Times are still tough right now in America. Banks are trying to recover, the stock market is up and down, and businesses large and small are looking for capital that is not readily available. When these things happen, 99% of all companies “batten down the hatches”, cut costs, reduce payroll through layoffs, and do everything possible to just survive the ordeal.
And frankly, it’s hard to find fault with a policy that says, “When sales are slow, it’s time to reduce expenses”. On the surface it just makes sense to try and minimize losses during this period. This certainly makes short term sense. And American businesses today are run on a short-term view of the world. We stress quarterly profits, consistently reduced expenses, and tight control over all aspects of the budget. And this certainly includes the cost of developing people.
A small minority of companies take a longer term view and use these slow periods as a time of retrenchment and training. These companies tend to understand the cyclical nature of business, the cost of rehiring and retraining employees, the potential loss of long term revenue from dissatisfied customers, and all of the other hidden costs associated with ramping up the business again.
Let me illustrate with a brief example.
A company I once worked with saw a disturbing slow down in revenue. Top management sprung into action (or reaction) and immediately laid off 15% of their back-end delivery organization. At the same time, they used the money they were “saving” and hired additional sales people. Within 6 months, the executives were pleased that their investment had paid off, sales were on the upswing, and projections for future earnings were very encouraging.
There were, of course, some hurdles. Not only was the delivery organization down 15% in terms of staffing, but other employees had seen the layoffs as a harbinger of future trouble and left the company. And, when people leave your company voluntarily, it usually translates into losing your best people. After all, those are the people that always have options and places to go. So middle managers estimated that their ability to deliver services was now about 25% below capacity prior to the layoff. When the influx of orders arrived, they were unable to handle the volume, and both timeliness and quality suffered dramatically. Customers who had been promised both cost savings and efficient delivery received neither. Some orders were cancelled due to long delivery intervals. Others were delivered but the quality was so bad that the Sales and Customer Retention teams were forced to spend an inordinate amount of time trying to keep the customers happy. Many customers lost faith in the company’s ability to deliver its product and took future orders elsewhere, creating a downward spiral which nearly bankrupt the company.
This is a company that had saved money in the short term, but that same short term view caused lasting damage that far outweighed the savings.
Companies that take a longer term view of their business invest in their management team at all levels, during good times and bad. It’s fairly easy to invest dollars during good times, as profits easily cover the expenses. But it’s more important to invest in your employees during bad times. And this is especially true at the middle management level.
Training your middle managers has the potential for the highest payback in your organization. Properly trained middle managers produce excellent results that translate directly to your bottom line. Poorly trained middle managers create a disengaged workforce, where all employees are effectively doing as little as possible, or do what their manager tells them to without regard for what is right for themselves or the company. And, this lack of employee engagement might not be readily apparent to the executives at the top of the organization. Untrained managers tend to measure and manage what they can easily measure, not what they should manage and measure. Therefore, while productivity may not be where it once was or where the executive team thinks it should be, the lack of appropriate measurements will obscure the extent of the decline.
Forward thinking companies take full advantage of a temporary slowdown to prepare themselves for the inevitable upturn. Reviewing existing processes and procedures, training employees and mid-level managers, and developing a consistent plan of action across the organization is the best way to ensure that you are properly positioned when the economy rebounds.
At ECI Learning Systems LLC, we are dedicated to helping companies get the greatest return from their most valuable asset: their employees. We work with you to align 3 key organizational factors:
• Your Company Culture
• The Leadership Styles of your key managers
• The Expectations of your Employees
When these 3 factors are aligned, you create an energy in your company that improves productivity, reduces absenteeism, increases creativity, and positively impacts your bottom line. Contact ECI Learning Systems LLC today to get your free Workplace Evaluation.
Until next time.....
ECI Learning Systems, LLC