Dr. W. Edwards Deming
The headline read “Confidence Declines to Lowest since February”. The Conference Board’s index fell almost 5 points in a month. Unemployment at 9.6% is at a 26 year high. The CEO Economic Outlook Index declined from 94.6 in June to 86 in September, because there were fewer company executives expecting sales and head count to improve. (See MSN Money News Center)
Anyway you look at it, there is more than enough fear to go around. So what is the impact on employees? In most cases, people “keep their heads down and their mouths’ shut”, not a good thing. Management isn’t told about problems out of fear of more layoffs, which causes a decrease in product quality, productivity, and increases delivery times and costs. That kind of response to fear puts a company out of business.
What is a business owner to do? Dr. Deming said it, “Drive out fear.”
Have a Plan
This is not going to be a fast recovery. What do you need to do, if the economic situation does not improve, for the next 12 months? Look at head count, purchases and expenses. How do you stay in business and provide jobs? What indicators will you track and what do they need to be to get you out of protection mode? Write it down and follow it.
How are layoffs being done? Eating the elephant in small bites has its advantages, but not when it comes to driving out fear. That monthly cut of a few more people month after month, leaves everyone worried that they will be next. People focus on surviving – putting a roof over their family’s head and food on the table. You need them focused on keeping quality at a high level and looking elsewhere for cost cutting measures. Make the cuts deep and quick, and then sit down and discuss, with employees that remain, their jobs are safe, you’ve done all the cuts for your planned period of time, a year, so they can come to work and not wonder if they are next. It means everyone will have to do more with less, but they can at least be sure they are safe. Tell them you don’t want them to be afraid.
Tell your employees the truth; there won’t be bonuses, big parties, or new equipment purchases. Reward programs are cancelled for everyone. You are keeping the cash expenditures low to protect their jobs. Ask for their help. Recognize those making suggestions with praise, and where possible, identify what they saved. Keep a running tally board, when it totals the gross annual cost of a single average employee’s wage make a posting, “Because of these people’s suggestions one person’s salary for a year has been saved, thanks to them we all have jobs.”
Tighten Your Belt
I once worked for a company where the owners laid off one third of the workforce, had the managers take a 20% pay cut, and then went out and bought themselves very expensive cars and remodeled their offices. This is an extreme, but often, employees don’t see where management is also making concessions. It is very normal for frustrated people to look at the “other guy” and feel slighted. Management is a prime target. If you are cutting management perks and/or salaries communicate what you are doing, too. Make a statement such as, “Management chose to give up benefits and salary equal to X number of employees’ salaries.”
Necessity is the mother of invention. Now is the time to look at your products and drive out costs. Focus your designers and engineers to spend a portion of their time looking at existing products. Listen carefully to employees ideas and see if they can be expanded across a line of products.
Get your sales force out mining existing customers. A salesperson coming through the door with an idea to cut the customer’s costs is going to get time with the purchasing agent. Now is when you build relationships, if your sales force helped in the bad times, the customer will remember it in the good times and be less likely to switch to a competitor. Get your designers focused on lower cost replacement products, particularly for your competitions’ lines. Figure out how you can get the other guy’s business.
Smile and Hang On
Scots kings used to have to eat dinner in front of their subjects. The idea being, if the king ate well, he wasn’t worried. If the king wasn’t worried his subjects didn’t need to be afraid. Your employees are looking at you for their cues. If you come through the door with a scowl and a worried expression, they are going to be afraid and go back to head down, mouth shut mode. Worry cannot add a minute to your life, quite the contrary, it will hurt your health and possibly shorten your life. You’ve made your plan and implemented it, now help your staff with your skill set. If you’re an engineer at heart, throw some ideas out to the designers. If you’re a people person, get your sales staff charged up. Put your energy into creating improvement and you will drive out the fear that would otherwise cripple your company. You’ll come out the other side of this ‘economic downturn’ stronger and positioned for real growth.