May 2008 HBR Case - Will Our Customers Bail Us Out?

For those of you that haven't had the opportunity to read the May 2008 case study I'll give the highlights. A company, Clarinda, is struggling and already downsizing. It can ask the customers to hep keep the company afloat--however, will this hurt the company?

David is heavily leveraged in debt on the company and is being forced to stay on the course to try and turnaround this company. So, he is trying to determine how to get out of debt with the company and get out of the picture. They just lost 1/3 of their yearly business and have some major problems.

Dave wants to contact his customers and inform them of the company's situation but is getting told not to by peers and lawyers. The answer should be "Things are fine." Their largest customers has an opportunity to help Clarinda, but Dave was struggling with how to approach them--and what to say to them.

My personal take on what Dave should divulge to the customers:

Personally, I think it is extremely important that Dave discloses the current state of the company. Why the layoffs occurred, and the future of the business. If his customers in this industry are as loyal as the case infers this is going to be very important to disclose the current state of the business. There appears to be a great deal of trust in this industry, and Dave would be weakening the trust between him and his customers if he did not have full disclosure.

Regarding Dan, the drunken salesperson. I think this is something that must NOT be disclosed to customers. I really feel that this should be handled in-house. The best case scenario is to sit down with the guy and lay the cards on the table. Express how Dan has changed over the past couple of years and how that is impacting their business. They're close friends. When a friend confronts you about something you're not doing or something you are doing that is hurting themself and others around them it can be an eye-opening and hopefully life-changing event. If this is the case, GREAT--they can mend their issues and move forward. Otherwise Dave is highly likely to lose a very close friend and valuable member of the business.

So, I will tear through June's Case study soon enough...until then...you may see some more new blog postings about other things....