[Motivating Your Employees in Downturns

& Recessionary Times]

Downturns and recessions can be very traumatic for employees. Cost-cutting
efforts and layoffs can strike deep fears and emotional setbacks in them. In
such circumstances, motivating your staff and maintaining their enthusiasm and
productivity amidst the turbulent downturns and recessions can be very
challenging.

Many organizations take the easy route of mandating their employee’s

behaviors but do not realize that such an approach will lead to the failure of
their cost reduction measures. On the other hand, motivating employees and
getting their emotional commitment toward the decisions taken by the
organization in difficult times is more likely to make cost reduction programs
effective. This white paper will explore the possibility of motivating your
employees by acquiring their positive emotional commitment.

Why Most Recessionary Measures Fail?

During downturns and recessionary times, cost reduction is the most common
measure initiated by the companies to withstand recessionary pressures. In
most cases, this is a reactive measure with no commitment behind it. Very few
companies sustain the cost reduction programs well past the downturn or
recessionary period.

One of the most frequently cited reason why most cost reduction programs fail
is that the cost reduction programs were not implemented properly and were
not managed well1. To put it another way, most people in the organization did
not do what they were supposed to do. Many cost reduction measures are short-
sighted and are effective only for the short term. Once the initiative goes away,
organizations fail to sustain the savings. A large part of cost reductions happen
to be deferred expenditures and will definitely be born by the organization
some time later.

Another reason why cost reduction programs fail to achieve their objectives is
that they do not tackle the root causes of expenditure patterns. Measures that do
not address low productivity, poor leadership decisions, wasteful expenditure
and ‘cost-accommodating’ behavioral patterns of the employees are bound to

1
Cost Transformation Driving Results, Archstone Consulting, 2008
 be less successful. Unless the workforce commits itself to the cost reduction
measures wholeheartedly and changes its attitudes and behaviors, organizations
will have a hard time sailing through difficult times.

Motivating Your Employees in Downturns and Recessionary Times –

Best Practices
Avoid Mandating Approach. Many managements resort to a top-down
mandatory approach that depends heavily on discipline, fear and subtle
intimidation. Most of their measures are quick and dirty. They are focused on
immediate results without examining their sustainability or the past
effectiveness of such measures. Managers begin to push the employees and
bully them to try harder and work longer.

In most cases, there will be no honest communication between the management

and the employees. As the axe begins to fall, insecurities of the staff rise.
Amidst the frenetic circulation of negative rumors and intense skepticism,
employee morale hits an all-time low. In the absence of any serious effort to
reduce anxieties, the whole organization culture is disturbed. Employees will
be more focused on ‘seeming to work harder’ than actually working harder.
The ‘cost reduction’ programs will soon turn out to be ‘value reduction’
programs.

Adapt Motivational Approach. While there will be hard decisions to make,

engaging workforce in a superficially positive way will not work. Adapt a
positive motivational approach to secure emotional commitment of the
employees. In this method, management tries to look for emotional
commitments rather than rational excuses. Understand that any long lasting
change can only brought about by making people accept the change from
within. Put emphasis on frugality rather than reducing headcount. Make them
feel proud to have a thrifty culture. Honestly communicate the organization’s
position in the downturn or recessionary times. Make them focus on cost and
value rather than stoking up insecurities.

IKEA is known to celebrate the frugal nature of their founder. By circulating

frugal stories and taking pride in keeping the costs low, management supports
cost reduction initiatives both formally and informally. Amazon.com presents a
‘door desk’ award every month to the employee who is outstanding in being
thrift. The door desk isn’t worth much money but is a symbolic gift that
represents a makeshift desk the company’s founder Jeff Bezos used in the early
days of the organization.
 On the formal front, install systems that encourage thrifty behavioral patterns.
Provide incentives to low-cost behaviors. For example, hourly employees at
Nucor are known to earn more than their regular counterparts as Nucor has an
incentive system that encourages low-cost working style.

Employee engagement is a very important attribute of all peak performing

organizations. A study by Towers Perrin-ISR showed that companies with
highly engaged employees posted a thirteen percent growth in income in a year
while those with less engaged employees showed a negative growth of four
percent2. This same employee engagement factor can be used to fast track cost
reduction in recessionary times.

Understand that you can only cut so much fat. Hard measures such as bonus
cuts, employee layoffs, outsourcing, shutting down a loss-making division, etc,
are effective but only up to a certain threshold point. There will be many
elements in your cost reduction strategy that require individual responsiveness
and altitudinal changes from your employees.

Display Genuine Commitment from the Top Level Leadership. When there
is a strong leadership cohesion and genuine commitment from the senior level
management in changing their behavioral patterns and attitudes that support
cost reduction, it really spreads like an infection across the organization. This
display of honesty, both formal and informal, will motivate employees to adapt
cost-conscious behavior and secure their positive emotional commitment.

Make Your Cost Reduction Measures Fair. When every stakeholder in the
organization does his or her part in cost reduction without any exceptions and
inhibitions, employees are more likely to commit themselves to the cost
reduction measures. If your cost reduction programs demand selective
participation from some employees while excluding others from the frugal
measures, employees will feel ill-treated and the resulting revulsion will prove
to be counterproductive.

Conclusion
While tough decisions such as employee layoffs and bonus cuts may be
unavoidable in downturns and recessions, securing positive emotional
commitment of your employees towards cost reduction programs is necessary
to make any lasting progress. Motivating, rather than mandating, is more likely
to produce effective cost reduction in difficult times.

2
Engaged Employees Drive The Bottom Line, ISR-Towers Perrin, July 2006