People Management

People Management

Cut, Yet Keep!Convincing employees to stay despite a bonus cut… ..

Key learnings:

• Prudence has it that even the most stable of organisations take preventive measures to face recession
• Not paying bonus is one such measure

With recession spreading to more and more countries, even the most stable of organisations will have to start taking anticipatory counter-measures. Of course, most of these measures will be in the form of monetary cuts since cost-cutting is taken as a synonym for survival! But if employees see that things are still OK with their company, and that recession will not hit their industry badly, the one thing that they will not graciously accept is being asked to forgo monetary rewards. In other words, they will still expect the annual or festival bonus.

During an economic downturn, smart organisations would rather not pay bonuses than cut training and recruiting budgets. “Once the economy gets back on track, the bonuses can be dished out. But reviving the functions of recruiting and training after a slump is not easy. Therefore, it is in the interest of every organisation to keep these functions going,” says an expert.

This stand may appear logical to business heads, but unfortunately employees suffer from a short-term vision. So how can organisations, which haven’t been hit hard by recession, convince employees that some counter-measures are imperative regardless of how they are doing during a downturn? This week’s mailer attempts to suggest a strategy on that.

Target talent
Not receiving the annual is the first sign of eventual doom, especially in small enterprises. This assumption, even in the worst of economic times can prompt employees to start looking out. One way to curb this is to form a nexus with top performers and employees with large influence circles, and share with them the real reason for holding back on bonus. Convincing this lot that the bonus cut is a temporary and preventive measure should help convey the message to the bottom-line in a more persuasive manner. Employees are likely to say, “So if they can go without the bonus for all they have done, so can we.” They may also think that if top performers are taking a bonus cut and not leaving, then things outside maybe pretty bad!

Being taken into confidence by the management makes the selected few feel special and they do a good job as spokespersons.

Do not compare
The typical approach to sharing the bad news is informing employees how badly the other industries have been hit, while they are still managing to sail. Then employees will ask, “If we are still posting profits then why penalise us for what others are experiencing?” From an employee’s perspective, if the annual bonus is a promised part of his package, then he should be receiving it whenever the organisation records profits.

Rhetorical speeches on how what is happening to others can also happen to us fall on deaf ears. It is not because the employees are unconcerned, only that they fail to appreciate the long-term measures. Therefore, an effective way to get them to see a bonus-cut as a preventive and temporary measure is to communicate the doom side of recession regularly and subtlety.

Newsletters that carry case studies of enterprises being hit by recession, managers referring to how a friend’s company had to layoff employees, C-level executives commenting on the recession in blogs and fewer organisation-sponsored social events should convey the message that all may not be well below the surface. While these efforts should prepare employees not to be shocked when a bonus cut is announced, the green balance sheet should keep them indoors!

Well-structured
The current volatility of the economy should serve as a warning to organisations structuring their bonus packages. In addition to promising realistic bonuses, a prudent move is to share bonuses on a biannual or quarterly basis. Employees who do not receive their Diwali bonus will still look forward to the quarter. Waiting an entire year in the hope of bonus is too long a wait for an employee, especially when the bonus is skipped.

Denying employees their bonus while the going is good is not easy. But with the economy ‘misbehaving’, even the best of businesses have to tread cautiously, and cutting bonuses is a step in that direction.

Ref: TheManageMentor

Job Preservation - People Management

Say no to lay-offs.... Job preservation is the need of the hour.

• · Lay-offs can levy a heavy emotional strain on those who stay, besides those who leave
  · Organisations have to weigh both the emotional and financial implications of executing a lay-off

The current economic turbulence has hit the worker population hard. The blow has come in many forms, the most severe being lay-offs. The laid-off workers are both anguished and desperate; they need jobs, irrespective of the industry. The fate of the economy is not known and the surge of predictions and assumptions is making the scene even more chaotic. If the economy turns for the better sooner than expected, then the lay-offs would have been premature. But if the downswing continues for a long time, employee morale will take a definite beating, creating an adverse impact on corporate performance.

Lay-offs in an economic downturn are inevitable. Organisations resort to lay-offs because they lack the ability to sustain the existing staff strength due to reasons that are beyond them. However, laying off workers is not the only solution to the recessionary crisis. While there are organisations that have their own compulsions to lay-off workers, there are others who have the option of reconsidering such a move. Experts suggest that lay-offs should be the last resort for any business, and therefore organisations must use all their strength and creativity to find alternative solutions.

Beyond lay-offs Voluntary retirement, salary cut, reduction in work days/hours and recruitment freezes are some of the other options that organisations can consider. Innovative alternatives to lay-offs can help companies restore worker faith that could help them emerge stronger post-downturn. However, there is also a belief that workers may run out of patience, especially the top 10 percent, as their work hours and salaries get a cut, and may leave for better opportunities in the competitor's yard. There are many assumptions about the way employees might behave in a downturn scenario, but there is a counter-argument for every assumption. While some say that organisations that opt for 'creative' lay-off measures are more likely to foster employee commitment, others argue that such commitment would be hard to come by. Another thought is that employees may be willing to take the salary cut so that their co-workers do not lose jobs.

Irrespective of what the assumptions are, experts strongly recommend that organisations refrain from axing their employees. Lay-offs, they believe, spread a very strong feeling of negativity among the worker fraternity and leads to a feeling of insecurity, frustration and depression. The emotional baggage that comes with lay-offs will be huge, requiring a healing process to sooth the nerves of those left behind. According to corporate psychologist Richard Shawn, only those organisations that have a plan to assuage the hurt feelings of people affected by the lay-off of their colleagues must resort to the harsh measure. Organisations that are ruthless and fail to address the emotional trauma that comes with lay-offs will regret it as its impact will be felt in the future when prospective employees do not want to be associated with the company. Hence, from a long-term perspective, lay-offs should be the last resort and if organisations have to implement lay-offs, they need to be extremely sensitive to the emotional needs of those affected.

Mathematics of lay-offs In addition to the emotional burden that lay-offs levy, there is a big financial strain that they bring with them. The cost of severance packages and outplacement of laid-off employees is huge. The unemployment insurance premium charges too have skyrocketed. Organisations often find themselves having two equally troubling options. In such a scenario, it is wise for them to make a choice that is humane.

It will also be worthwhile to analyse the impact of lay-offs on organisational performance. According to Shane Wayne, the CEO of MindHire.com, there is also an upside to lay-offs. In times of a downturn, lay-offs may help organisations take care of their performance issues by eliminating poor performers and sieving the staff for better. It would be a good bargain since these underperformers would only eat into organisational productivity which will be hurting more in a downturn, and therefore axing this layer of workers will benefit the organisation as a whole. The move may not create motivation and morale ripples.

To do, or not to do! While the question is difficult to answer, experts say that the choice is individual. While lay-offs may offer an opportunity in terms of performance issues getting solved, they surely should not be used as a quick-fix measure to business problems. Organisational leaders need to weigh all possibilities and make the decision in the larger interest of the staff, since it is the employees who are going to resurrect the organisation back to life finally.

Ref:TheManageMentor.