Crummy Factor #1: Budget Ax Severs Emotional Ties
Day-to-Day Impact: Loyalty goes by the wayside.
When employees are hired, they form psychological bonds with
their organizations based on mutual feelings of loyalty, trust, fairness, and
obligation. But during a downturn, when companies retreat into cost-cutting
mode, the bonds break down.
“The relationship becomes very
transactional,” says Cali Ressler, a former Best Buy HR manager who
helped create the company’s popular
href="http://www.culturerx.com/">Results-Only
Work Environment (ROWE) program. Managers looking for layoff targets
start to judge workers in terms of how much time they’re putting in
at the office and what kind of immediate value they offer — metrics
that might exclude perfectly qualified and productive employees.
The attitude
among workers isn’t much better. “If the employee thinks he’s
next on the chopping block, why should he put in more than just his time?”
Ressler says. Forget about working relationships built on trust. When business
is bad, work is reduced to a mere exchange of services.
See also: The Hidden Cost of Layoffs.
Crummy Factor #2: Bad News Trickles Down
Day-to-Day Impact: Middle managers get stuck playing
bad cop.
The CEO may announce in an email that the company is going
to conduct layoffs, but managers are the ones who have to look people in the
eye and tell them their jobs have been cut. “The top tells the middle
what to do to the bottom,” says NYU business professor Batia
Wiesenfeld, essentially putting managers in the awkward position of undertaking
tasks that they may not believe in — like cutting valuable employees
or explaining why the company can’t pay out bonuses.
Thus in a
downturn, managers often find themselves choosing between two scenarios:
standing behind the organization and making decisions that leave employees
feeling betrayed; or siding with direct reports and passively resisting the changes
they’re being asked to implement.
See also: How to Manage Your Team in a Downturn (and Come Out on Top).
Crummy Factor #3: A Climate of Fear Sets In
Day-to-Day Impact: Coworkers get political.
Dwindling resources and shrinking headcounts rattle the
psyches of all employees. “When scarcity is upon us, we fight for our
share of the pie,” says executive coach and business psychologist
Debra Condren. “It’s survival of the fittest.”
That’s exactly what happened at Deloitte Consulting in the run up to
the 2001 recession, says a former operations consultant for the company’s
L.A. office. “The culture got really ugly,” he says. With
only 35 percent of the workforce assigned to consulting jobs, it’s no wonder the political jockeys
came out. Consultants started brown-nosing higher-level partners with Dodgers
tickets and offers to babysit. “One coworker actually started
subscribing to a horse husbandry magazine because he knew one of the partners
owned horses,” the consultant adds. In crummy times, the workplace
becomes more about political maneuvering than actual work.
Crummy Factor #4: Bureaucracy Becomes Central
Day-to-Day Impact: The rulemakers make a grab for
power.
Two departments rarely see their headcounts shrink in a
downturn: accounting and legal. It’s easy to see why: Restructurings
and mergers, both prevalent activities in downturns, require manpower with
financial and legal expertise. Plus, a cost-cutting agenda practically ensures
that all of the money-handlers will be needed to crunch the numbers. That’s
great for those departments, but what about everyone else? Accounting rules and
forms get more complicated, which means that even minor things like how an expense
report is filled out can become pain points for managers and their teams. There
are also more delays than usual when it’s time to draw up contracts:
If money is tight, the lawyers are going to be especially dictatorial in
determining whether or not the company is getting a good deal. “It’s
a classic disease during a decline,” says
href="http://bobsutton.typepad.com/">Bob Sutton, a Stanford
business professor and the author of The
No Asshole Rule. “Any rulemonger —
the checkers checking the checkers’ work — has an
opportunity to grab more power.”
Crummy Factor #5: Innovation Comes to a Standstill
Day-to-Day Impact: Good ideas are ignored, and
employees get resentful.
With accounting bureaucrats empowered, most managers can
forget about pushing out new R&D projects, marketing campaigns, and
innovation efforts. Although going aggressive can put a company in a better
position to survive a slowdown, few firms can resist becoming risk-averse.
Thus, mid-level leaders find themselves pulling back and focusing entirely on
how to meet short-term financial goals. Not only can this strategy set a
company back competitively, it also can demoralize top performers.
A mid-level employee at Restoration Hardware says slowed
consumer spending has the company in lockdown mode. The staff used to be
intense and driven, but motivation has deteriorated as top-level management
becomes fixated on saving every penny instead of investing in better tools to
manage inventory. “There are people like myself who are capable and
willing to create the tools,” she says, “but it’s
a combination of not having the financial resources or the desire for change.”
Ready to throw in the towel? Click over to our Crash Course,
How to Manage Your Team
in a Downturn, to learn how to turn things around.