OB AND HUMAN RESOURCE MANAGEMENT: Study of the Economic slowdown on Employee morale

Submitted by: Shezad Trunkwala Submitted to: IIPM- Ahmadabad Batch:-SS/10-12/IIPM.

ACKNOWLEDGEMENT

I, Shezad Trunkwala student of IIPM Ahmadabad from batch IIPM/SS/10-12/take this opportunity with intellectual nourishment, professional help and encouragement from many quarters. I would like to express my gratitude to The pioneers in the field of marketing management who have shaped their understanding through their rich and varied contributions. Professors and seniors for providing the stimulus for making this Desk project successful A number of academics and practitioners for sharing their insight and experience with me. I heartily thank our faculty Prof. Robin Thomas for his substantial input and all IIPM faculties for guiding us with the best examples during lectures and consistently encouraged us to execute theories taught in the class into practical project report and we are obliged for his help to work on gathering and analyzing the data for research for our project. I would like to thank my institution, IIPM-Ahmadabad, for providing me this great opportunity and attempting to inculcate the traits needed to succeed. I am also thankful to various Industry experts and executives for sharing relevant information and valuable thoughts with me and helping me in writing the Desk project.

Index

Introduction Impact of sluggish economy on employees morale Findings 1) SHRMs Survey 2) Practices of crisis management Conclusion Recommendation 1) The three step approach to lift morale 2) Maintaining morale Bibliography

Introduction Many companies seek to shore up their bottom lines in a sagging economy by cutting budgets, hiring fewer employees and laying off others. Businesses that seek to protect finances during an economic slowdown may neglect employee morale. Yet happy, productive employees also affect the bottom line because they're making the products and providing the services that keep their employers in business. Job Security An economic downturn often leads to higher unemployment rates, which increase employees' concerns about losing their jobs. Employees also may be less productive if company cutbacks brought on by the sagging economy prevented them from getting pay raises or bonuses. An "Inc." magazine article titled "Economy Hurting Employee Morale" notes a survey found that companies could boost morale by offering incentives that help workers reduce their expenses. Such incentives could include an occasional four-day work week to help employees save money on gasoline and other transportation costs. Communication Employees' concerns about job security in a slow economy are only heightened by a lack of communication at the workplace. Economic downturns affect industries differently, and some industries are more resilient in downturns than others. The National Underwriter P&C website covers the property and casualty insurance industry and warns against neglecting employee morale in a sagging economy. The site recommends informing all employees about the economic state of the

company as well as workers' individual departments. Neglecting communication with employees during an economic slowdown may not only hamper morale, but it also may cause some of the best employees to look for jobs elsewhere. Layoffs Companies that lay off workers in a sagging economy usually have a strategy for how the layoffs are conducted. A New York Times article titled "The Survival of the Safest" says managers often seek to protect the crucial employees while carrying out mass layoffs of others. Their intention is to remove less essential employees from the workplace quickly so their complaints don't ruin morale. Yet the workers who remain may be friends with former co-workers who were laid off and are disgruntled. Therefore, those former employees' complaints could still hamper the morale of some of the remaining workers.

Impact of a Sluggish Economy on Employee Morale One of the many struggles facing business leaders today is the fact that the economic downturn has strongly impacted workplace morale. According to a recent survey by Accenture, 61 percent of managers surveyed said employee morale was low in their organization, and more than 25 percent of those who responded said they are taking steps to see what can be done to increase how employees feel about their jobs. Unfortunately, many organizations have not increased salaries in the past few years, or if they did give an increase, it was not a whole lot of money. Further, the Society for Human Resources Management (SHRM) reports that the average salary increase is less than 3 percent and that is projected to hold true for 2012. The only good news in all of this is that the number of companies freezing salaries was down for the second consecutive year in 2011and fortunately, this trend is expected to continue into 2012. As organizations struggle with balancing limited budgets and the need to hang on to critical talent, many are focusing their rewards on their star performers and those who would be most difficult to replace. This practice is focusing more attention on pay for performance since top-performers are an employers secret weapon. While pay for performance is an excellent way for an organization to maximize its salary increase pool, it can create serious employee-relations issues and have a negative impact on employee morale and engagement. Even average performers need some encouragement that what they do on a daily basis matters to the organization. The economy is putting a spotlight on what HR people have known

