Because employees talk. If word gets out that the company is in a tight place before management addresses it to employees then that erodes trust in leadership.
If people distrust leadership then when they do finally acknowledge something negative (eg. we're having 10% layoffs) then employees rationally assume things are actually far worse than that (eg. we're having multiple rounds of layoffs) and will behave accordingly (eg. leave even if not laid off).
On the other hand if leaders build trust by acknowledging reality then when they announce that things are bad people are more likely to behave proportionately and trust that things are only as bad as announced rather than 'reading between the lines' and assuming they are 10x worse.
Comments
Because employees talk. If word gets out that the company is in a tight place before management addresses it to employees then that erodes trust in leadership.
If people distrust leadership then when they do finally acknowledge something negative (eg. we're having 10% layoffs) then employees rationally assume things are actually far worse than that (eg. we're having multiple rounds of layoffs) and will behave accordingly (eg. leave even if not laid off).
On the other hand if leaders build trust by acknowledging reality then when they announce that things are bad people are more likely to behave proportionately and trust that things are only as bad as announced rather than 'reading between the lines' and assuming they are 10x worse.