Blanchard LeaderChat

Years ago, business owners were asked, “If you had to choose between a fire that wiped out your facilities versus having all of your people quit and walk out at the same time, which option would you take?” Almost everyone said they’d rather lose their buildings and equipment because to rebuild their human organization would require a lot more effort and be more difficult to accomplish.

In the latest issue of The Ken Blanchard Companies’ Ignite newsletter, co-founder Ken Blanchard shares how the recession of the past two years put many organizations into a position of having to decide between people and profits in order to stay in business. Some of those decisions were painful, and in some cases, the way decisions were made had an adverse impact on the human side of the organization. The facilities and the equipment are intact, but the people are not present in the same way as before.

As a result says Blanchard, “People are looking for clues to see if their organization is only interested in the bottom line, or if they are equally concerned with the people side of the business.”

For leaders looking to rebuild trust, commitment, and morale in their organizations, Blanchard recommends senior leaders focus on creating a compelling vision, while immediate managers work to implement plans by connecting individual work to overall goals. 

As Blanchard explains, “Senior leaders need to create a compelling vision that defines or redefines the organization’s business. The key here is to have a clear focus on the customer and make that everyone’s goal. During the past recession, people saw what looked like self-serving behavior on the part of a lot of leaders. In many organizations, it seemed as if top leaders saw the organization only as a way to achieve personal ends. In contrast, when senior leaders identify a compelling vision of the future and align the organization’s goals and values toward this vision, everyone can move in the right direction and focus their energy on the customer.

“Frontline managers need to make sure that each and every employee’s work is connected to an overall department or organizational goal and that the employee can see how their work has an impact. To build trust and respect with direct reports, frontline managers should schedule regular one-on-one meetings with their people. Managers should use these sessions to clarify expectations, solicit input, answer questions, and provide feedback. Nothing shows that you care and respect a person—and their work—more than spending time with them, checking on their progress, and providing help when necessary.”

To read more about Ken Blanchard’s thoughts on rebuilding trust, commitment, and morale, be sure to check out the complete article here.  To participate in a complimentary webinar Ken Blanchard will be conducting on this topic visit the information page for Healing the Wounded Organization.  The webinar is free and hosted by Cisco WebEx.  Click here for details.

Join Dr. Dick Ruhe, Senior Consulting Partner and co-author of Know-Can-Do right here on LeaderChat beginning at 10:05 a.m. Pacific Time for a 30-minute Q&A session.

Dick will be stopping by immediately after he finishes his WebEx sponsored webinar on We’re Still Here … Now What? In this special event, Dick will be sharing six strategies to help leaders re-focus and re-energize their organizations by adopting a growth—instead of survival—mindset.  Over 400 people will be participating in the webinar and most will be gathering here to ask follow-up questions.

If you have a question that you would like to ask Dr. Ruhe, just click on the COMMENTS hyperlink above. (Once you’ve typed in your comment hit SUBMIT COMMENT.)  Dick will answer as many questions as possible during the 30-minute online Q&A.

If you can’t stay for the entire 30-minute chat, but would like to see all of the questions and responses, you can always stop by later or click on the RSS FEED button on the right-hand column and you’ll receive updates automatically.

The debate between what’s better for company’s experiencing a downturn in sales, layoffs or pay cuts, continues to draw differing opinions.  In today’s US edition of The Wall Street Journal, columnist Cari Tuna reports that while 65% of companies resort to lay offs when faced with economic short falls, a growing percentage are choosing mandatory furloughs and pay cuts as an alternative. 

 

What are the deciding factors in determining which path to follow? It all depends on how you see the future unfolding. 

 

If you “don’t see a light at the end of the tunnel, it just makes sense to lay off less productive workers,” says Satish Deshpande, a management professor at Western Michigan University’s Haworth College of Business. 

 

Other workplace experts believe that pay cuts and mandatory furloughs are the better choice if you believe a sales decline will be temporary.

 

Which route would you choose?  It probably depends on your outlook for the future.

 

If you’ve already had to make some changes in compensation or structure because of the economy, be sure to check out our free webinar tomorrow on Revitalizing the Downsized Organization.  Senior Consulting Partner Chris Edmonds will be sharing some hands-on management strategies for keeping everyone focused, productive, and optimistic as we ride out this downturn.

 

For more on this debate, check out our earlier post on January 30, Layoffs or Pay Cuts: How would you decide?

 

 

 

 

Some new research from Watson Wyatt, a global consulting firm which specializes in human capital and financial management offers some indications that a bottom to today’s turbulent work environment may be in sight. In a February 2009 report on the Effect of the Economic Crisis on HR Programs researchers at Wyatt report that the majority of the companies they surveyed have already put their most drastic cuts behind them, and are now looking to make smaller cost-cutting changes moving forward.

 

Key Findings 

• More than half of companies (52 percent) have already made layoffs, up from 39 percent two months ago. However, the number of companies planning layoffs has fallen ten percentage points from 23 percent to 13 percent.
• Forty-two percent of companies have already put salary freezes into place, an increase from only 13 percent two months ago.
• Sixty-nine percent of companies have revised their merit increase budgets for 2009. The median increase at those companies has decreased from 3.5 percent to 1.5 percent.

