Volume 31: Managing Employees in a Down Economy

Throughout 2008 G&A Partners has been focusing its Spotlight newsletter on the employee lifecycle – everything from identifying and hiring the right talent to measuring and rewarding performance. We intend to resume that series of topics in 2009, examining employee engagement and compensation strategies, succession planning as well as terminations and retirement. Given recent economic events, however, we felt it appropriate to offer some timely advice on managing your employees through these tough times. The following is an article G&A Partners wrote for the Houston Business Journal. We hope you will find it informative.

Current headlines are grim. The recent crisis on Wall Street is having a serious trickledown effect on Main Street and the country’s already-sluggish economy. Consumer confidence is severely rattled, and to make matters worse, more than 700,000 people in the US have lost their jobs since December 2007. Smart business managers recognize that now is a time for prudency, but certainly not panic. But how do managers keep their employees from panicking?

It should not come as a surprise to business owners that employees are feeling a bit shaken right now. They may have valid concerns about your company’s strength and about their own job security. However, while feelings of uncertainty among employees are understandable, it is important that distractions not cause employee performance to suffer. So how do business owners help employees stay focused and motivated?

Commentators have frequently used the word “unprecedented” to describe recent economic events. With that in mind, there is no proven playbook guaranteed to guide business owners through this downturn, but common courtesy and consideration can help ensure that companies maintain a level of trust and commitment among employees.

Communicate openly and honestly. In times of crisis, no one wants to hear platitudes, and your employees are no different. Communicate frequently and be honest and forthright about the condition of the company. If your company is well-positioned, explain why. Don’t assume your employees know how you will be able to withstand external market pressures. If your company is encountering difficulties, your employees deserve facts, not false hope. Your employees are more likely to stick with you through adversity if they are treated with respect and sincerity, not lied to, and made to feel a part of the team rather than excluded.

Quell fears of layoffs. Concerns about layoffs, whether real or rumored, are especially distracting for employees and destructive for your company’s morale. Water cooler gossip is typically far worse than reality, so if layoffs are likely, notify employees as early as possible. You may not be able to share extensive details, but be frank - employees will be better able to prepare for a worst case scenario if they know what is possible. If layoffs are not in your immediate plans, quell your employees’ fears without making long-term promises for the future. Let them know that you will keep them apprised of developments and changes as they occur.

Review the status of employee benefit plans. A volatile stock market has taken its toll on some employees’ retirement plans. While little can be done about market fluctuations, a well-diversified 401K account will feel less impact from recent market declines. Employers should review their plans and the investment options offered by third party plan administrators. Employers may also want to extend educational opportunities to employees to learn more about their 401K investment options and the importance of diversification. Certainly, current conditions may warrant a review of investment selections and perhaps even a reallocation of funds, but those decisions are for individual employees to make. As an employer, do what you can to ensure your employees know and understand their responsibility.

Take a balanced approach to cutting costs. It is natural that business owners would want to cut back during this time. Most likely your employees will understand, and in fact even respect, that decision. However, when choosing where to cut costs, be sure to take a balanced approach. You may want to think twice about canceling the holiday party if your management team is still flying first class. Disparity, whether real or perceived, can lead to morale issues. And don’t automatically cut employee initiatives like training programs or performance rewards. Cutting strategic programs that help develop and motivate employees could prove to be very short-sighted.

Provide new and challenging assignments. In a bearish economic environment, individual company growth often stalls, but that does not mean your employees careers have to be stagnant. Keep your employees motivated by challenging them with new assignments. If you have been forced to cut staff, this may be an opportune time to assign additional responsibility to someone who has proven themselves capable. By identifying opportunities to further develop your employees’ professionally now, your business can emerge on the other side of this downturn with stronger, more committed employees.

Encourage aggressiveness and innovation. Adversity often breeds opportunity, so rather than retreat, challenge your employees to find opportunities to improve your company’s competitive position. Include employees in the brainstorming and strategizing process where appropriate, and listen carefully to their ideas. A collaborative effort will help breed a sense of loyalty and team among employees and could quite possibly generate a winning idea.

Like everything else right now, managing employees in this current market environment is difficult. Depending on the nature and condition of your business, there are perhaps days you would rather run for cover than rally the troops. As a manager, however, you are accountable to the people that work for you. It is easy to lead in good times, but leading through adversity builds character – and leading well through adversity creates CEOs (if that is a position anyone still aspires to in these tough times).