Is a reduction-in-force the answer?

There is no doubt that the current economic environment may require unprecedented solutions for poor business performance. The national unemployment rate climbed to 8.1% in February, indicating that layoffs might be the "go to" solution for many companies experiencing declining business results, but this solution is far from unprecedented. Any seasoned business professional has likely weathered this storm multiple times in her career as either the orchestrator or the pink slip recipient.

What research has shown is that reductions-in-force have either no impact on performance or a negative impact on performance. A study by Bain and Company of S&P 500 firms during the 2001 downturn, showed that it took six to 18 months to realize savings from job cuts. What is more difficult to calculate is the impact from the knowledge drain, plunging employee morale, loss of trust in Senior Leadership and voluntary turnover that follows a reduction-in-force. While turnover may not feel like a probable threat in the current economic environment, statistics show that voluntary turnover increases after a reduction in force by as much as 30%. Old patterns would suggest that organizations will be recruiting for professionals with talent similar to those who were displaced within 18 months to two years. Upon evaluating the long-term, negative consequences associated with a reduction-in-force, company leaders might wonder what other possibilities exist.

We know this recession is different and requires a different solution. What if organizations included those people who are the organization - the employees - in the discussion for solutions? What if the employees were trusted with complete transparency and were asked for their ideas? That is precisely what happened at Beth Israel Deaconess Medical Center. The Boston Globe reports that CEO, Paul Levy, humbly asked the 8,000 health system employees for suggestions in the name of saving jobs. He immediately began receiving ideas at a rate of 100 per hour that included cutting hours and giving up pay increases.

People want to belong to organizations, they want some sense of control over their futures and they want to see their companies succeed. Organizations have an opportunity to enlist the support of employees as a united force, fostering creativity, generosity and loyalty.

Employee involvement during tough times is an idea supported by Darrell Rigsby, author of Moving Upward in a Downturn, Harvard Business Review. He suggests that difficult times should be used to strengthen the company through:
1)Building stakeholder relationships
2)Refocusing on the core business
3)Pruning the portfolio
4)Establishing a set of core values
5)Establishing a sustainable cost structure

There are times when a reduction-in-force might be the last option to save a faltering company. In that case, leaders must become transparent, accept responsibility, over communicate and express compassion and empathy. The leaders job following the cuts will be to support the healing of the organization and the transformation into hope and eventual health.

If you have already endured the reduction-in-force and are wondering what's next, read our follow-up blog Recovery After A Reduction-in-Force.

Unleashing the Collective Genius of Employees

The Stanford Graduate School of Business and human resources expert Hayagreeva Raoare are offering a complimentary webinar on March 30th entitled: "Unleashing the Collective Genius of Employees".

The webinar starts at 1pm EST. You can pre-register at the link below:
http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090320005162&newsLang=en

Unleashing the Collective Genius of Employees will feature frameworks for rethinking the way employers engage employees, and provide practical tools to enrich the employee experience in pursuit of higher levels of innovation and customer satisfaction.

By attending this webinar business leaders and human resource managers will:

• Understand the value of democratizing innovation
• Encounter a real-world example of an "innovation stock market" to test viability of ideas
• Discover the emotional triggers that drive an employee's will to innovate
• See the benefits of rewarding failure
• Learn to improve customers' experience
• Gauge a firm's ability to tap into employees' collective genius

Organizational Trust Requires Alignment

In previous blogs we have reviewed Stephen M.R. Covey's first two "waves of trust" - self-trust and relationship trust - derived from his ripple effect metaphor of trust. The model which is introduced in Covey's book, The Speed of Trust, suggests that trust is interdependent and flows from the inside out. Covey's third wave of trust is organizational trust. He suggests that the first two waves of trust might be in place, but if the systems and structures of the organization do not promote trust - it may diminish.

If an organization espouses a value for trust, but has highly bureaucratic and controlling systems, policies and processes; the employees will not experience trust. Dissonance is then created between who the organization says it is and what is actually experienced. Leaders rarely look for indicators of trust in their policies, systems, and processes; nor do they often consciously build trust there.

Covey suggests that organizations that are aligned between holding a value for trust and enabling it, will exhibit these behaviors:
1) Information is shared openly
2) Mistakes are tolerated and encouraged as a way of learning
3) The culture is innovative and creative
4) People are loyal to those who are absent
5) People talk straight and confront real issues
6) There is real communication and real collaboration
7) People share credit abundantly
8) There are few "meetings after meetings"
9) Transparency is a practiced value
10) People are candid and authentic
11) There is a high degree of accountability
12) There is a palpable vitality and energy - people can feel the positive momentum

From the above list we can see that trust is an imperative for a healthy organizational culture. Leadership Beyond Limits, LLC offers a tool that will help leaders measure the level of trust in their organization, as well as other values essential to a healthy, productive culture. The values posted on the wall could become a source of little more than amusement, if employees are experiencing something different day-to day.