While most companies are now settling in to what many believe will be a long recession that will not bottom out until the end of 2009 or into 2010, the good news is that, according to this report, it looks like the majority of the layoffs, salary and hiring freezes, and resetting of merit increase budgets have already been announced.

Let’s keep our fingers crossed.

We just published the results of our annual corporate issues survey. This year’s survey shows that executives and company leaders are somewhat optimistic that the US economy will rebound in 2009. Following the 2008 slowdown that has crippled economies around the world, over 70% of those surveyed expected the economy to begin its recovery sometime this year.  Only a quarter of the respondents thought the downturn would continue unabated into 2010.

 

The 2009 results represent feedback from more than 1,700 executives, line managers, and training and human resource leaders from a range of companies, industries, and countries. Since 2003, over 6,700 leaders have participated in this ongoing study. Here are some of the highlights from the press release:

 

“Participants in the most recent Blanchard survey were asked to describe their organization’s overall outlook in regards to the economy, training expenditures, expected cuts, and coping strategies.  In addition, the survey touched on corporate issues relating to organizational, HR, and management challenges. Responses focused on the most important aspects of future corporate growth and employee development, as well as how employees are prepared to deal with these and other hurdles. Some of the survey’s top responses include:

 

Tactics for Coping in a Down Economy

 

-         Invest in productivity and performance

-         Cut travel costs

-         Increase focus on branding and differentiation

 

2009 Top Organizational Challenges

 

-         Economic challenges

-         Competitive pressure

-         Growth and expansion

 

2009 Top Management Challenges

 

-         Managing change

-         Creating an engaged workforce

-         Reducing costs

 

Types of Training to be Offered in 2009

 

-         Leadership skills

-         Managerial/supervisory skills

-         Customer service skills

 

With the expectation that the economy will begin to recover within the next year, survey respondents also predict that their corporations will not make drastic cuts to training budgets. Fewer than 1 in 5 state that their organization plans to spend significantly less money on training in 2009, as compared to 2008. This desire to maintain an adequate level of training points to the identification of corporate development as a way to ride out the storm of economic turmoil, while also refining and realigning each organization’s own learning infrastructure.

 

While recent news has highlighted the downsizing of well-known companies, the Blanchard survey results show signs that corporations are looking inward to survive current conditions instead of resorting to the old playbook of cuts, cuts, and more cuts. Companies seeking to decrease costs along all facets of the organizational structure are not, the survey suggests, primarily targeting personnel and marketing. Only 29% of respondents listed personnel layoffs and cuts as ways their companies plan to cope with the down economy, while marketing cuts came in at 14%. More than 60% plan to invest in productivity and performance-maximizing strategies, while another 46% plan to focus on their corporate branding and differentiation.”

You can view the entire Blanchard 2009 Corporate Issues Survey findings at:

http://www.kenblanchard.com/img/pub/Blanchard_2009_Corporate_Issues_Survey.pdf

 

 

What would you do if you were faced with having to cut payroll costs by 10% to survive in today’s tough business environment?  Would you eliminate 10% of your workforce, or would you have everyone in the company take a 10% pay cut?  That’s the choice that many companies are facing today.

The Ken Blanchard Companies faced this question (as many other companies did) in the aftermath of the 9/11 attacks back in 2001.  In our case, we lost $1.5 million that month. To have any chance of ending the fiscal year in the black, the company would have to cut about $350,000 a month in expenses.

One of the leaders suggested that the staffing level be cut by at least 10 percent to stem the losses and help get the company get back in the black—a typical response in most companies. After all lot of discussion, we ended up deciding to have everybody take a salary cut, except for people making under $50,000. In the end, this strategy worked well for us.  We pulled together, managed costs, and after things bounced back, we were able to put together a string of some our best sales years.

It made me wonder why more companies don’t use the same strategy instead of resorting to layoffs.  In searching the web, I found that there are two camps beginning to develop.  One is suggesting that layoffs are the answer, while the other is recommending that pay cuts across the board are the better response.

Surprisingly, both camps point to the negative impact on turnover, morale, and productivity that the opposing choice will cause.

For example, in the layoff camp, proponents like economist Arnold Kling of George Mason University argue that when you cut pay for everyone across the board, you risk losing your best people first. If you are going to lose people, he argues, wouldn’t it be better to lose low performers instead of high performers? 

In this same camp, other economists like Yale’s Truman Bewley explain that “The advantage of layoffs over pay reduction was that they ‘get the misery out the door.’ “

In the other camp, you have organizations who believe that every job is worth saving, and who do not want to break up groups that have worked together for a long time and that have developed emotional bonds.  For these groups the impact of layoffs will only create a break in trust and leave the remaining members of the company with “survivor’s guilt.”  In this camp, people believe that spreading the sacrifice over the entire organization is the better option.

In the end it seems like the deciding factor may be the type of culture present in your organization. Some organizational cultures are more of the “we’re in this together” while others have developed more of a “Sorry, but business is business” type of attitude.

Which way would you decide if you had to choose?  Which camp best typifies your organization’s approach to cutting costs?