"Funny thing about rumors, no one knows who starts them and they are hard to stop."
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When Rumors Run Wild

The Federal Reserve sees a big problem with Fannie Mae and Freddie Mac. So, in order to be proactive they announce a plan to shore up the balance sheets. I am sure that when they decided upon this course of action that they thought the market reaction would be positive. It wasn’t. Rumors were soon flying based upon the supposition that if all was well this would never have been necessary.

Now, I have no idea of the internal finances of any of these huge companies in trouble today, but I am pretty sure that aside from their own auditors and executives, neither does anyone else. So, all of the rampant speculation in their stock prices is based upon nothing more than rumor, plain and simple.

Funny thing about rumors, no one knows who starts them and they are hard to stop. Plus, it is so much more interesting to all of us human beings when the rumor is negative or nasty as if none of us have something that we would rather not talk about. And even if there is a seed of truth in the rumor it is always shared without context of any kind, so it sounds so much worse than it could ever really be.

In small business, we need to be attentive to the rumor mill. Our shares may not trade publicly, but things can get out of hand fast with employees, investors, and customers if nasty rumors are not handled correctly. The trick is to know when to be concerned and when to laugh it off and this is totally a function of context and timing. If your company is amidst boom times and some competitor starts spreading a rumor about you, well, usually that is something to ignore. Most people will instinctively know that small minds breed this sort of thing and the best way to deflate the thing is to literally laugh it off. To do otherwise makes you look paranoid.

On the other hand if you are, as an example, in the construction business right now and things are a struggle, then a rumor regardless of its origin could prove a real problem and even devastating. You in that case need to listen to what is being spread, make a determination if any of it is true, and then design a response that is both candid and optimistic without being a Pollyanna.

Bottom line: engage without paranoia and win!

Posted by Herb Kay on Thursday, July 24, 2008

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