In tough economic times like these, you sure can’t afford to sit back and do nothing. But you don’t want to do these three things.
It’s easy to see how companies fall victim to these mistakes. You just don’t want it to be your company. Here’s what the three biggest are.
Mistake #1: They lay off employees too soon. It’s one of the toughest calls a company can make. Still many of your peers push the panic button when times get tight and make that call earlier than they should.
Yes, it’s an immediate way to cut costs dramatically.
But encourage other top execs to think of the big picture: When you institute a layoff, on average, companies turnover a third of their staff within 12 months.
So even if you only release 5% of your workforce (and you pick those that are most expendable), you’ll ultimately lose closer to a third. And you won’t have any say over who heads for the door.
Worse: You may very well lose some folks you’d hate to part ways with! Peak performers tend to be “Type A” personalities, who are uneasy about working in uncertain conditions and may well seek out more stable pastures.
Alternative: Pare back schedules in other ways. You could start by cutting out overtime, or finding people who’d prefer to shift to part-time hours. Even mandating a reduction in the workweek (and salaries accordingly) would be more palatable to employees than losing all 40 hours and the entire paycheck.
Mistake #2: They lower performance standards. Yes, it may be tougher to meet existing goals in the current economic climate. But lower the bar and you lower expectations – and don’t give your people enough credit. So no one’s going to rise to the challenge.
There are plenty of places you can lower the bar: bonus criteria, revenue targets, collection goals, etc. The thought being by making goals more attainable you’ll keep employees from getting discouraged or even burnt out.
Alternative: Work to cultivate a culture where people understand you’re all in this together. Goals aren’t always going to be met, especially in a recession. That’s critical to communicate. Letting people off the hook certainly isn’t going to motivate them to work any harder.
Of course, the opposite will have to hold true when things turn around. Yes, people may not be getting their bonuses this year. But when you have a boom time you’ll need to be prepared to pay 100% or in some exemplary circumstances maybe 125% of what they could earn.
Mistake #3: They retreat inward. There’s a big temptation to hunker down during a recession to regroup and ride out the storm. Companies look inward at what they can improve and shore up. A valiant undertaking. But at the same time, that robs you of the big picture perspective that can keep your company going in even the toughest times.
Alternative: Now’s the time when you want to reach out to trusted customers and suppliers with these questions:
- What are our greatest strengths as a company?
- What are our biggest weaknesses?
Their answers may be surprisingly different from what you think in-house.
Getting honest answers from impartial sources can be just the insight you need to further build on those strong points and either downplay or work to fix your vulnerabilities.
And that will position you to come out swinging no matter when recovery takes hold.
