About the Rumor Mill
When leadership does not communicate openly about issues, people will rely on perceptions and assumptions about the matter, and will infer from there what will happen and communicate about that. Then it will propagate through the grapevine in a snowball effect. Leadership needs to be proactive because after the rumor mill is producing at full power, it is much more difficult to mitigate the bad effects. The low morale will sway employees' focus from their work and productivity will suffer.
Can managers eliminate the rumor mill? Professor Nigel Nicholson wrote that "executives trying to eradicate gossip at work might as well try to change their employees' musical tastes. Better to put one's energy into making sure the 'rumor mill' avoids dishonesty or unkindness as much as possible." (Nicholson, Nigel, How Hardwired Is Human Behavior?, Harvard Business Review, 1998, EBSCOHost Accession Number: 780282). His argument is that gossip was a skill that our Stone Age ancestors needed to survive the unpredictable conditions, and therefore this is "hardwired" in your brains.
Professor Nicholson also wrote: "Consider what happens when a company announces impending layoffs but does not specify which people will lose their jobs. In these situations, people will do almost anything to save their jobs and avoid the pain of such loss. How else can you explain the kinds of leaps in productivity we see after a company makes such an announcement? But another dynamic emerges when a company announces that entire divisions will close. The people affected - those who cannot escape the loss - do the unthinkable. They scream at their bosses or perform other acts of aggression. Instead of acting rationally, they flame out in a panic to survive" (Nicholson, Nigel, How Hardwired Is Human Behavior?, Harvard Business Review, 1998, EBSCOHost Accession Number: 780282).