The myths (and truths) of an economic downturn
28th Jul 2008 @ 12.53pmMcDonald’s UK HR Director, David Fairhurst, has recently pledged to continue to invest in training and recruitment (Personnel Today 22 July) to help the fast-food chain cope with the economic downturn. A brave statement, considering the widespread budget-cuts that are afflicting businesses as fears of a recession grow daily.
Here are a few myths (and truths) when it comes to organisational performance during troubled economic times:
* Myth 1: As jobs are cut and the talent pool grows, there are rich pickings to be had in the job market.
* Truth 1: In turbulent times it makes sense to encourage businesses to focus more than ever on engagement and retention. Negative media reports, budget-cuts, redundancies and poor performance figures can make employees nervous and insecure, and many may jump ship before they are pushed. When you consider that it costs over £7,500 to recruit and onboard a new employee (with several months passing before they are at full productivity), to keep hold of your best people is a no-brainer.
* Myth 2: Cutting back on engagement initiatives should save money and therefore help financial performance:
* Truth 2: No. Engagement and keeping people connected is absolutely vital. Research shows repeatedly that engaged employees perform better and are more likely to stay committed and energised. Good communication, training, managing expectations, ongoing assessment, listening / feedback, involvement in decision-making, incentive plans, motivation and flexibility is key, underpinned by strong leadership at every level. The direction of an organisation needs to be articulated clearly and simply - cutting out unneccesary complexity and detail - so it can act as a beacon for people to stick to during turbulent and changing times. And never under-estimate the importance of explaining WHY, as well as WHAT and HOW, so people can adapt to change more readily and understand why they are being asked to do so. However, cutting out the ‘nice-to-haves’ or short-term tactics that create good feeling of a very short-term nature is important. Keep people focused on the strategic priorities, give them the tools, skills and confidence to explore these at a local level on an ongoing basis, and recognise the contribution they are making.
* Myth 3: Cutting substantial training and development budgets will cut costs significantly and so help financial performance.
* Truth 3: Cutting back in this area will merely compromise an organisation in the long-term as it will create employees that are less effective and less likely to move up the ladder in terms of succession. Training will help keep an employee feeling valued, invested-in, and of course help to enhance skills that will improve their performance.
* Myth 4: Pay employees enough and they’ll stay:
* Truth 4: It is widely accepted that pay is not necessarily the uppermost factor in keeping an employee at work. Making employees feel valued and empowered to take on more responsibility and recognising those who perform well is just as if not more important, can boost morale and create a feeling of being in control of one’s future. Involving people in the exploration and discussion of strategic issues will keep people connected and feeling that they can have influence themselves, and will foster a culture of involvement and innovation that will help a company out-perform the competition.
A downturn is part of a cycle. Shifts in growth are part and parcel of what makes the economy tick. It is an ever-evolving, moving feast which can only change for the better in time. Companies need work harder than ever to optimise the use of their resources, whether human or financial, but always respecting and exploiting the collective intelligence of its employee base who are the ones who really know what’s going on at the proverbial coal-face. Senior leaders, be warned….use it or lose it. Cut communication, training and development and you may just find that your best people become your competitors. In the long-run, they could make all the difference to your organisation’s success.
posted by Alison Esse
filed under Misc, Organisations
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Unfortunately, most “engagement” efforts fail to produce significant results because they are attempted in a toxic environment. That toxicity is the natural result of using the conventional top-down command and control approach to managing people.
Top-down demotivates and demoralizes employees by treating them with great disrespect thus causing them to treat their work and their customers with the same level of disrespect. Top-down concentrates on issuing directives in the form of goals, targets, visions, orders, etc treating employees like robots in the “shut up and listen” mode.
Nothing is more disrespectful to humans and nothing better stifles their creativity, innovation and productivity, the exact things that make any company able to survive and even excel in a down economy. Top-down concentrates on communicating down to employees not realizing that the most valuable communications consist of the complaints, suggestions and questions of their employees.
Does Google Have It Right?
Best regards, Ben
Author “Leading People to be Highly Motivated and Committed”
You make a very good point Ben. To ask employees to find the solutions, give the feedback and share their own experiences as an opportunity to learn and educate others is key to engagement as they will feel more valued, empowered and proud to work for their organisation. Simply telling them what to do is not the path to a culture of innovation nor creating an engaged workforce. I think the command and control culture is waning as the years pass, with a more democratic leadership style, but I think much, much more can be done to create feedback and solution-finding mechanisms at grass-roots level. You might be interested in hearing about O2’s ‘Real Directors’ initiative which was designed for exactly this purpose. ‘To stay ahead of the competition, it [02] thinks it needs to turn things upside down and give staff on the front line the ability to create some change and make themselves heard.’ See People Management for the full article.
Thanks, Alison, for commenting on my post.
In 30+ years of managing people, I spent my first 12 using the top-down approach with no clue how wrong I was. I then started listening to my people and that turned out to be the doorway to high performance by my people (they eventually proved to be 4 times more capable than I had thought possible).
Listening also allowed me to discover just what leadership is and the horrible effects top-down has on people. The more people trusted me the more they were willing to tell me about their reactions to management actions and initiatives.
In my last position, as exec in charge of 1300 person unionized group requiring a major turnaround, productivity per person rose over 300% in 4 years and more thereafter. We also unleashed huge amounts of creativity, innovation, motivation and commitment while most employees simply loved to come to work and had very high morale.
I disagree with the need for democracy in the workplace. We need authority, not democracy. Someone has to stand accountable for the performance of the entity and for different parts of it.
The problem is not authority but the misuse of it by a top-down, shut up and listen approach to managing people that demotivates and demoralizes employees. In addition, execs simply don’t have enough knowledge of what is going on to make good decisions without listening intently and responding respectfully to the complaints, suggestions and questions of their employees.
Thanks for making me aware of the ‘Real Directors’ initiative.
Best regards, Ben
Author “Leading People to be Highly Motivated and Committed”
Thanks for sending the article, Alison. Very interesting.
O2’s is another proof that the top is the least knowledgeable about problems in the workplace and thus far less able to make good decisions as compared to an informed and motivated person near the bottom of the chain. The top is responsible to support the bottom with whatever they need to do a better job and often that is knowledge of the company as a whole since melding that with direct knowledge of problems leads to the very best decisions. Besides, the top is far less caring about improvement than a committed bottom because the top doesn’t have to live with the problems day in and day out.
Best regards, Ben
Author “Leading People to be Highly Motivated and Committed”