The present economy may leave organizations feeling as if they are being squeezed in a vise. But there is opportunity amid the economic uncertainty. Careful attention to positioning individuals and teams to succeed will not only allow organizations to weather the storm, but also to emerge from the downturn in a stronger competitive position.
All organizations will be changed by the downturn
In the present economy, there will certainly be winners and losers, as there are in any period. But while some organizations may fare better than others, outcomes will be consistent in at least one respect: All companies can be expected to emerge from the downturn as changed organizations. In some cases, the changes may be fundamental, owing to mergers, acquisitions, restructurings, or shifts in market focus or positioning. In other cases, the changes may be more modest. Cost-cutting efforts, layoffs and shifts in priorities may simply result in new ways of addressing existing goals and objectives.
However, regardless of the magnitude of the downturn’s impact on your organization, it’s important that you recognize that this time will bring changes, and with them come immediate challenges and longer-term opportunities. The immediate challenge is to minimize the disruptive aspects of organizational transitions on employees and customers. The longer-term opportunity is to ensure that once the downturn ends, your organization will be not only different but better.
Disruptive events, such as recessions, cause organizations to re-examine taken-for-granted ways of working. In these periods, there is a unique opening to restructure working relationships in more productive ways—before managers and employees once again settle into more stable patterns. And therein lies the opportunity to leverage a downturn to create positive changes that can serve your organization well—now and in the future.
Lessons from the past
In understanding organizational responses to periods of economic uncertainty, we can draw some lessons from the 2001-2002 downturn. Near the end of the recession, Hay Group surveyed executives from organizations appearing on Fortune’s Most Admired Companies list and from peer companies, as part of our ongoing partnership with the magazine. Nearly all respondents (86 percent) agreed that the economic environment was more challenging for their organizations than it was two years prior to the recession. With respect to motivating employees, however, respondents in the most admired companies generally reported that their organizations were in a better position post-recession than pre-recession. They also reported enhanced levels of employee loyalty and reduced concern about losing key talent. For the peer companies, by contrast, the downturn was perceived to have had a net negative effect in each of these areas.
The 2001-2002 downturn was a transforming event for the most admired companies and peer companies alike, involving widespread changes in operations. While the most admired organizations and their peers exited the downturn in different places with respect to employee motivation and commitment, all came away with an enhanced appreciation for the impact on business success of employees’ performance and engagement. Fifty-seven percent of all respondents viewed the impact as greater or much greater than two years prior, whereas just 7 percent saw the impact declining.
A perspective from the vice president of human resources for a Fortune 500 building products manufacturer highlights the particular importance of employee performance in a downturn: “When our business is good,” he noted, “you could put monkeys in charge and they would still make money.” But when times are tough, he continued, strong leadership is essential and individual contributions are easily distinguished. Put another way by Warren Buffett, you find out who’s been swimming naked when the tide goes out.
A current view: human resource priorities
In November 2008, Hay Group conducted a global study to understand how human resource strategies, programs and priorities are being affected by the current economy. Nearly 2,700 respondents from 91 countries were asked to describe whether changes were being made to such areas as pay and benefits, staffing levels, performance management and training programs, and what those changes entailed.
Notably, three of the top five workforce concerns indicated by respondents pertained to the employee life cycle—attracting and recruiting the right talent, engaging and motivating employees and retaining key contributors. Concerns about talent acquisition and retention may seem misplaced during an economic downturn, when we are confronted with daily reports of organizations laying off large numbers of people. But the study results point to key reasons for organizations to continue to attend to these issues.
Even amid downsizings, organizations are still hiring staff to fill critical roles. And many are finding it harder to do so, as promising candidates are reluctant to move from their current positions. As one respondent noted, “Our new-hire offer acceptance rate is low due to the market situation. The candidates are worried about future layoffs if they change jobs, as the practice is commonly based on last in, first out.” Likewise, faced with constrained compensation budgets that limit their ability to reward staff, many organizations are fearful of losing valued employees. Savvy leaders recognize that competitors often see opportunities to lure away key contributors in downturns and worry about vulnerabilities in some or all of their markets.
Employee engagement is critical in a downturn, but it’s not enough
Maintaining a focus on engagement is especially critical in difficult times. Engagement refers to the commitment employees feel toward the organization (e.g., their willingness to recommend it to friends and family, their pride in working for it and their intentions to remain a part of it). But it’s also about employees’ discretionary effort—their willingness to go the extra mile for the organization. Right now, as organizations need to do more with less and strive for greater efficiency, tapping into the discretionary effort of employees is all the more essential.
Unfortunately, however, our research confirms that many organizations that have enviably high levels of employee engagement still struggle with performance issues. So while engagement is necessary, engagement alone is not sufficient for achieving maximum levels of individual and organizational performance. Leaders must not only engage and motivate employees but also enable them to channel their efforts productively and effectively.
In what we call an enabled workforce, employees are effectively matched to positions, such that their skills and abilities are put to optimal use. Likewise, employees have the essential resources—information, technology, tools and equipment, and financial support—to get the job done. They are able to focus on their key responsibilities without wasting time navigating such obstacles as procedural restrictions or nonessential tasks in the work environment.
Most organizations employ a sizable number of frustrated workers: individuals who are highly engaged but lack the tools required to be fully effective and successful. Frustration is a significant problem for organizations and employees, especially in a challenging economic environment. Organizations trying to squeeze out every drop of productivity can’t afford to squander the energy of motivated employees. And employees who are being asked to work harder and to do more with less understandably want to work in smart and efficient ways. In the short term, these motivated but frustrated employees may suffer in silence. But over time many can be expected to turn off and disengage, or tune out and leave.
The second part of this article will offer a “path to performance” for generating business results through enhanced levels of employee engagement and enablement.