What’s UP (Weekly, Hot, Applicable Topic Summary - Unbiased Perspective)

Employee Morale During Corporate Downsizing

The focus of successful business leaders is to develop and maintain a motivated, energetic workforce that is capable of delivering desired business results. Simultaneously, business leaders must keep their finger on the pulse of the organization to accurately interpret and react to an ever-changing economic environment. In today’s turbulent economic climate, this challenge relies on a leader’s ability to maintain/improve team effectiveness and team productivity even though some members of the team have been released. This week’s blog addresses the difficulties of maintaining high employee morale during a period of company layoffs.

Innovative Downsizing Strategies

Once the downsizing/employee reduction decision has been made, major corporations have used one of three (or a combination thereof) means for reducing employee operating expenses. Sometimes, companies “outsource” a portion of their organization to another company that specializes in the operation being downsized. For example, instead of maintaining a marketing department or technology support team, a company may eliminate these roles internally and enter into a contract with another company to perform them externally. The primary advantage corporations realize from this activity is elimination of employee payroll expense, healthcare, and medical benefits. The amount paid to an outsourced contract firm is far less than employee payroll expense.

Another popular company strategy is to “offshore” a portion of the organization to a business entity in another country. This entity may be an affiliate of the corporation or a separate entity altogether. The advantage to the corporation is a significant reduction in employee operating expense by utilizing a workforce whose salary, healthcare, and medical expenses are far less than the expense incurred by using the American workforce. There is concern over standardization of employee compensation and employee engagement practices in other countries (however, that discussion falls in the category of corporate social behavior and ethical business practices – to be discussed in a future blog).

A third strategy is to merely reduce the existing workforce. While the U.S. Department of Labor quotes the unemployment rate at approximately 10%, some companies have reported layoffs and labor reductions well in excess of that percentage. Corporations have vigorously attempted to maintain high productivity levels with fewer employees. Some companies have even tried to do more with fewer employees. In the cases where a company reports success in this endeavor, they might not necessarily share information on employee morale - which may have been severely impacted.

Employment Fluctuations – A “Natural” Behavioral Pattern

Fluctuations in employee staffing is a natural evolution. Companies grow and increase their workforce. Companies shrink and reduce their workforce. Companies aggressively manage their workforce and “prune” out those who do not consistently meet the expectations of their role. Nonetheless, employee morale is also a natural behavior. The stress and anxiety level of those chosen to stay is arguably just as high as those chosen to be released. Most corporations utilize outplacement services to help workers through the layoff process. These services can offer assistance with filing unemployment insurance claims. Outplacement services can also provide guidance and assistance in “re-tooling” employees for other job opportunities.

Employees that have not been eliminated may deal with stressful issues such as: “why was this employee selected to stay and that employee was selected to go”; “will there be another layoff”; “will I be eliminated next”; “how much more work am I expected to deliver”; or “have I been given the appropriate training to carry an additional workload”. These are all “water cooler” and hallway discussions that inevitably decrease the amount of time employees are effective and efficient in completing their tasks. Leaders must play an integral role in reducing chaos and maintaining productivity during this time.

Open and Honest Communication

In order to maintain an effective work environment, leaders must confront the issue with integrity, honesty, and vision. Every company has goals, objectives, values, and a mission. In a time of layoffs, leadership must consistently re-iterate the corporate goal; the role employees play in achieving the corporate goal; and any reassurance possible that the remaining employees are a valued part of the corporation’s future. If the company’s leadership has consistently operated with a high degree of integrity and honesty in the eyes of their subordinates, the probability of successfully maintaining morale and productivity will be higher than if leadership is perceived as dishonest, untrustworthy, and unethical. Further, the leadership behavior and attitudes displayed when executing an employee reduction strategy is not only observed by the company’s employees. Corporate vendors, suppliers, competitors, and investors are also closely monitoring these activities. It is truly a difficult scenario.

More information on employee morale and productivity can be reviewed in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing).

Feedback to the bi-monthly blog entry is always welcome.

