Whether we are about to enter a recession or what ministers prefer to call a period of economic slowdown, the end-result is the same: businesses tightening their belts and preparing to shed employees.
Over the past few weeks, telecoms giants Motorola and Cable & Wireless have announced 7,000 job cuts between them. But job losses are not confined to the technology sector – earlier this week British Energy confirmed falling profitability meant 400 staff would be made redundant.
As soon as the spectre of redundancies is raised, fear takes hold within an organisation. The grapevine becomes the primary channel of communication and people behave defensively.
Individuals may refuse to share information unless others have something to offer in exchange. Departments act to protect their own, laying the blame for complaints or failures on other departments. Initiatives to promote cross-functional teamworking grind to a halt. Short-term thinking replaces long-term planning.
Recently, in a large service company, the threat of redundancies had thrown the performance measurement system into chaos. Salespeople routinely forecast low sales for the next quarter so they could easily meet targets. In another company that prides itself on exceptional customer service, the spectre of job losses has led to some customer complaints not even being logged, let alone dealt with.
There is no blanket solution to problems such as these. However, there are a few broad principles that can be of use.
Regular, clear employee communication is a priority to counteract the grapevine. Staff surveys show that vague warnings about layoffs are more frustrating than accurate news – even when the news is bad. Sometimes the message of impending redundancies is clearly transmitted throughout an organisation, but not enough explanation is provided.
Managers often tell us that their front-line workers are either unable to understand complex strategic or financial explanations or not interested. In reality, when an employee’s career and livelihood are at stake, it is impossible to give too much information.
Since the top layer of managers is an important resource for a company at such times, it has to be protected. Managers are often torn between loyalty to their employer and the consequences of being made redundant themselves. Headhunters will be lying in wait for managers with sound track records, and “stars” who have not been reassured about their prospects may decide to jump ship rather than be pushed – even when the company never intended to off-load them.
It is imperative to keep the loyalty of the top team – by involving them as much as possible, bending over backwards to tackle their personal concerns and, when necessary, managing the departure of senior people from the company with sensitivity and generosity.
A lot has been written about the psychological impact of redundancy, voluntary or otherwise, on those leaving a company. However, the impact on those that remain should also be considered.
The “survivor syndrome” – first identified in people who had emerged from large-scale tragedies such as plane crashes and earthquakes – is very much in evidence in organisations where numbers have been drastically cut. Symptoms include guilt and an inability to perform more than the most basic tasks. Organisational survivors tend to have poor motivation and lack initiative. It is difficult to convince employees to work as a team again or to focus on delivering excellent customer service.
Unfortunately, a culture of fear and uncertainty does not simply go away. The healing process takes time and needs to be actively managed. As a starting point, the board must decide on its new priorities and build a clear plan around them. This must be cascaded down throughout the organisation, giving employees the opportunity to raise issues and to identify skill gaps as well as providing the means for addressing both.
While such efforts may be time-consuming, they pay dividends. By cutting corners here, the risk is that the cost benefits of the redundancy programme are wiped out by loss of customers and revenues – and employee morale. If you get it right, you should have a highly motivated work-force, ready to take market share from demoralised competitors, when the economic cycle moves into a more positive phase – as it inevitably will.
John Nicholson is chairman of Nicholson McBride, Europe’s leading business psychology consultancy. Nicholson McBride has its European headquarters in London and a US network based in Boston.