Challenging Times Call for Contingency Plans
Although most companies have taken action in advance of the current financial crisis, a sizable number of U.S. and European companies are unprepared to manage their workforces during an economic downturn. According to
Watson Wyatt's 2008 Global Strategic Reward Survey, about one-third of U.S. firms and 20 percent of companies in Europe failed to make contingency plans in advance of the current global financial crisis.
Of those companies that made contingency plans, organizational restructuring was the most popular option that was considered by nearly 70 percent of companies in the U. S. and Europe, followed closely by staff reductions and slowing the rate of salary increases. Other options considered include early retirement, reduced workweeks and sabbaticals. Watson Wyatt says the research is based on input from about 1,400 companies in 37 countries.
So here are some additional ideas from the Business Essentials editorial staff for managing in a down economy:
Get out of denial and embrace reality. Attuned executives and business owners have a higher probability of surviving major economic downturns.
It's better to be frugal now than out of business later.
Stay positive and stick with the basics: business development, customer care and satisfaction, closing sales, doing exceptional work.
Communicate regularly with your employees. Let them know what's going on and how good or bad the numbers look. Update them frequently and consistently.
Invest only in must-haves. Make the company party a potluck as opposed to a dinner out.
Transition your poor performers and keep only your absolute best employees.
Have a family initiative to bring extraneous spending to a halt. Try to cut your personal spending to a minimum.
Take responsibility for business development and involve yourself in closing important transactions. Spend at least one hour a day visiting current and past clients.
Track your pipeline carefully. Figure out why you’re losing some business, and set a goal of closing everything in your pipeline.
Consider taking on work you would have turned down six months ago. Work with a new business philosophy: all business and revenue is good business and revenue.
Do work yourself, and get your management team to do the same. Give everyone multiple jobs and tasks.
Know that this, too, will pass.
Recognizing the Importance of Employee Engagement
Many business leaders today have not experienced or managed businesses during a serious financial crisis like the financial crisis we are now in. Regardless of one's experience, executives, managers and business owners all seem to be seeking help dealing with today's crisis of confidence in the economy, especially when it comes to employee engagement and talent management.
A phrase often used, mainly in sports, is "The best defense is a solid offense." Put another way, when it comes to your business, don’t wait for something to happen to you; take the initiative and have the conviction to make something positive happen. So before simply considering downsizing, right-sizing, cost cutting, deferred investment, or reductions-in-force, pause to consider some of the following points:
Avoid Knee-Jerk Actions.
While the financial experts debate the cause of the global financial crisis, executives and business leaders cannot wait for a uniform explanation of what has happened and what prognosticators believe will happen in 2009. Accept that we are in a recession and that it will take time to recover from it.
Difficult economic times often result in strategies such as hiring freezes and job cuts. There also tend to be cuts in spending on new or ongoing initiatives such as training and other efforts that may not show immediate financial returns.
Few would argue that well-thought-out cost cuts are not a logical starting point, but cost-cutting as a knee-jerk response can be self-defeating. A Perth Leadership Institute white paper noted that "short-term cost cuts often end up hurting long-term sustainability of profits and competitiveness...[and] morale and employee loyalty suffers.” Therein is a litmus test for leaders to hone their expertise in taking action and initiative to transform challenges into new opportunities.
Communicate Often and Fully.
Managing and engaging talent in this very different business environment is a challenge. Few companies have a clear understanding of what to do during a global financial crisis let alone a crisp plan to avoid unfavorable consequences to the business. Consequently, executives who become true talent leaders by managing and engaging talent well during downturns have a clear competitive advantage for their companies.
Successful business leaders take pains to frequently communicate to all employees regarding business strategies and objectives prospectively. Clear communication helps the entire team understand the actions their senior leaders are taking and the results they are collectively achieving. Absent frequent and clear communication, the unknown that often causes fear, leads to many questions that are only answered by what employees "think, feel or believe," not what they know. And that kills engagement, morale and productivity. Astute leaders avoid that scenario by communicating as often and as purposefully as possible to connect employees’ organization-wide. This results in enhancing teamwork and engagement by encouraging everyone to work productively and collaboratively during difficult times, and seek to continuously improve the organization's value proposition to customers.
