Crummy Factor #1: Budget Ax Severs Emotional Ties
Day-to-Day Impact: Loyalty goes by the wayside.
When employees are hired, they form psychological bonds with their organizations based on mutual feelings of loyalty, trust, fairness, and obligation. But during a downturn, when companies retreat into cost-cutting mode, the bonds break down.
“The relationship becomes very transactional,” says Cali Ressler, a former Best Buy HR manager who helped create the company’s popular Results-Only Work Environment (ROWE) program. Managers looking for layoff targets start to judge workers in terms of how much time they’re putting in at the office and what kind of immediate value they offer — metrics that might exclude perfectly qualified and productive employees.
The attitude among workers isn’t much better. “If the employee thinks he’s next on the chopping block, why should he put in more than just his time?” Ressler says. Forget about working relationships built on trust. When business is bad, work is reduced to a mere exchange of services.
See also: The Hidden Cost of Layoffs.
Crummy Factor #2: Bad News Trickles Down
Day-to-Day Impact: Middle managers get stuck playing bad cop.
The CEO may announce in an email that the company is going to conduct layoffs, but managers are the ones who have to look people in the eye and tell them their jobs have been cut. “The top tells the middle what to do to the bottom,” says NYU business professor Batia Wiesenfeld, essentially putting managers in the awkward position of undertaking tasks that they may not believe in — like cutting valuable employees or explaining why the company can’t pay out bonuses.
Thus in a downturn, managers often find themselves choosing between two scenarios: standing behind the organization and making decisions that leave employees feeling betrayed; or siding with direct reports and passively resisting the changes they’re being asked to implement.
See also: How to Manage Your Team in a Downturn (and Come Out on Top).
Crummy Factor #3: A Climate of Fear Sets In
Day-to-Day Impact: Coworkers get political.
Dwindling resources and shrinking headcounts rattle the psyches of all employees. “When scarcity is upon us, we fight for our share of the pie,” says executive coach and business psychologist Debra Condren. “It’s survival of the fittest.”
That’s exactly what happened at Deloitte Consulting in the run up to the 2001 recession, says a former operations consultant for the company’s L.A. office. “The culture got really ugly,” he says. With only 35 percent of the workforce assigned to consulting jobs, it’s no wonder the political jockeys came out. Consultants started brown-nosing higher-level partners with Dodgers tickets and offers to babysit. “One coworker actually started subscribing to a horse husbandry magazine because he knew one of the partners owned horses,” the consultant adds. In crummy times, the workplace becomes more about political maneuvering than actual work.
Crummy Factor #4: Bureaucracy Becomes Central
Day-to-Day Impact: The rulemakers make a grab for power.
Two departments rarely see their headcounts shrink in a downturn: accounting and legal. It’s easy to see why: Restructurings and mergers, both prevalent activities in downturns, require manpower with financial and legal expertise. Plus, a cost-cutting agenda practically ensures that all of the money-handlers will be needed to crunch the numbers. That’s great for those departments, but what about everyone else? Accounting rules and forms get more complicated, which means that even minor things like how an expense report is filled out can become pain points for managers and their teams. There are also more delays than usual when it’s time to draw up contracts: If money is tight, the lawyers are going to be especially dictatorial in determining whether or not the company is getting a good deal. “It’s a classic disease during a decline,” says Bob Sutton, a Stanford business professor and the author of The No Asshole Rule. “Any rulemonger — the checkers checking the checkers’ work — has an opportunity to grab more power.”
Crummy Factor #5: Innovation Comes to a Standstill
Day-to-Day Impact: Good ideas are ignored, and employees get resentful.
With accounting bureaucrats empowered, most managers can forget about pushing out new R&D projects, marketing campaigns, and innovation efforts. Although going aggressive can put a company in a better position to survive a slowdown, few firms can resist becoming risk-averse. Thus, mid-level leaders find themselves pulling back and focusing entirely on how to meet short-term financial goals. Not only can this strategy set a company back competitively, it also can demoralize top performers.
A mid-level employee at Restoration Hardware says slowed consumer spending has the company in lockdown mode. The staff used to be intense and driven, but motivation has deteriorated as top-level management becomes fixated on saving every penny instead of investing in better tools to manage inventory. “There are people like myself who are capable and willing to create the tools,” she says, “but it’s a combination of not having the financial resources or the desire for change.”
Ready to throw in the towel? Click over to our Crash Course, How to Manage Your Team in a Downturn, to learn how to turn things around.
