Employee Engagement – Investing during a down turn
One of the biggest challenges senior executives face during the current recession is managing the need to balance costs with sliding revenues and profits during the market downturn. To find the balance between shedding unprofitable investments and not missing out on too many potentially profitable ones, it remains not a question whether cost cutting should be undertaken, but rather from where, how this is conducted and why it’s crucial to communicate information on such measures to your team.
During the recession, executives placed emphasis upon the financial risk of investing, often at the expense of assessing the competitive risk – i.e. of not investing. How you manage a downturn, including employee engagement and development will directly influence your talent position in an upturn.
A few examples of underinvestment strategy are radical strategy change; minimalising internal communications; rationalising people out of your business; reducing employee engagement initiatives, team training and leadership development; and cutbacks of sales & marketing budgets, which result in inferior and reduced levels of communication with customers.
Short term tactical actions such as these, whilst designed to reflect significant budget savings, are usually undertaken as a knee jerk reaction to a drop in business confidence. Many economists believe that such activity only contributes to investment volatility over a cycle and that this is actually excessive, rather than efficient. Trying too much to marginalise financial risk through cutbacks can carry a very hefty price tag – we even go so far to say at the expense of the organisation’s competitive advantage.
There is no doubt that companies need to cut operating costs in severe downturns to stay afloat, but reviewing cost cutting measures should involve companies exhausting all available means and avenues to keep people in their jobs, for example introducing leave without pay, job sharing, pay cuts, reduced works etc, and ensuring that these options and the reason for them are communicated.
Once a market recovery is imminent, it is those organisations that proved themselves loyal to their employees through regular communication with teams during the downturn and open, honest dialogue with customers, that can expect such trust and loyalty to be returned to them. Companies that did not do the above, can expect their employees, and to some extent, their customers, to ‘vote with their feet’. Quoting Richard Branson, on Virgin Karma “we are loyal to our team, our team are loyal to us”.
Many organisations who’ve severely cut back on all manner of spend will soon be faced with competing for quality talent in the commercial arena on price alone, rather than on the internal and external strength of a nurtured brand and culture.
Developing true strategic employer branding still remains one of the most valuable methodologies for companies seeking to put a greater focus on productivity, their people and their brand. Unfortunately, many HR professionals consider employer branding to simply be a recruitment tool, to attract talent and run initiatives. It’s not just that, if implemented correctly, employer branding can be an important talent management tool.