When Times Are Tough, Its People Who Make the Difference
Fortunately, most executives no longer accept this antiquated conventional wisdom. They understand that a time of economic turmoil is precisely when they have the most to gain from focusing on employees. If employees are distracted, anxious, disengaged or believe they’ve stalled in their careers (especially top performers), they aren’t likely to do what’s required to keep the enterprise moving forward or constructively deal with problems.
In our experience, though, there’s still a gap between recognizing that it’s folly to ignore people priorities in tough times and actually devoting time to them. In a climate when business leaders face what may seem like an unprecedented number of challenges, people can drop down the list of priorities, leaders’ best intentions notwithstanding.
So what can leaders and managers do during the months ahead to close the gap between intentions and actions? What steps are critical to benefit both the business and the workforce? Based on our experience, and the work we’re doing with companies right now, here are our five must-do’s:
Lead by example: Regardless of leaders’ own concerns, they need to present a thoughtful, calm and authentic "face" to people in a period of crisis. It’s the time for straight talk, for meaningful reassurance and for a clear vision and plan to get things back on track. The companies that come through a crisis most successfully are almost always those that commit to frequent, open and honest communications with employees, no matter what else is going on or how tough the messages are.
Think creatively about staffing: A common reaction to any economic downturn is to downsize to manage costs. But even if across-the-board staffing cuts meet cost reduction targets, they are rarely the best answer. Instead, consider how to deploy employees in creative and more productive ways to help reduce costs. For instance, are the best performers doing the highest-value work? Can underutilized workers move to other areas of the organization? By looking at ways to realign the workforce with both short-term opportunities for efficiency and growth and long-term strategies, companies may be able to minimize staff cuts and any ensuing turmoil. If layoffs still prove necessary, approach them with a more surgical eye, identifying which jobs and roles are most critical to the business, especially now, and evaluating the implications of the people and roles being eliminated.
Consider opportunities to "upskill" or upgrade talent: As companies consider or undertake layoffs—even targeted actions—the available pool of talented professionals should grow. This could be the time to add new skill sets or increase bench strength at competitive rates, especially with financial services professionals. According to the New York State Department of Labor, the current financial crisis will take about 40,000 jobs out of the financial services industry in New York, including jobs in such areas as IT, sales and business planning. This represents a unique opportunity to tap into an unusually wide and deep talent pool.
Rethink compensation: Merit budget increases—rarely exceeding 4 percent over the last few years anyway—will likely decline in the general economic slowdown, making it harder than ever to retain the best people and reward performance through base pay increases. Profit reports suggest there will be fewer incentive dollars available for year-end or special bonuses across industries. This is the time to make differentiation real in the company—identifying the high potentials and top contributors and ensuring they receive the lion’s share of available compensation dollars. This is absolutely not a time that companies can afford to spread pay evenly across the workforce – a practice colloquially known as "peanut-buttering," which yields few benefits and can send top talent out the door at the time they’re needed most.
Stay close to key talent: In the current environment, with 2008 fourth-quarter profits expected to slip nearly 30 percent for the S&P 500 as a whole, it’s more crucial than ever to keep critical staff engaged and productive. The good news, especially given budgetary pressures, is that pay itself has little to do with driving engagement. As our research consistently shows, engagement builds from emotional connections to the company and the nature of the work experience and environment. Keeping people at the company—and keeping them engaged—doesn’t always require a big financial outlay, but it invariably involves an investment of significant time and attention, especially from senior leadership.
In our view, it’s impossible to separate people’s actions and performance from the company’s results. After all, financial performance is ultimately the sum total of millions of individual actions taken by employees to move the business forward. Getting employees to take the right actions, with the right degree of energy and skill, is a core part of building a solid financial and operational foundation.