for a long time. If organizations cant continue to increase salaries like they did in the 1990s, the concept of total rewards takes on new meaning. Thinking about pay, benefits, flexibility, rewards, and recognition programs as all part of an employee engagement strategy begins to make sense. Will a top performer (or anyone for that matter) ever be satisfied with a 3 percent salary increase? Probably not, but it appears that for the next few years, we are stuck with limited budgets for increases. This creates challenges for managers who need to balance out smaller increases with other types of rewards and incentives. Some

organizations are using flexible work arrangements such as telecommuting, compressed work weeks, and flextime as ways to boost sagging morale. Others are subsidizing public transportation or providing free parking on site. No or lowcost incentive programs can work in the short term to keep morale up, but it is going to take more than an ice-cream social in the parking lot to get the attention of workers who havent had a salary increase in a couple of years. Keeping morale high and increasing employee engagement should be a focus for all of us who manage people. Focus on keeping employees aware of where they fit in your organization and rewarding them in any way you possibly can will make a differenceeven if you cant give the kind of salary increases youd like to give, or get yourself, for that matter!

Findings 1) SHRMs Poll

The Society for Human Resource Management (SHRM) conducted a poll in January 2009 to gauge workers perceptions of the job market and the impact of the economic downturn on employer benefits and personal financial behavior. Although one-half of workers felt that their jobs were not currently at risk, only about one-third felt that their jobs would not be at risk if the economy continued to decline over the next six months. Nearly one-third of workers are likely to begin a job search or intensify their job search when the economy and job market improve. The most frequently reported action employees have taken in response to the downturn in the economy was decreasing the use of credit cards and/or cancelling credit card accounts.

In light of widespread economic challenges, many organizations have trimmed expenses by decreasing spending on HR products and services.7 Despite this, the majority of workers feel that the response of the HR department in their organizations during the economic downturn has helped preserve benefits and staffing levels and promote communication. More than two-thirds of workers (69%) reported that their organizations HR department had been helpful (helpful or somewhat helpful) in preserving the overall benefits package for employees. More than one-half of employees reported that their HR department

had been helpful in reducing the likelihood of layoffs (59%), facilitating communication between management and employees (57%) and fostering confidence in the financial stability of the company (56%). By contrast, less than one-half of workers (46%) felt that their organizations HR department had been helpful in boosting employee morale.

2) Practices of crisis management Unfortunately, current economic downturn has taken by surprise to many companies whose executives are paralyzed while they are assuming an indolent attitude toward the employees who feel fear of being fired in a recessive context where opportunities to find a new job are really scarce. In such emotionally charged scenario, best practices in Talent Management should be articulate to provide from the mechanisms to alleviate uncertainty, create a strong sense of belonging to the organization in the remaining employees and a feeling of cohesiveness to face the vagaries of an evolving crisis.

In facing this dramatic perspective is convenient, relevant and necessary develop with a sense of urgency, with the conviction from Senior Management and decided support from CEO, practices of crisis management. Lets see how this initiative could be done:

These are the 5 critical skills for managers working in a crisis team:

a) Boldness: managers belonging to a crisis team should have the courage of recognizing the magnitude of managerial mistakes, misconceptions and bad decisions taken in the past and must assume diligently the initiative of taking opportunely the business decisions that should not be postponed, and at the same time, make sure that is possible conciliating the best concerns of the shareholders with the emotional integrity of the workforce.

b) Pro activity: To slow and mitigate the impact of a disruptive crisis over the organizational climate, financial performance and operational continuity, any manager who belongs to a crisis team should be a champion in applying his/her skills, knowledge, influence and experience in deploying of the relevant contingency plans to avoid harmful repercussions for the company in a long term perspective.

c) Effective and pragmatic communicator: In times of systemic crisis exaggerated and alarming media coverage may cause further damage, increase shareholders fears, nurture employees demoralization and create a negative opinion in the public opinion regarding the likelihood of a troubled company of experiencing a quick and safe recovery. In facing such a perspective is convenient, relevant and pertinent that a smart CEO take the decisions of appointing and empowering to those managers who will play the role of authorized spokesman to bring accurate, correct and opportune information to media and so mitigate the harmful effects of a crisis systemic, unexpected and/or disruptive.

