The current market economy is continuing to force into harsh relief those business that are valuable and have sound fundamentals and those that are weak. Or to put it another way, as Warren Buffett so eloquently did “When the tide goes out it is easy to see who is swimming naked”.
But even if your product has value, your customers love you and your business model works, you still need focus on cutting costs and driving up efficiencies. This may be a fundamental shift to your strategy from loss-making growth to month on month profit, or it might mean fine tuning by examining every process to reduce waste. Or a combination of both. Either way, a good understanding of the businesses operation processes is critical.
Reducing waste is deeply unsettling for employees. At best is means reduced budgets and asking them to cut travel expenses. At worst is means redundancies. Both of these requires line managers to be better communicators and be more empathetic with their teams. They need to lead from the front.
Just when we should be better man-managers I see examples of poor man management, bordering on cowardly. Here are just a few. Every one fails the “Would I like to be treated this way” test.
The redundancy process
The redundancy process is not clearly documented and hence it is not applied fairly, done with respect and dignity. The proper consultation period is given lip service, hence individuals who should be kept are laid off – and this damages the company. Those who are laid off and feel they have been treated badly or unfairly are walking adverts actively damaging the company’s reputation. This will really become apparent when they try to hire again. This is a simple process to document and make sure every line manager has access to it.
Redundancy not review
Companies are using redundancy to ‘cut out the dead wood’. A job that should have been done through fair and consistent reviews enabling the individual to correct their behaviours, or have training scheduled to help them up their game. Instead they are made redundant. This is not only unfair but it also squanders potential talent that should have been trained and coached. And often unrecognised stars in the organisation end up as collateral damage when wide-sweeping redundancies are announced. Regular reviews would have recognised their value to the organisation and saved them.
“I can treat my staff like shit – where else can they go?”
The current market conditions are being used to cut staff salaries with the undertone of “well at least you have a job”. In many cases salary cuts are being made at junior levels but not the more senior ones which drives up resentment and hits morale. This will only be seen when the job market becomes easier and staff vote with the feet. I was staggered when I overheard one MD at a dinner say, “I can treat my staff like shit – where else can they go?” The best ones can and will go. Nimbus is still hiring and we are getting the pick of the crop, and in fact our recruitment is accelerating and our good name in the marketplace is paying dividends.
Clawing back commissions
At one major software company they have the typical hockey stick in sales – i.e. they all occur in the final quarter. But they pay their sales and support teams quarterly commissions on the anticipation of them hitting their annual target because they have hit them every year for the last 5 years. Except for this year. So in the employee’s contract that commission can be clawed back. Bearing in mind some of the commissions to be clawed back were 30% of an individual’s salary. Instead of the Managing Director, Sales Director or Line Manager communicating the problem and explaining how the commissions were going to be clawed back, Finance sent out an email to each individual saying “Pay us a cheque for the full amount”. Ouch!
Training budgets unnecessary luxury
With costs being cut it is easy to see training budgets as an easy target. Again the “they’re lucky to have a job mentality kicks in”. Training is a small part of an employee’s annual cost but disproportionally important to maintaining their enthusiasm, skills and motivation. What internally run training can you offer? If the CEO is a brilliant speaker, then can’t he running a training course or coach one to one? Can you identify good podcasts or blogs and make them available to staff? If you think education is expensive you should try ignorance.
No career planning, but at least you have a job
Every employee wants to grow and improve – or more importantly they want to see their salary grow. It is very easy in the current environment to lapse into the mode of ‘they are luck y to have a job when every one else is losing theirs”. But not every company has gone into hibernation, paralysis or administration. Good companies are looking for ways to innovate, grow and position themselves for the recovery. That means a happy, motivated workforce which in turn means future prospects. So maybe there are limited opportunities for promotion, but sideways skills-enhancing moves have the same effect. It builds skills in the organisation and keeps people fresh. Even better if you can change the structure of the role so it is not a like-for-like swap.
“Can’t you stay with friends?”
Expenses comes under closer scrutiny, which is healthy. Perhaps a conference call could replace an expensive flight – saving money and employee stress. But often undue pressure is a put on staff to rough it. Stay with friends. Stay over weekends to make long-haul flights cheaper. All these are great ideas but how do you soften it? Stay with friends – BUT take a bottle of wine and charge it to expenses. Stay over the weekend, BUT charge the weekend hotel and a hire car to the company and make the most of the time away.
The future bright
If the current economy were a short blip with then a return to the market conditions we’ve seen of the last 5 years then some of the examples or poor management, whist not acceptable, are understandable. But the clever money is predicting that the economy has had a ‘reset’ and we will have to operate with the current economic conditions for several years. Therefore these examples of poor management are actively damaging companies.This means that some may not survive. Which is good, because many do not deserve to.