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Don't Let the Economy Get You Down

I found this good article by Michael Wood suggesting the needed attitude and the steps to be taken in this time of economic crisis especially by the employers.

So, here we are, in the midst of perhaps the worst recession in U.S. history. And although originally fueled by bad lending practices in the housing market, the new fuel is the fear, uncertainty and doubt engulfing consumers. Yes, the great U.S. consumption engine that the world relies on is coming to an abrupt halt just as unemployment numbers are soaring.

For those who have jobs, there lingers a nagging fear that those jobs are not secure, as fellow workers and friends get laid off, retirement accounts get ravaged and cost controls eclipse opportunities for growth. It isn’t surprising that issues related to declining morale and productivity has become commonplace in the workplace. IT is not immune to this situation, and finding ways to stabilize and improve morale within the IT ranks has become increasingly difficult.

Leaders need to understand that in recessionary times, it is anything but business as usual. They need to introduce counter-measures to break the cycle of fear that emotionally and physically grips employees. The conventional wisdom points to frequent and honest communication and increased employee recognition programs as ways to improve morale. Consider the following from “Impact of the Recession on Employee Morale” from www.managingconflict.com:
“Instead of deliberately and consistently communicating with employees, employers will go into 'shut down' mode. The result will be increased fear among employees and mistrust of management.

Communicate constantly to minimize uncertainty. Uncertainty arouses the fear circuits in the brain and is an absolute killer to employee productivity. When people are unsure about the stability of their organization, their standing with their boss or supervisor, or a clear understanding of what’s expected of them, most assume the worst. The ensuing stress decreases the amount of a chemical called dopamine in the brain, a chemical that is critical for clear thinking and reasoning by the prefrontal cortex. Continuous uncertainty can also increase the levels of Cortisol in the body, too much of which can permanently damage both the brain and the circulatory system.”

So it appears that continuous doses of fear create physically debilitating effects. But is the conventional wisdom enough to remedy the situation? Today, employees need more than empty reassurances and pats on the back. They need to see evidence that management has a workable approach to regrouping and returning to a stable and predictable work environment. Here is an approach that might help management move in that direction.

Develop a formal set of downsizing rules and scenarios that consciously quantify the trade-offs and impact on customer retention, employee service levels and owner value. Each scenario would be event-triggered, objective and fair. For example an organization that wants to keep reductions in the workforce as a last resort might choose the following sequence of events if downsizing is required:

  • Elimination of all bonuses and discretionary perks for upper and middle management – to demonstrate sacrifices will be top down.
  • Reduction in executive pay to the previous 3 to 5 year levels – to demonstrate sacrifices will be top down.
  • Monetization of non-performing passive investments (land, buildings, etc.)
  • Reduction in Inventory (more frequent replenishment) to preserve cash flow
  • Aggressive accounts receivable collection efforts to accelerate cash flow
  • Hiring freeze – without rehire using attrition to achieve FTE goals
  • Early retirement incentives – without rehire using attrition to achieve FTE goals
  • Elimination of matching 401k contributions with pledge to resume once business improves.
  • Reduction in subsidized medical insurance costs with pledge to resume once business improves.
  • Reduced work week options such as 4 day / 32 hour week, unpaid leave with benefits, etc.
  • Reductions in pay geared to wage brackets (i.e. 100k and up employees take 15% where under 40k employees take 3%)
  • Reductions in force based on performance ratings and tailored to the value each organizational unit delivers and balanced with service level support requirements.
While this is just an example, it illustrates the kind of proactive planning that once communicated to employees fosters trust and allows them to monitor events that could lead up to their release.

More than ever, employees need to be able to communicate to their families the current state of financial risk they are facing in a way that minimizes surprises. IT can provide management with the monitoring metrics to assist it in forecasting the impact of scenario triggering events. This information can be shared openly with the workforce helping to forge a connection that conveys “we are all in this together."

What are your organizations doing to foster positive morale during this recession? How is it working? What would you change? Share your stories with fellow gantthead members. Start a discussion group thread or a GIG


This is what I call a post. Every one should must read especially in this time of recession. Everyone needs to prepare such strategies for faster recovery. Keep updating.

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