d) Outstanding abilities of team working: When an unexpected crisis arises in such a way that the future viability of a company may be threatened is advisable that the managers who belong to a crisis team being commanded by their CEO, consider the pertinence and convenience of hiring immediately to expert consultants in PR and facilitators in Change management from a long term perspective to preserve the public image of this company and recover at the same time, employees morale to face

constructively to the different stages of this crisis and achieve so a positive organizational learning that ensures the profitability and competitiveness of this company for the years to come. In such pessimistic perspective Board of Directors and the Advisory Board must operate in tandem with Top managers with the aim to articulate the strategic framework to be applied systematically for the relevant plans of mitigation and contingency.

e) Strategic focus and leadership: The members of a crisis team should be influential managers, with a thorough knowledge in their functional disciplines, a strategic mindset strongly developed and the willingness of assuming the role of coaches to support to their coworkers in a initiative of recovery of their company, that will require from them a sense of purpose, full motivation, hard-work and adaptability to new and uncertain business perspectives.

Conclusion The recession continues to impact many industries, with restructurings and layoffs creating concern among employees. When profits are threatened, companies often view layoffs as a direct way to reduce costs, however, when efforts are focused solely on managing job cuts, remaining workers are left in limbo. Managers are also likely to become more directive, communicating decisions rather than involving their teams in decision-making processes. Organizations dont always recognize the impact this behavior has on remaining employees or anticipate the long-term negative effects. This creates a potential time bomb. Disenchanted employees will be the first to go when the economy starts to improve leaving the organization without the workers it was most keen to retain. Rarely does a company allocate sufficient budget to deal with employee morale issues. Yet there are tangible, cost-effective steps for organizations to take in moving employees away from feeling like victims or suffering survivor syndrome. These steps help employees feel more in control of their environment, so they are better able to understand why things have changed and how they can positively impact outcomes. The following three-stage approach will keep an organization on track, improve morale and promote productivity following workplace change. The steps help move employees up from the bottom of the change curve, where they feel disappointment and anger to feeling optimistic and happy. The important principle here is to maintain momentum, moving quickly to create a sense of urgency and progress.

Recommendations The following three-stage approach will keep an organization on track, improve morale and promote productivity following workplace change. The steps help move employees up from the bottom of the change curve, where they feel disappointment and anger to feeling optimistic and happy. The important principle here is to maintain momentum, moving quickly to create a sense of urgency and progress.

1) The three stage approach to lift morale Stage 1 - Listen Get feedback and ideas. Stage 2 - Communicate with solutions to business issues and employee concerns. Stage 3 - Recognize business and employee accomplishments and successes. Stage 1: Listen to employees Relationships between the organization and employees are fractured following a period of upheaval. And this situation wont improve on its own. Companies must take a proactive approach, beginning with listening to employees and getting their concerns out into the open. Leaders must acknowledge employee issues and be motivated to make improvements. Of vital importance is publicizing that employee feedback is encouraged and necessary and that the organization values their ideas. Decide the messages behind the listening activities deployed, and use them consistently, for example:

 We know staff morale is low and want your help. We need to save money and are looking for ideas on how to best achieve that. We want to add to our top line and need your feedback on opportunities to look at. Who does what in stage 1? Leaders should be visible, approachable and well-briefed, so that they can field employee questions. Interaction should be face-to-face whenever possible. Key messages should also be developed and be used as part of regular, ongoing communication activities. Managers need to believe in and support all listening activities. They should be briefed on the rationale and approach for these activities before they meet with employees, and asked for their ideas on how listening activities should be implemented. Listening activities Employee survey - This can encompass routinely scheduled company surveys or those designed expressly to communicate change. Employee discussion/focus groups - Include as many employees as possible. Managers with the right people skills (listening, questioning, for example) can be trained to run these groups. Management discussion groups - Led by a facilitator, these sessions are designed specifically as management briefings. Managers are guided through a process that will enable them to run employee discussion groups and to get feedback on specific topics. (This approach works best with cost saving or similar topics, rather than morale and trust issues.

