Functions of Persistent Rumors in Business



It is normal in any business organization to hear rumors against the company, managers, supervisors as well as fellow employees. Unlike gossip, rumors deal with social issues, not personalities, that affect a sector of a company or the entire business organization. People may immediately dismiss rumors as hearsay and unproductive talk. But if they persist, they might have a structural basis that requires a closer examination and analysis. A persistent rumor about the company or workplace usually has structural roots that need attention and solution. All companies which face bankruptcy or imminent demise are always forewarned by rumors. Before Enron collapsed, for instance, rumors about the company fraudulent accounting persisted. But it seemed that the early warning signs were ignored by the company leading to its closure. “A detailed look at the Enron accounting scandal reveals the circumstances that made it possible for Enron to succeed in deceiving the public. There was connivance with external auditors & banks, while SEC gave Enron exemptions from investment laws, instead of paying heed to the early warning signs”(

Rumor as an Indicator of a Serious Issue and Lack of Transparency

A company which hides some vital information to their valued customers, stockholders, employees and to the public is prone to rumors. In today’s social media age, it only takes a post, selfie, or viral video to spread the rumors if a business firm is found deceiving the stockholders or customers about the true state of the company, products or services.As the saying goes, “If there’s a smoke, there’s fire!”. The smoke is the rumor, the fire is the negative effect that destroys the company. A firm cannot hide the reality to the public. It is only a matter of time that the fire will come out and burn the entire house! So, if there’s a persistent smoke or rumor, it is better for house managers or CEOs to put it off before it burns the company. And this could only be done if the company starts providing clear and convincing information to the affected sector about the issue. A transparent system is less prone to rumors. Thus, when rumors came out about the bending of iphone 6, Apple immediately issued a statement and credible explanation to stop the rumors on the alleged defects of the phone. And it did apparently succeeded in putting off the smoke as Apple posted a historical profit of $18 billion last year due to massive sale of iphone 6 and 6plus.

Rumor as An indicator of a Management Problem.

It is important that managers must be empirically updated with what’s going in the company. It there is a discontent in the company, the manager must be the first to know it, not the last one. S/he must open to suggestions and willing to listen even to people whom s/he dislike. Rumors can serve as warning signs and guide for managers on what management area that s/he needs to examine and improve. A feedback mechanism is therefore necessary to check once in a while the general sentiment of employees in the company as well as the true state of things in the company. This feedback must come from below, from rank and file employees up to the top managers in order that the general picture of true state of the company will come out. The Japanese firms which use the inductive method of management are good on this. They usually ask feedback or opinion from people below before they create or implement a major policy that affects the entire business firm.

Remember: a persistent rumor can be an allay not an enemy in business when used wisely by business managers. They serve as a guide or indicator on what area to improve on in the company!

Photo credit: Shutterstock


Thank you for reading this post! If you want to read my regular posts, please follow me or send a LinkedIn invite to Feel free also to follow me on Twitter @detectivebogart and join my 99K+ online community for some sociological and inspirational tweets.My Instagram @venballano Profile: Blog: Facebook: Ven Ballano. Shots:@venballano.
Dr. Vivencio “Ven” Ballano is a sociologist-professor, religious educator, research consultant and media piracy specialist at St. Paul University, Quezon City, Philippines.

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