The pressure is on – we are in an economic downturn. This in turn has placed increasing demand on organisations to react or respond in ways unprecedented since the 1990’s. Some industry sectors are more affected than others. However what prevails generally is a global uncertainty about where this is going. Are we in a recession, depression or are we on the path to recovery? Governments internationally have been pouring money into sectors that they see may stabilise the economy. Locally, businesses are focused on the bottom line, economic sustainability. Some are still focused on the ever important environmental challenges representing future sustainability. What many organisations have forgotten is the long term sustainability factor, the social risks, people! Cascio, a leading world authority on responsible restructuring and researcher of recessions over the last 20 years states ‘companies whose knee-jerk reaction is to lay off more than 10 percent of staff have historically been associated with poorer, long term share price performance’. So ignore the people (social) factor at corporate peril!
Fiscal scarcity can often lead to commitment phobia! So why get engaged when you don’t know where the $$$ are coming from? Simply, if you don’t, then you may not survive (or end up married for the long term!) Let’s think about it. In terms of organisational sustainability you have three aspects of a business that create sustainability – economic, environmental and social factors. What is the bottom dollar, return on investment, profit margins, share prices, future contracts, are all familiar catchcries at business meetings. What about the environmental factors? The predicted sector performance, competing demands, carbon footprints, climate change, consumer demands etc. Most organisations bury themselves with these concerns. Most forget the people aspects, seeing them as disposable commodities.
Imagine this picture – you have two widget making companies, both are in environments where they are low on future contracts. Their customers are all holding their breath waiting for a sign of recovery before committing to ordering more widgets.
Reacts and looks at the overheads, amount of contract workers, and decides to lay off 20% of its contracted and 5% of permanent workers. They hope to ride out the downturn by good old fiscal reality through curtailing the most expensive assets, people. When the strategy is announced, the reaction they receive from staff is one of disbelief, betrayal and outrage. Many of the employees have been with the company for many years and had actually believed the message sent by executives, that we are a community… a family even… we all pitch in and help. Employees feel that they have been used and abused. Most feel they were needed when the pressure was on, yet were just discarded when things are not going well.
Responds and looks at the overall situation, the management recognises that they have engaged in a contract with their staff. One that is on paper – an employment contract, one that is psychological – loyalty to their workers. Senior executives decide in the interests of their staff, they will each take a 5% pay cut. They also implement environmental strategies based on a prior survey that saves them 10% of their overheads. As part of the planning process they decide that there are other strategies they can employ if things turn for the worse, and prepare a contingency plan. This is communicated openly and regularly to all staff. Their priority is to ensure their people are employed and engaged. They see this as an ideal time to invest some money into training and development as they don’t usually have the time to release people due to operational pressures.
A curious circumstance happens overnight. Suddenly the overseas customer’s have realised that they can actually capitalise on another aspect of their business. However they will need more widgets to do this. They decide that it is a great business decision to lock their suppliers into reasonable contracts before their competitors discover the same opportunity. They approach both companies with the proposed option to supply widgets.
Company A had reacted to the other environmental and economic challenges, and as a consequence neglected their people. When the contract is offered, emergency meetings are called, as they do not have the full complement of staff required for widget production. They realise they need to organise mass recruiting and that will cost them dearly, before they would even see a return from the contract. Desperately they contact the former employees. They are informed by the majority of their former staff, that they are all ready employed at Company B as they had heard how staff were, and are, treated there.
Company B realised it had done the right thing and catered for the changing winds of opportunity. They had a full staff complement available and would not need to spend on recruitment, as many of Company A’s staff had submitted applications for vacant positions previously frozen. Company B’s staff respected that they had had been valued during the difficult time. In turn the employees felt empowered to raise initiatives, potentially saving on costs, and were prepared to support all the contractual obligations in the supply of widgets.
Company B knows the importance of being engaged with its employees. It recognises that although employment is not necessarily a marriage for life, it is still a commitment. That it is a contract of engagement through both the good and bad times. More importantly, that promoting employee engagement at all times, is critical to organisational sustainability for the long term viability of the organisation as a whole.