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Be honest and timely in quelling rumors

Paul Haze doesn't mind starting a rumor when he sees the telltale signs that something is underfoot at his company. So a few years back, when the software engineer noticed bean counters taking inventory, he felt obligated to tell people the company would be sold within, say, six months. "Three months later," he says, "we had a merger."

He had asked his manager what was up. But the boss said he hadn't heard anything about it. Still, it was a sign Haze couldn't ignore and a story he couldn't resist telling. "You get the scoop first!" he says.

Meet your hard-working colleagues in the grapevine department, rumor and gossip. They aren't officially on the payroll, but they can have a big effect on the bottom line. Managers know it, but they just roll their eyes, decline to comment and demand to know who started such nonsense.

Too often, it's the managers who trigger the speculation fest. Untrusting of employees, they withhold the facts and let the rest of us fill in the blanks. "If employees don't have a definite explanation from management," Haze says, "they tend to interpret it themselves."

Psychologists say rumors are part of our innate search for meaning. "They're hypotheses in general circulation that have run amok," says Ralph Rosnow, a former professor of psychology at Temple University. He first started studying rumors in 1969, when the rumor surfaced that Paul McCartney had died. (He hadn't.)

Rumors really fly when at least two conditions are met: high degrees of anxiety and lots of uncertainty. Then, two basic kinds of rumors _ wish rumors and dread rumors _ emerge, Rosnow says.

Rumors are typically hypotheses with potential widespread impact. Gossip, on the other hand, is usually presented as fact and tends to be more about people, the professor says. Gossip flourishes, research shows, in organizations where members are highly competitive and someone could benefit from tainting a rival.

Alidad Vakili, a 35-year-old lawyer in San Diego, Calif., witnessed such a character assassination first-hand. Someone anonymously sent a letter to his friend's superiors in 2002 alleging his friend was a philanderer, liar and thief. "It's a little like being indicted for a crime," Vakili says. "There will still be a lot of people who will see that person as the criminal they may never have been."

Still, such scuttlebuttheads aside, the grapevine is more important than managers think, says Allan Kimmel, a marketing professor at ESCP business school in Paris and author of Rumors and Rumor Control. In moderation, it can be used to influence decisions, vent feelings to relieve stress, signal status or power, nurture cohesiveness, and translate job tasks and policies into understandable language, he says.

Management often underestimates the power of the grapevine. According to a recent survey commissioned by professional employment services company Randstad, only 17 percent of employers think workers get their information from the grapevine, while nearly half of all employees credit it with first bringing the message of major company changes. One study from the 1960s found that 82 percent of "bits" of information coursing through one company's grapevine was accurate.

When Meghan De Golyer Hauser worked for one company, the grapevine said the boss was drinking on the job, the accountant was stealing and a co-worker was a nude model. "The rumors," she says, "all turned out to be true."

Big companies have had to learn the hard way just how powerful the grapevine can be. Procter & Gamble, for example, had to deal with outrageous rumors in the 1980s that the company was funneling cash to the Church of Satan. People, "found" hidden symbols in its logo.

The company phased out the logo, hired additional staff to handle consumer letters, mass-mailed churches and sued the rumor spreaders.

To quell rumors and gossip, company brass has to talk. It has to be timely and honest. "If they don't come through with their promises, or they communicate the full story ineffectively," Kimmel says, "they have themselves to blame."

If bosses wait too long, their efforts look like feeble attempts at damage control. If they gloss over it, they'll have less credibility than the mongers. When Bill Shanahan was a director of a hospital's alcoholism-treatment center, management met employee rumors with only "a blizzard of cliches," he says.

"Management communicated all the time," he says, "but it was just garbage." So when the chief executive stood up and said there would be no layoffs, no one believed him. With good reason: Layoffs came two months later.