Save the Ship, or Save the Passengers?

The small company I co-founded a year ago is in financial distress. The rest of the founders and I have set a target among ourselves that if we don't break even within two months we will close down the company. The employees are aware of the company's poor sales but do not know of our intention to close shop. Do we just drop the bombshell after the two months or do we tell the employees now of our plan? Where's the line?
I must confess that I've been stewing on this one for quite some time, probably too long to help the reader who submitted the question. For that I apologize, but every time I sat down to offer a solution, I ran into roadblocks. It's a true Catch-22, with no right answer.

If you decide to tell your employees now, you face the very real possibility that many of your workers will begin immediate plans to jump ship and take cover. If you wait, and your company fails to break even, then you risk taking them down with you, which is just plain lousy.

I actually went to my local library and checked out the old Michael Keaton movie "Gung Ho," because something about your dilemma reminded me of this movie. You'd have to see it to know what I'm talking about. Regardless, it didn't help me come to an easy conclusion.

But there was always one thing that stood out about your scenario, and that is the fact that you're a start-up that has only been in business for one year. For that reason alone, I think you're justified in keeping the plan a secret.

Anyone who signs on to a new company knows they are taking a risk. A start-up is an act of faith; an act of passion. It is also very often a fool's errand. While established companies offer security, a new company offers that elusive ideal of "potential" -- the chance to get in on the ground floor and make an impact, to take chances, to have your ideas heard and be a contributor from the get-go. But those upshots must always come with the knowledge that it might now work.

You may have loyal employees, but it's been a short-term relationship thus far. Had you been in business for 10 or 20 years, and your employees had staked their careers to you and the company, then you'd have real "loyalty," and giving them a heads-up might cause them to dig a little deeper to protect something they care about. You're not there yet. Your employees still have a fresh box of resume paper in the closet, and they'll use it.

It's an awful situation when you have to shut down and let your employees go. I hope it doesn't come to that, and that you can find a way to keep the company from sinking. But pointing out the holes in the ship at this point will only create more holes, and the best thing you can do for your employees is to patch what's already broken so that the company can stay afloat after your two-month deadline. If not, it's a sad day, but one they should have prepared for. As you stated, your employees know that things are not going as well as planned. They'll be upset if you must close the company, but they shouldn't be surprised.

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