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Keeping Spirits Up When Times Are Down

August 1, 1996
The weary group of corporate vice presidents shuffled into the conference room for yet another emergency strategy session. The reason? Same as it was the last three times this happened: Competition is up, contracts are down and costs must be cut—now. But this time, the desperate CEO at the head of the table adds another request. "Can you please do something about the morale around here?" he pleads. "I know times are tough, but if we don't find some way to perk up these people we'll never turn this place around."

How right he is. When employees share that indefinable sense of spirit, enthusiasm and pride called morale, they're more than willing to help companies achieve their goals. Problem is, many organizations suffer from low morale because employees don't have the vaguest idea what those goals are to begin with. If you're searching for ways to elevate the spirit of your workers—and who isn't?—give them something to believe in, provide hope for the future and lead them there.

Focus on growth.
Nothing saps esprit de corps quicker than an absence of positive objectives. "Most companies today are focused on restructuring, reorganizing and reengineering," explains Robert Tomasko, management consultant with Arthur D. Little in Washington, D.C. Because these programs are designed to fix problems, the problems become the focus of the employees' attention. They start worrying more about how the pie is going to be sliced rather than on how the business will grow. They become protective, fearful and eventually, demoralized. According to Tomasko, what more companies should be doing, and aren't, is focusing on growth. "This gives employees a sense of purpose and a way to look beyond problems and toward new opportunities," he says, "both of which help boost morale."

Now some people will tell you high morale is the result of the way you treat people. But that's not enough. Companies can't just strive to make workers feel good without also communicating a sense of purpose. Without clear objectives, even well-cared-for employees will feel disappointed in their efforts. It's the corporate equivalent of being all dressed up with no place to go.

Anaheim, California-based Odetics, a manufacturer of data management products, is a case in point. Recognized in the book, "The 100 Best Companies to Work for in America" by Robert Levering and Milton Moskowitz, Odetics scored high marks for being a fun employer—a characteristic that hints at sustained high morale. But CEO Joel Slutzky says, "We've earned a reputation as a fun company, but like any company, morale depends on what's happening with the business at any given time. We're not immune from highs and lows."

Give them a flag to follow.
Odetics faced its first real morale challenge in early 1994 when one of its key customers bought a competitor. Overnight, the customer disappeared, taking 40% of one division's sales and 10% of overall company sales with it. For the first time in Odetic's history, layoffs were inevitable and its 600 employees were noticeably anxious. This was the first layoff. Would it be the last? "The way we were able to minimize employees' fears was by developing a solid strategic plan based on growing the company," Slutzky says. The plan was very specific, outlining the number of new customers Odetics was aiming for as well as setting a goal for revenue. The emphasis wasn't on plugging leaks, but on building a stronger, better company.

The growth plan wasn't developed in a vacuum. Employee meetings, hosted by Slutzky and the company's HR managers, were held to discuss business challenges and gain employee input. Several suggestions were forthcoming, including one to cut the company's training budget in order to save a few jobs. It wasn't implemented, for good reason. At the time, Odetics had just begun implementing a companywide training program to give employees tools to help them with continuous quality improvement. "We told employees training was part of our strategic plan," Slutzky says. "That we couldn't grow the company without teaching employees about new technologies and without giving them new ways to improve our processes and cut time to market." By tying all strategic decisions back to the growth plan, Odetics was able to keep employees focused on the future.

To reinforce this growth message, every time a contract is signed with a new customer, the good news is announced on the company's public address system. Furthermore, earnings are charted in the company newspaper. "Success builds success," Slutzky says.

"Programs designed to boost morale are great, but it's the individual managers who keep the team strong."

In 1995, Odetics had two outstanding quarters in a row and by December, a successful third quarter appeared likely. Slutzky is gearing up to congratulate employees for Odetics' successful turn-around. His focus on growth hasn't diminished, however. His current challenge to employees is something he calls the 10/100 plan. "My goal is to get the stock price back to $10, which dropped to $4 when we lost the key customer last year, and to get annual revenue to $100 million."

By making the growth goal specific and simple, Slutzky has been able to focus employees on the future and help them celebrate measurable results—both of which help boost morale. "We didn't need a survey to know people were distraught over last year's layoff," he says. "But today, you can feel the excitement as you walk in the door.

"Yes, we're a fun company to work for," he adds, "but we pay attention to business first. If we were all madcaps and merry clowns, this company wouldn't last a day. High morale comes as a result of knowing what you're in business to do."

Conversely, Bruce Court, vice president of mergers and acquisitions for Development Dimensions International in Pittsburgh, says nothing negatively impacts morale (which he defines as the cheerfulness of an organization) like the fear of the unknown. "You see this very clearly after a merger," he says. In almost all cases, four things are likely to happen: turnover increases while productivity, quality and morale decrease.

