How to best take advantage of your employees in a poor economy?

I have heard many people's anecdotal accounts of how the poor economy of the past 18-24 months has affected them from a job perspective; but I am particularly interested in this as we emerge from the other side.

I have heard how employers reduced the number of workers to substantially lower levels, seemingly to reduce overhead costs, trimming budgets while hopefully increasing potential profits. This seems like a sound idea, particularly for shareholders looking for strong returns.

I have also heard how those employees left remaining have had to pick up the slack, needing to work harder and smarter, sacrificing much needed downtime for the 60+ hour work week. Companies have reduced variable pay, through the elimination of bonus programs or benefits, and employees just accepted it because they needed the job.

In the long run, is this the best way to take advantage of your employees in a poor economy?

I would argue definitively not. One would assume companies, when facing head count reductions would choose to eliminate people who have had less-than-stellar performance, who are in redundant jobs etc. In practice, this is probably mostly true. So what happens when the economy starts to improve? If those left standing feel like they have been taken advantage of, they will hold it against their employer not thank their lucky stars that they had a job through a tough time.

Anecdotally, many large companies are seeing mass exodus of the staff that they kept through the recession. Employees are feeling like their employers, rather than showing them loyalty through this time, just took advantage of them. They're feeling under-paid, over-worked, and under-appreciated. Now that the grass is starting to look a little greener, many people are all-too-willing to look at new opportunities; they are feeling less afraid to put some feelers out and step to the other side.

In another six months, how do you think those shareholders are going to feel? Companies who reduced people, reduced pay, reduced benefits may have succeeded in reducing their economic losses; but doing so without regard for future retention plans means they are likely to lose the talent that they decided were worthy to keep at the start of the recession.

Companies need to have a longer term focus if they are going to thrive when the economy turns around. To do so, it is important:
1) To properly evaluate who should downsized, who should be kept, and who is too valuable to lose;
2) To make those who stay feel like a part of the new structure of the company, make them feel valued;
3) To compensate those who are too valuable to lose as well as (or better than) they would be compensated in a good market. This doesn’t always mean monetarily – often people are looking for recognition of their efforts.

These simple thoughts may help a company from losing its most valuable asset: it’s intellectual capital. You don’t want it falling into a competitor’s hands – in the long run, that’s far more expensive than the money you’ll save over the course of the recession.

Views: 966

Comment by Peter Lanc on July 5, 2010 at 12:27pm
Nice blog. My thoughts are that too many organizations use the downturn to do what they should have been doing all along. Shame on them and on the HR people who allow that to occur. Running a business in line with values should tell people something! That they do what is right all the time. The other thing is to develop the people all of the time otherwise you los ground and then you have the vicious cycle!. Thanks for airing an important point


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