In a previous editorial our Founder and Chairman, Ken Lehman, outlined several “share the pain” initiatives to help organizations address “survivor syndrome” – the phenomenon in which workers don’t perform as well because they worry that they’re next after one or more rounds of layoffs – that can occur during a downturn. He wrote that turning to these initiatives first, before more draconian measures may be needed, can maximize the good will of your employees.
The thinking here is that when the recovery comes, demand for your widgets or services will increase. Therefore, to the extent that share the pain was tried, your workforce and their morale will be intact, enabling you to meet rising demand.
There is evidence that this notion is catching on, as small business leaders weigh the cost of non-RIF (reduction in force) cuts now versus significant recruiting and training costs later. Last month Newsweek reported on the results of a survey in May which found that 52 percent of HR executives say their companies have frozen or cut salaries instead of firing employees to save money. This is an increase from 27 percent in January.
However, we’re now entering a period which may test whether share the pain continues – and, more significantly in the long term, whether firms practice what many of them preach and share the rewards of a recovery, however gradual.
The Conference Board reported last week that in the second quarter of 2009 CEO confidence improved significantly compared to Q1. A confluence of factors may be responsible for this. The Association for Financial Professionals reported in June, for instance, that over 70 percent of the U.S. companies they surveyed had increased or maintained cash balances in Q1.
Certainly the activity between the White House, Treasury Department and SBA aimed at giving small firms much-needed aid, as reported in recent days in The Washington Post, is being closely watched and could be contributing to the rise in CEO confidence. Another, perhaps less closely watched – but no less significant – development was the June announcement that the person-to-person microlending website Kiva.org would launch a pilot expansion of its service in the U.S. This makes loans of up to $10,000 available to organizations that demonstrate an inability to raise capital through other avenues.
But in what may be a sign of the times ahead, The Wall Street Journal reported in late June that according to a Watson Wyatt survey of 179 companies, the cuts companies have made might be here to stay. According to the survey, over half of companies expect to employ fewer people in three to five years then they did before the recession began. And though 55 percent expect to restore cuts they’ve made within 12 months, 20 percent expect those cuts to be permanent.
The danger here is that companies that make cuts and then don’t restore them after there’s clearly been a recovery and their fortunes have improved are going to lose the good will of their workforce. Whereas in good times your employees, when treated well, will tend to deliver better service to your customers, in the above scenario, employees may become disgruntled and treat your customers poorly. So sharing the recovery can have a direct impact on your customer service and sales.
One of our Top Small Workplaces, JA Frate in Crystal Lake, IL, exemplifies the good will from employees as a vehicle to a renewed focus on superior service and increased productivity that came with not just sharing the pain in a downturn a few years ago, but sharing in the recovery once conditions improved. In the case of this transportation and warehousing provider, this meant restoring lost earnings to all affected employees.
There’s another reason to share the recovery when it happens, one that has implications for our economy at the macro level. In another survey reported on in Newsweek earlier this month, over half of American employees say they will look for a new job once the recession ends. Among 18- to 29-year-olds, that figure jumps to 71 percent.
This should be an incredible warning signal to small business owners and leaders that, by and large, workforces are not committed to organizations and their core values. We believe that strategies that can increase their commitment long term, such as sharing the recovery, can have a dramatic and lasting impact on the national jobs outlook and business performance at the individual level, including lower turnover and greater productivity.