also pose a challenge for HR as a whole team. Transparency is key here. Nothing is perceived as worse than when your own colleagues within the team have more information than you do. This immediately fuels fears, worries and mutual mistrust. This gives rise to rumors, and motivation continues to decline. To ensure that the HR team can function fully, maximum transparency must therefore be ensured. Everyone needs to know what the latest news is (even if there is none), because everyone is approached by a wide variety of employees. Everyone also picks up on different moods among the workforce. HR must become a safe haven for reliable information. Spreading information within the team costs additional time. A 15-minute sprint meeting every morning can be an essential success factor. New tasks can also be quickly coordinated here.

Many employees need an interim reference or other documents immediately. Here, too, colleagues from other HR areas have to help. Under normal circumstances, the HR department writes around 20 references a month. Suddenly, 200 colleagues are asking for them at the same time and some of them can’t understand why their request isn’t being processed immediately.

The HR team is bombarded with a lot of detailed questions. In this case, it helps to protect the by providing as much general information as possible and by training colleagues in “non-specialist” details so that even those who are not “experts” can provide first-level support. The experts (e.g. colleagues in payroll accounting, labor lawyers) are involved in truly time-critical issues that only they can handle.

Our lesson: streamline processes on the fly (e.g. only one signature instead of two, etc.) so that there are no delays when issuing documents, for example. The speed that is sometimes needed cannot be guaranteed with lengthy ‚we’ve always done it this way‘ processes. It is important to focus on the essentials.

In the event of insolvency, everyone is needed by HR. Even if, as in the case of Wirecard, the insolvency ultimately leads to the dissolution of the organization to a large extent, the experiences of such weeks are formative and valuable. They show how essential human resources can be in a crisis situation. This requires a new self-image for one’s own profession, in which the administrative corset must be discarded.

What matters for HR when insolvency occurs:

  • Close, proactive cooperation with the insolvency administration – strengthen their role and provide data
  • Form a crisis team in HR, daily leaps, redistribute tasks, prioritize together, keep people “busy”
  • Be responsive to employees, become an information hub, avoid uncertainty and rumors with maximum transparency
  • Identify key experts and maintain contact
  • Coach managers, recognize and promote leadership and ownership within teams
  • Self-reflection – admit that you are affected and allow your own emotions, get supervision and coaching yourself
  • Show attitude

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