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Strategies for retaining staff when pursuing business bankruptcy

On Behalf of | Jan 29, 2025 | Business Bankruptcy |

There are many challenges inherent in pursuing business bankruptcy. For example, leaders within an organization have to choose the type of bankruptcy to pursue. They may have to negotiate while restructuring or prepare to liquidate certain assets as part of the bankruptcy process.

Companies may lose their financial flexibility during business bankruptcy, as they may not have credit cards or other revolving lines of credit that help make operational costs more manageable. They may also experience operational setbacks when employees leave their positions.

Workers often view business bankruptcy as a sign that their jobs could soon be at risk. They may flee the company in droves to avoid the hardship of sudden job loss and a market flooded with unemployed professionals. How can leaders at businesses preparing for business bankruptcy limit the staffing consequences of major financial moves?

Embrace transparency

When workers discover through the grapevine that an employer is on the cusp of bankruptcy, they may assume that the company might downsize or go out of business. Secrecy only serves to intensify speculation in such scenarios.

When workers have accurate information about the upcoming bankruptcy process and what leadership intends to do to restructure the company, they may feel more comfortable staying in their current positions. Embracing transparency by communicating with employees about the company’s pending bankruptcy can deter some of the talent loss associated with organizational bankruptcy.

Recommit to top talent

It is all but inevitable that some employees leave the company during the bankruptcy process. However, the organization can take preemptive steps to ensure that the most critical employees stay on during and after the bankruptcy process.

Employees often worry about mass terminations. Workers may also worry about the need to work overtime and take on additional responsibilities as other professionals exit the organization. Negotiating with workers to offer them retention incentives and to communicate the company’s intention to come out stronger on the other side of the bankruptcy can help ensure that the workers with the biggest impact on company success continue their relationship with the organization.

Being ready for the various challenges that arise during business bankruptcy can help leaders protect their organization during a difficult time. Retaining staff is important if the company aims to rebuild after eliminating some of its financial obligations.