Court cites the case of a pharmaceutical company that owned two medical equipment manufacturers in the same state. The honchos at corporate headquarters thought it made sound economic sense to put the two companies together in a sort of "arranged marriage." The result was disastrous. Morale at the newly joined company went down the tubes because employees, who understood the goals of their original companies, had no idea what the merger was designed to do. "There was no sense of purpose, direction or guidance," Court says. And people left the new company in droves. Exit interviews revealed that departing employees shared the same lament. "They told us: 'We need a flag to follow.'"

Cultivate good leaders.
So why is it so hard for companies to communicate goals to employees? Isn't that a routine part of doing business? Maybe so, but Court believes too many managers still hold on to the notion that information is power. "Executives may have a clear sense of purpose but there's a black hole in middle management where key messages get in but never get communicated to the next link in the chain." Even if they want to communicate, he adds, a lot of managers don't have the necessary skills to do so.

"Leaders are definitely the key to keeping employees focused," agrees Mary Schoenborn, acting HR manager for Great Plains Software Inc., in Fargo, North Dakota. At her company, leaders are so focused on the goal that they've generated 13 years of consecutive growth in the highly competitive financial software industry. "Programs designed to boost morale are great, but it's the individual managers who keep the team strong," she says. "They're the ones who can individualize goals for employees." Her company believes so strongly in management as the key to high morale that all managers receive extensive training in communication skills, especially in how to listen to employees and put their suggestions into action.

Hal Rosenbluth, CEO of Rosenbluth International, a travel services company in Philadelphia, believes listening to employees is key. For example, he has gained quite a reputation in management circles for the ideas presented in his book, "The Customer Comes Second." His premise is that by caring, valuing, empowering and motivating employees, morale stays high and customer satisfaction can't help but follow.

Pam Schmidt agrees. When she took over as director of membership and customer services for the Alexandria, Virginia-based American Society for Training and Development (ASTD) in 1993, she was greeted with a group of 20 employees she describes as scared, cynical, beaten down and unwilling to experiment. Sick leave was up, motivation was down. "I spent three months just listening to employees [talk] about what they felt the problems were," she says.

Listening to employees benefits customers.
In the process, she discovered that the department, which provides services such as fulfilling publication requests for ASTD members, hadn't changed its processes in 50 years even though membership had grown exponentially. Furthermore, the computer and telephone technology used by employees wasn't able to keep up with increasing call volume. Members who didn't hang up out of sheer frustration were put on interminable hold. By the time employees picked up most calls, members were irate and employees took the brunt of it.

It was obvious to Schmidt that new technology and processes were needed to turn the department around. So after listening to employees, she set a goal to eliminate distractions and disruptions to the customer-service process. "I wrote the plan and I worked the plan," Schmidt says. "As cynical as employees were, they wanted something to believe in."

"In the end, when it comes to morale, there are only two ways to go: gimmicks or growth."

With a concrete plan for process improvement in place, employees had something to work toward. They provided suggestions for technical improvements. They searched for more efficient ways to handle membership requests. And as each suggestion was implemented, they started to believe working conditions and customer satisfaction really could improve, which they did. In 1994, 16% of callers to ASTD's customer-service center hung up in frustration. By August 1995, that number had been slashed to 5.6%. With each achievement, trust in the department increased and so did employee morale.

Can you quantify morale?
Today, there's still some angst among ASTD employees because the change process isn't over. But Schmidt says they're much more willing to jump in and try to fix the problem. An even better indicator, she says, is that employees now laugh during weekly meetings. To what single thing does she attribute the turnaround? "We had a plan and the focus was external."

Schmidt's experience shows what a positive effect morale can have on customer satisfaction. But is there any way to quantify the overall bottom-line impact of high morale? Tomasko doesn't think so. "It's hard to make a strong case between employee morale and economic performance because some organizations have done great things without high morale," he says. This may be true, but these companies probably didn't do those great things for long.

Carol B. Rosebrough, general manager of Cox Communications Inc., a cable company with 13 franchises around Williamsport, Pennsylvania, believes high morale can be quantified, and she has done so. When Rosebrough assumed her current position in 1988, she inherited a workforce of 38 employees who'd spent years working in dismal working conditions with outdated tools and resources. Their lack of spirit had driven customer satisfaction to an all-time low. Over the years, by listening to employee complaints and gradually implementing their suggestions, Rosebrough has seen morale steadily improve. How does that translate to the bottom line? "Dollar for dollar, we increased cash flow by 55% between 1989 and 1994," she says, "and revenue has jumped almost 42%."

If your company is focused on growth and you listen to—and implement—employee ideas about how to achieve that growth, you can't help but experience similar successes. In the end, when it comes to morale there are only two ways to go: gimmicks or growth. Gimmicks are those slap-happy motivational programs wherein a high-energy speaker comes in and whips employees into a frenzy of good feelings. Unfortunately, these programs are like aspirin: They only make the pain go away for a few hours. To make truly lasting changes in morale, you must find a way to release employees from the negativity that constricts them. And the best way to do that is by giving them that flag to follow.

Personnel Journal, August 1996, Vol. 75, No. 8, pp. 26-31.