How to Be a Good Boss in Tough Times
There were no names. Mike Schmitt (’84) described the sinking feeling of going around the room asking his senior managers for names of people whom they should lay off. His managers just looked at each other. They couldn’t come up with anyone.
Why? Because these weren’t ordinary times. Schmitt is the president of MWG Metalworking
Group, a Cincinnati-based manufacturer and designer of machined parts for original equipment
manufacturers. When orders dried up last July, he needed to cut his workforce of 180 by 50 positions
in order for the company to survive.
When others couldn’t decide, it fell to Schmitt to make the hard calls. “We were going to lose people,” he recalls, “and not just our talented people, but people who really like the company and who really wanted to stay here.”
It’s a tough time to be a boss. Mike Schmitt is just one business leader struggling with the aftershocks of the worst recession in half a century. Workers are anxious, fearful and distrustful. For good reason.
Since the beginning of the recession in
December 2007, U.S. employers have cut 7.2
million jobs. And while a few indicators show the
economy rising from the ashes, unemployment
remains near 10 percent. Additionally, workers face the stress of continuous cost-cutting and stagnant wages.
Not surprisingly, a recent Gallup Poll found a dramatic rise in the percentage of U.S. workers
who are personally concerned about losing their job—31 percent, up from 15 percent in 2008. Add
to that, rising worker anxiety about cuts in benefits
(46 percent) and possible pay cuts (32 percent).
What’s a boss to do? We’ve talked to experts and those on the front lines. Here we share their thoughts about what it means to be a good boss and how to meet both grim realities and anxious employees with grace and conviction.
One of the first things a boss should realize is that economic stressors can bring out the worst in the boss-worker relationship. Even in the best of times, power causes people to become more focused on themselves and less on others, and underlings to focus on those who wield power. When facing a time of threat, bosses tend to become even more aloof, isolating themselves from others, in order to work on solving the business problem. At the same time, employees tend to be hyper-focused on what the boss is doing, and the signals he or she is sending. Stanford Professor Robert I. Sutton, a leading author in the field of organizational behavior, refers to this tension as the “toxic tandem.”
Bosses need to rein in their emotions and strive for consistency, Professor Robert Bretz, Notre Dame’s Giovanini Professor of Management, stresses—especially in hard times.
“One of the things I teach my MBAs right from the start is you can be anxious and frenetic as a boss, you can be calm and quiet as a boss, you can be high energy, you can be low energy, you can be happy, you can be generally sad; but you have got to be consistent,” says Bretz. “People have to know what to expect from you. They have to know that a particular act has the same meaning today that it had yesterday.”
The more information people have, the better. Organizational research bears this up, says Bretz, who studies job search decisions and the linkages between individual and organizational effectiveness.
He says that a responsive boss knows to adjust perceptions so that employees won’t be dissatisfied
and feel betrayed by unmet expectations.
Business owner Schmitt holds monthly
meetings where he tries to be as honest and straightforward as he can with his employees.
He discusses the issues facing his business and the volume of projects they will need to bring in to support their workforce. If future layoffs are a possibility, he discusses the timeframe in which decisions will be made.
“I’ve had colleagues tell me not to do that—
that it breeds more talk on the shop floor, but I
think that’s a fallacy,” says Schmitt. “I think people
know what’s going on. They talk to our order
entry clerks and know what orders are coming in. I think you need to develop a true relationship that is based on trust. I had an employee come up
to me and say, ‘I really appreciate you telling me that. It’s not what I wanted to hear, but I was going
to close on a house next week and now I’m not.’”
NetApp, a data-storage company, was declared number one in Fortune magazine’s “100 Best
Companies to Work For” survey in January 2009. One month later, senior leadership determined that the company needed to lay off six percent of its workforce.
It was only the second layoff in the company’s history. The first occurred after the dot-com bubble burst in 2001; the current one brought on by the worldwide financial crisis.
In making difficult staff reduction decisions, Tom Mendoza (ND ‘73), NetApp vice chairman and Mendoza College benefactor, says his company tried to look at it strategically. “The number one question you have to ask yourself as a company in a tough time,” he says, “is ‘what are we going to stop doing?’ And then if we stop spending on that, that frees up cash and resources and people to focus on what are the big bets we are going to make to grow out of this.”
Most companies interviewed for this article have made layoff decisions based on business
objectives and operational goals as NetApp did. Professor Bretz says that other companies may make decisions based on seniority, contract stipulations (particularly in the case of unionized employees), or performance. He cautions that making layoff decisions based on performance can prove difficult because of weaknesses in performance evaluation systems. He points to a survey a few years back in which 50 percent of the respondents agreed with the statement, “My performance assessment is unfair.” And because these responses pre-date the recent recession, Bretz believes the dissatisfaction rates are likely even higher today.
When making its decision, NetApp’s Mendoza says his company also chose conservative forecasts
and deeper staff reductions, so they could assure
their workforce that this would be the only layoff—there wouldn’t be another a few months down the road.
