The myths (and truths) of an economic downturn
McDonald’s UK HR Director, David Fairhurst, has recently pledged to continue to invest in training and recruitment (Personnel Today 22 July) to help the fast-food chain cope with the economic downturn. A brave statement, considering the widespread budget-cuts that are afflicting businesses as fears of a recession grow daily.
Here are a few myths (and truths) when it comes to organisational performance during troubled economic times:
* Myth 1: As jobs are cut and the talent pool grows, there are rich pickings to be had in the job market.
* Truth 1: In turbulent times it makes sense to encourage businesses to focus more than ever on engagement and retention. Negative media reports, budget-cuts, redundancies and poor performance figures can make employees nervous and insecure, and many may jump ship before they are pushed. When you consider that it costs over £7,500 to recruit and onboard a new employee (with several months passing before they are at full productivity), to keep hold of your best people is a no-brainer.
* Myth 2: Cutting back on engagement initiatives should save money and therefore help financial performance:
* Truth 2: No. Engagement and keeping people connected is absolutely vital. Research shows repeatedly that engaged employees perform better and are more likely to stay committed and energised. Good communication, training, managing expectations, ongoing assessment, listening / feedback, involvement in decision-making, incentive plans, motivation and flexibility is key, underpinned by strong leadership at every level. The direction of an organisation needs to be articulated clearly and simply – cutting out unneccesary complexity and detail – so it can act as a beacon for people to stick to during turbulent and changing times. And never under-estimate the importance of explaining WHY, as well as WHAT and HOW, so people can adapt to change more readily and understand why they are being asked to do so. However, cutting out the ‘nice-to-haves’ or short-term tactics that create good feeling of a very short-term nature is important. Keep people focused on the strategic priorities, give them the tools, skills and confidence to explore these at a local level on an ongoing basis, and recognise the contribution they are making.
* Myth 3: Cutting substantial training and development budgets will cut costs significantly and so help financial performance.
* Truth 3: Cutting back in this area will merely compromise an organisation in the long-term as it will create employees that are less effective and less likely to move up the ladder in terms of succession. Training will help keep an employee feeling valued, invested-in, and of course help to enhance skills that will improve their performance.
* Myth 4: Pay employees enough and they’ll stay:
* Truth 4: It is widely accepted that pay is not necessarily the uppermost factor in keeping an employee at work. Making employees feel valued and empowered to take on more responsibility and recognising those who perform well is just as if not more important, can boost morale and create a feeling of being in control of one’s future. Involving people in the exploration and discussion of strategic issues will keep people connected and feeling that they can have influence themselves, and will foster a culture of involvement and innovation that will help a company out-perform the competition.
A downturn is part of a cycle. Shifts in growth are part and parcel of what makes the economy tick. It is an ever-evolving, moving feast which can only change for the better in time. Companies need work harder than ever to optimise the use of their resources, whether human or financial, but always respecting and exploiting the collective intelligence of its employee base who are the ones who really know what’s going on at the proverbial coal-face. Senior leaders, be warned….use it or lose it. Cut communication, training and development and you may just find that your best people become your competitors. In the long-run, they could make all the difference to your organisation’s success.