As more companies and organizations confront the prospect of downsizing, careful planning is essential to controlling short and long-term reputational impact. As with any high-stakes situation, it is usually best to deal with bad news as early and thoroughly as possible. Everybody knows that their lives could change as a result of the current financial crisis. As such, senior executives need to keep employees informed – or risk the panic that will inevitably come as a result of letting the media tell the story for them. That being said, management has to prepare as if its candor will result in leaks to the press and work with communications professionals accordingly to prepare appropriate holding statements before information is shared with employees.

The fact that employment related disputes are on the rise raises the stakes expontentially. Fulbright and Jaworksi’s 2008 litigation trends survey found that employment matters are now in-house counsels’ most common source of litigation. And the National Law Journal reported on Monday that retaliation suits hit record highs in 2007 – up 18 percent from 2006. In a culture made only more litigious during economic downturn, it is more important than ever to ensure that employees feel as if they’ve been treated fairly and respectfully throughout any downsizing process.

If layoffs are required, planning needs to include an integrated team encompassing C-Suite executives from every discipline – legal, human resources, communications, sales, marketing, IT, finance, etc – and selected operations-level personnel from across the company. It is wise to develop precise timetables for layoff announcements and specific assignments for everybody involved in delivering the news internally and externally. Special consideration must be given to revolving shifts and different time zones. Messages need to be concise but comprehensive. It is a good practice to provide HR experts to handle individual, detailed questions following the announcement, but those delivering the news need to be prepared for employee questions that can range from innocuous to hostile.

It is also vital to consider how and when to communicate the downsizing to shareholders, financial analysts, labor unions, customers, vendors, high authority bloggers who cover the company or industry, government officials – local, state, and federal – the traditional news media, and even employees’ families. If there are additional layoffs possible, that information should be offered to all of the audiences as prudently and as transparently as possible. If not, these audiences will draw their own conclusions before the company has a chance to share its side of the story.

Layoffs are never pleasant for anybody. But by ensuring that the process is carefully planned and carried out, management can avoid brand damaging perceptions and costly litigation, while leaving stakeholders feeling as if a difficult, reality-driven situation was handled with as much dignity and empathy as possible.