Explains Mendoza, “If you’re afraid to make a real decision, and you make these mini-decisions,
the death of a thousand cuts scenario, your employee base is constantly looking around. They never know what’s next.”
Avoid Learned Helplessness
Honest, consistent behavior is essential, both for what it does to stabilize
the situation as well as helping
employees avoid a secondary pitfall that Bretz calls “learned helplessness.” When employees don’t know what to expect, he explains, they don’t do anything: “It’s the idea: ‘I’m going to keep my head down. I’m going to do enough so I don’t get yelled at, but I’m not
going to do so much that I stand out.’”
If the image that comes to mind is that of a sullen old dog, that’s right. Bretz explains that the psychological term “learned helplessness” grew out of a series of animal studies. In one,
researchers administered a mild shock to a dog to teach it to jump over a barrier. Then, they switched it up and began to shock the dog at random
intervals. “So, what happened is the dog doesn’t know why it is getting shocked, lays down on the ground and refuses to move,” says Bretz.
How much of a problem can this be? Consider this: In both 2007 and 2008, researchers from the
Center for Work-Life Policy, an independent research organization, interviewed 200 employees in the financial sector who had been identified
by their bosses as having “high potential.” In the follow-up survey, which was taken as the economic
downturn began, these workers reported a 12 percent
drop in engagement levels with their job, and more than 70 percent reported feeling paralyzed and demoralized by their stressful work situations. Bosses need to be concerned when high-performing employees are discouraged, because those valued performers may walk out the door for another job—a likely scenario during stressful times.
After 20 years in the human resources field, Peggy Taylor (SMC ’78) has come to believe that you
cannot “over-communicate” with employees. She is currently senior vice president, global human resources for the global orthopedic company Biomet, which employs 7,000.
“We’ve held town hall meetings, distributed newsletters from the CEO and e-mail updates, conducted focus groups and surveys,” she says. “Use as many channels as you can to help your team better understand your business objectives and any changes they are experiencing, which will help with reducing anxiety.”
Mendoza, vice chairman of NetApp, concurs: “When the economy really shook last November (2008), we put all our executives on a schedule to get out to the field, to get out to our different offices, and make sure we hosted many, many meetings—I would say average size of 40—such that people could ask as many questions as they wanted. By the way, it’s very important you invite any question, it doesn’t matter what.”
In addition to reassuring employees during
tough times, leaders should also pick up the phone and communicate proactively with clients, investors and other stakeholders, says Roxanne Martino (‘77), president and CEO of Aurora Investment Management, a Chicago-based firm which manages hedge funds. “What happens is your staff sees that you’re not afraid to address the issues (with clients), and it calms them down,” she says.
Repeat Your Message
Given how difficult it is for employees to absorb information when they are under stress, human resources executive Taylor says that it is essential that leaders find ways to reinforce company
In fact, anxiety creates cognitive distortion and can make it harder for people to concentrate and to process information, said Myra White, a clinical instructor at Harvard Medical School, quoted in a recent New York Times article. White went on to say that because anxious people can’t listen as well, they may need to have instructions repeated to them several times.
At Biomet, medical products lines have remained strong despite the recession. But Taylor says the company has had to close a couple of plants and a dental implant business during the last two years.
“We usually will hand out frequently asked questions so that employees have something in writing, on a piece of paper, so they can take it home and share it with their spouse or significant other,” Taylor adds. “Because that’s also a difficult conversation and giving them those tools is important.”
She says that information is too often held by a few senior leaders and not disseminated widely. After an announcement, employees will likely take their follow-up questions and worries to their immediate supervisors. To avoid misunderstanding, Taylor says, leaders should spend time with supervisors up front, letting them know what is happening and why, and providing talking points about the situation which they can share.
Michael Crant, a Notre Dame management professor who studies organizational behavior, says that employees interpret everything in light of job security when times are tight, and they fear
for their future, so sometimes employees are inferring something unintended from a conversation or a document. In the absence of clear, continuous communication, employees will think the worst.
Business owner Mike Schmitt recalls just such a situation, which took place back before the economy lost steam. Three years ago, his company enjoyed a record quarter. As a surprise reward, he bought a television set for every one of his workers and had them delivered to their plant. “I called a plant meeting to distribute the TVs,” Mike explains, “and the second I did, the rumors started that I sold the business, that it was being moved and shut down.”
When there is bad news to deliver, Bretz advises bosses to be empathetic and treat employees with respect. Not only is it the right thing to do, he adds, but there’s a financial incentive. Several studies have shown that people will steal less frequently
when they are treated kindly—even when the boss delivers news that employees dislike.
“We made it very clear to our employees that this (layoff) had nothing to do with bad people,” says Mendoza. “It has nothing to do with performance. It has
everything to do about the economy. And that’s very important from a psychological perspective
both to the people who are affected and the people who are staying. And we didn’t do any of that ‘rush them out of the office’ type of stuff. We had their bosses available to talk to them for as long as they wanted.”