As such, today's business leaders have to communicate to their employees that things are bad and, without everyone’s full engagement in the business, things may not improve.
Invest in Customer Value.
During difficult times comes another opportunity that communication can foster during a slowdown: the opportunity to speak openly to all employees about challenges faced by the business, and to share insights across the organization so everyone knows how to create superior customer value. This can be particularly advantageous because research has shown that the companies most likely not only to survive slow times but also to thrive during them are those that invest in enhancing the value they provide customers.
Some experts suggest that employers use a slowdown to pick up outstanding talent and then aim their skills at the accounts of competitors. The idea is for companies to leverage their competitive edge in the business, not simply to win customer loyalty from lower prices, but through higher quality, or a unique selling proposition to prospective customers.
Position Human Resources as the Business Leader.
HR is not just an organization function. Finding and keeping the best talent when money for compensation and rewards programs is less available requires thoughtful strategies and skill. To support the efforts of talent leaders, HR must become engaged and lead the organization in strategic initiatives designed to more fully engage employees, build and grow talent, and develop metrics to measure and chart business improvement.
Finally, here are a few additional initiatives to employ to maximize employee engagement and talent management during this financial crisis:
Account for investments associated with people programs by tying them to the financial performance of the business.
Create recognition and rewards programs to reinforce the efforts of your most valuable and highest contributing talent.
Encourage an organizational culture that embraces learning and holds managers and employees equally accountable for their learning and ensure that their learning initiatives are shared throughout the organization. As futurist Buckminster Fuller is quoted as saying, "You can never learn less."
The effects of the financial crisis need not result in knee-jerk, cut–at-all costs actions. As executives, managers and business owners, you can provide the impetus your company needs to take the initiative to be creative with the resources you have and to look at employee engagement and talent management from a clear and new perspective. If leaders need a rallying call for these trying economic times, view the recession as an unparalleled opportunity, not as fate without a solution.
Leaders Must Communicate in Difficult Times
With so many businesses in turmoil, it is more important than ever for company leaders to communicate clearly to employees. Unfortunately, according to a new study, that's not happening.
Employees tend to assume the worst if executives do not keep them posted during bad times, and rumors and gossip can adversely affect employee and team morale. According to a new survey from communications firm
Weber Shandwick Worldwide, one of the world's leading global public relations firms with global offices, more than 70 percent of 514 workers surveyed said they are not getting enough communication from their company leaders about the financial crisis and how it affects their company and their future.
"Most employees are saying that their senior management is not speaking to them about the crisis," said Harris Diamond, CEO of Weber Shandwick. More than half the workers surveyed said "they've heard nothing during this crisis."
The lack of frequent and clear communication and information from company leaders may translate to an uncertain outlook. Some 70 percent of employees surveyed expect the current economic and financial problems to negatively impact the company they work for over the next year. Another 62 percent of them said their company would have trouble meeting its goals; about a quarter believe their company will have to lay off employees. Why do they hold these beliefs? Likely because their company leadership is not communicating with them; they are drawing their own conclusion absent factual and clear communication about the financial crisis and how their company plans to compete during difficult financial times.
Many top executives may not be deliberately keeping employees in the dark, Diamond said. He believes that company leaders may be consumed with guiding the company through the economic turbulence. Other managers may not know yet what steps they will be forced to take, so they are unclear what to communicate to employees until those decisions are made. In any event, Diamond warns that silence is a big mistake.
"The problem is, when [employees] assume the worst, they are de-motivated," he said. "They're not necessarily sure anybody is in charge, they make assumptions and in many cases they decide to leave." The departure of skilled talent and a fearful, de-motivated organization can be very damaging for a company trying to navigate through a tough economy, he noted.
Mid-managers and supervisors need to communicate clearly and frequently as well. "Organizations that equip their front-line managers to address conditions and times like what we're now facing, will have greater alignment with business objectives, a greater sense of urgency and a higher level of performance and retention of key people during a downturn," according to Diamond. "It's critical."
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