Stage 2: Communicate your solutions to business issues and employee concerns The next stage is communication. The listening activities should have created lots of ideas and feedback. In this stage, it's important to build a shared understanding of your companys future, including substantive solutions to business issues and progress being made. Who does what in stage 2? Company leaders focus on addressing concerns expressed by employees in the listening stage and briefing managers on issues. The purpose is to create a shared understanding of the challenges and solutions facing the organization. Managers undertake specific efforts to communicate these outputs. They must create opportunities for dialogue and discussion, which leads to higher levels of employee engagement. Managers should also assure employees that they can expect honest and timely information. They should show their willingness to discuss anything on employees minds and help employees feel comfortable asking questions and sharing solutions. Employee advisory work groups should be set up to address a number of challenges most critical to the organization. Because this program thrives on momentum, these groups should have clear objectives and a limited shelf life. Potential activities must be honed down to focus only on their most important issues. A kick-off meeting can define the teams scope, role and timescales. Work groups should also encourage leaders to communicate progress through all communication channels.

Communication activities Public forums - Communication should take place in person through Town Hall and team meetings, site visits and brown bag lunches. Gossip is curtailed if managers become more transparent with performance data, such as sales figures and customer information. A highly visible and approachable leadership team shows that senior management cares about its workers. This alone serves to foster a more positive employee work environment. One-on-One dialogues - Discussions between managers and direct reports enhance personal communication and increase trust. Electronic media - Emails, web casts and other means of rapidly reaching out across boundaries should be employed to reinforce messages and speed the flow of information.

Stage 3: Recognize business and employee accomplishments and successes Focusing on quick wins and success stories and recognizing employee accomplishments will help keep morale as high as possible. No one is immune from becoming despondent and unproductive when they work in a doom and gloom environment. Negativity is often exacerbated outside the workplace by personal issues and a constant onslaught of negative news stories. Who does what in Stage 3? Leaders and managers seek out successes and recognize and thank employees for their contributions to the company and/or team initiatives. Every effort should be made to point out quick wins, for example, a project deadline met, a new order placed, or success in a key objective.

Recognition activities Formal initiatives - include established companywide recognition programs as well as rewards such as small bonuses and plaques. Informal gestures - include such things as a warm "thank you" for a job well done, or a congratulatory email or hand-written note. Public recognition - includes acknowledging an employee or work groups contributions in a meeting with their peers, or in company publications. Being recognized publicly often has the added bonus of encouraging and motivating peers to strive for similar successes.

2) Maintaining morale This three-stage approach can lift employees out of the bottom of the change curve, however ongoing adjustments are needed. Managers should be trained to enable a more empowered workplace, particularly when they no longer have easy access to traditional motivational tools such as promotions, bonuses and pay raises. Following are a series of useful, cost-effective tools to deploy in todays economic environment; managers should review the following activities: Autonomy - The freedom, independence and discretion employees have in carrying out their jobs. Skill and task variety - Employees activities to ensure that they are making best use of their different skills and abilities. Also to check that the extent to which their job involves whole and meaningful work so they have ownership over a whole process rather than small parts. Decision making - How the managers are making decisions. If they are very directive, ask them to look for opportunities where employees are can be consulted. Promote more self management, where employees have autonomy to make their own decisions. Career development - Team members have up-to-date career development plans which recognize the limited resources available but draw on cost effective activities such as job rotation, mentoring and coaching. Objectives - Individual objectives to check that employees are clear on their priorities and contribution to the organization.

Keeping employees motivated and engaged after restructurings and layoffs isnt easy. But the steps outlined here are simple, cost-effective ways to stay on the right road - and to retain the people you need once the job market picks up again.

Bibliography

1) http://articles.economictimes.indiatimes.com 2) SHRM online: www.shrm.org 3) SHRM Research: www.shrm.org/research 4) SHRM Survey findings: www.shrm.org/findings 5) Source: The Employee Point of View: The Economic Downturn (SHRM, 2009)

The Society for Human Resource Management (SHRM) is the worlds largest association