Then again, how you treat people who leave may strongly influence how employees who stay with the company feel after the layoff. According
to Professor Bretz, the top reason workers cite for leaving a company is lack of respect by their supervisor.
To help their supervisors on the front lines deal with anxious employees, Biomet has strengthened training programs during the last year, says human resources executive Taylor. “We’ve been helping our supervisors to be able to discern the difference between just the normal anxiousness that we’re all experiencing in this time and when it’s more than that,” says Taylor.
When empathetic listening will not be enough, supervisors are encouraged to refer employees to a new employee assistance program, whereby employees have access to outside professional counselors who can help them sort through any number of issues such as financial stress,
family situations or dealing with elder care.
Although it takes time and puts a person at risk emotionally, Professor Bretz stresses that the best thing a boss can do to support anxious employees is to get to know each of them on a personal level. After making this effort, the boss will find it easier to be understanding and appreciative. “Somebody in your organization’s mother just died,” he says, “and if you’re the boss, you should know that.”
He also says research shows you cannot praise people enough. “You ask people what’s the one thing that’s most lacking from their job, it’s praise and recognition,” he says, adding that nonverbal
recognition is most memorable. “Just send a
handwritten note saying, ‘I appreciate what you do’,” he says.
For several years, Mendoza of NetApp has encouraged employees to send him e-mails when someone in the company puts in extra effort to help a customer or co-worker. He calls it “catching someone doing something right.” He picks up the phone and calls to congratulate the person—whether the employee is in San Jose or Tokyo—and he says the practice has become a strong part of the NetApp culture.
After 21 years managing hedge funds and having faced three drawdowns before the latest one in 2008, Roxanne Martino says she felt confident to charge her employees to take action, even during the bleakest moments during the credit crisis. “You have to have a contrarian management style that says, ‘Yes, this is very bad, but our job, today, is to still manage money. Let’s move that money,’” she says. “Opportunity is going to be there, and you don’t want to miss it.”
Today, Schmitt’s manufacturing business has gained some new contracts, and Schmitt says his company is looking to expand its higher precision manufacturing capabilities. He says when he gets together with former classmates, the conversation turns to what each is doing to essentially re-invent their company and adapt their operations to survive in a demanding new environment.
According to researchers, this forward-looking
vision is another key to re-assuring anxious
employees that they should dedicate their best
efforts to their employer.
“You beat yourself up over decisions that didn’t work out,” says Schmitt. “At the end of the day, you have to move beyond that. Because your true obligation now is to the 130 families left that
are depending on you. And you need to be a strong,
positive leader moving forward because the objective is to hire those other 50 people back. So you have to compartmentalize it. Because if you don’t, and you let the negative part overwhelm you, you’re not doing your job, you’re just not.”
AGAINST THE TIDE
Jim Sinegal, CEO of the retailer Costco, directs a company that is swimming against the downsizing current.
In April 2009, despite the loss of 27 percent of profits from the year before—in a business where 70 percent of costs are labor costs—Costco executives vowed to ride out the recession without layoffs. They tightened their belts wherever else they could—and have done so.
Sinegal, a member of Notre Dame’s Business Advisory
Council, says his company made the decision in keeping with their employee-friendly policies, such as offering
higher-than-average wages and health-care benefits to its retail workforce. With anxious employees feeling the effects of the downturn at every level, Sinegal says, the company wanted to earn the trust of those employees who might be thinking, “‘Sure, Costco tells us they are going to take care of us,’ but in the back of their minds, there always has to be that waiting to hear that shoe drop.”
In the retail sector where employee turnover can run up to 100 percent annually, Costco enjoys turnover rates of just 10 percent. “Our turnover was always very low; it’s gone even lower,” says Sinegal, whose company is seeing a rebound in store traffic and sales, particularly for food staples.
American workers seem to be paying attention to which companies are more likely to retain staff during tough times. According to Management Professor Mike Crant, recent surveys by the Society for Human Resource Management show that employee perceptions of job security were the most important driver of their level of job satisfaction, and this is a relatively new phenomenon.
Advice for the boss...
Findings from focus groups and virtual strategy sessions conducted with high-performing managers from the financial sector:
Your employees will find out the bad news on their own, so it is better that they hear it from you. Distribute talking points so that employees know how to respond to external questions.
Communication style is not “one size fits all.” Be authentic and genuine in how you communicate.
Reductions in force can be huge sources of turmoil for the survivors. However, RIFs that are done fairly can actually have a positive effect on employee engagement.
Opportunity for professional growth
is a huge motivator.
Rather than employees putting in face time in the office, have them meet with clients. It will keep both your clients and employees engaged.
Don’t shut out colleagues, friends and family. Reach out for support and help and encourage team “sharings.”
Source: Sustaining High Performance in Difficult Times, Center for Work-Life Policy, 2008.
—Mary Hamann is the editor of Notre Dame Business.