What’s UP (Weekly, Hot, Applicable Topic Summary - Unbiased Perspective)

What’s UP (Weekly, Hot, Applicable Topic Summary - Unbiased Perspective)


Corporate Leadership Development

Leadership development is the crux of long-term success of business operations. It focuses on identifying, evaluating, and improving the knowledge, skills, abilities, and competencies of those chosen to lead the organization. Leadership development may also “shape” one’s values and attitudes in conjunction with the organization’s values and attitudes. Finally, leadership development addresses one’s ability to lead others.

Across all industries, there are leadership development programs. There are leadership development programs in most major universities. In our technology-based society, there are also seminars, webcams, virtual classrooms, newsletters (and yes blogs) on leadership and leadership development. With so many avenues for leadership training and development, the question still remains why are there so many organizations with poor, unqualified leadership?

This week’s blog highlights the role of leadership development; those fortunate to be selected for leadership development; and the consequences of poor selection of leadership development candidates.

The Role of Leadership Development

First, and most important, I will address the age-old question: “Are leaders born or are leaders developed?” While there is significant and far reaching research that shows one may be born with viable leadership traits, I am firmly in the group that believes leaders are developed. Regardless of the leadership traits, skills, or innate patterns one demonstrates, you must still undergo an “experiential process” to develop, enhance, and perfect those skills. Retention of leadership concepts through training classes has been estimated in the range of 10-15%. There must be a comprehensive, “hands-on” approach of transferring knowledge and developing leadership skills.

Some researchers argue that leadership traits can be observed at childhood. Some children “naturally” take the lead and demonstrate leadership behaviors with peers in their social environment (i.e. school; extracurricular activities; other siblings, etc). However, demonstrating leadership skills at an early age may highlight those who are willing to follow just as much as highlighting those who are willing and able to lead. Part of human nature is to consider ideas and solutions from others when/if we do not have an idea or solution of our own.

Second, leadership development helps the organization fill the pipeline with capable, qualified leaders to ensure continuity of business operations. In a time of economic downturn, many companies look for ways to minimize expense. Unfortunately, one of the first areas to get cut is training and development. The short term effect is potential increased profitability from eliminating an expense. The long term effect is a potential organization in disarray without developed leaders in place to provide vision, clarity, and direction as the organization navigates through a highly competitive business environment. Finally, how can an organization successfully select and retain talent if they have no program for developing that talent (any volunteers for working in an organization that cannot or will not provide you with development and training opportunities)?

Selecting Leadership Development Candidates

The next crucial component in leadership development is determining who will be selected for leadership development. It is imperative the organization has a fair, un-biased employee performance appraisal process in place to accurately evaluate employee performance and potential leadership candidates. Multiple reports provided by the U.S. Equal Employment Opportunity Commission (EEOC) identify biased, unfair (and illegal hiring practices). Further, EEOC reports documented substantial financial penalties organizations have paid because of unfair employee promotion and employee salary practices. If the selection process for leadership development emulates these dysfunctional practices, the long term consequences will also result in financial disaster.

The cost of replacing incompetent, unqualified leaders is expensive. The organization must retrace its steps: re-state the leadership qualifications and the role it is trying to fill; re-identify and re-evaluate viable candidates; and re-select a leader. Without internal leadership development, the organization may seek external leaders. Though an external leader may have the competencies to be successful, will their values, attitudes, and beliefs align with the organization? The possible damage to organization morale, team effectiveness, and employee productivity may be impacted. Employees will lose trust and confidence in the organization if their existing leadership cannot display integrity and ability in selecting good talent. Finally, heightened vigilance for not adhering to government regulations will result in hefty fines and potential negative reaction from the investment community – which all organization’s proactively seek to avoid.

Implications for Aspiring Leaders

The role(s) of the leadership selection process and leadership development are not new. They have been in existence for decades. For those aspiring to become leaders in today’s business environment, the following tips will be beneficial:

• Invest time and effort in your individual development plan. Make sure you conduct an accurate self assessment of your strengths and weaknesses.
• Discuss your self assessment with your manger/leader and devise a plan to help improve your skills – together.
• Seek input on how to get selected (or considered for future selection) into the organization’s leadership development program. You will not become a leader within that organization if you are not included in this development. You may successfully deliver significant initiatives for the organization which will result in other types of rewards and recognition, but it will not result in a leadership role.
• Follow up with your manager/leader on a specified period of time to ensure you are adequately fulfilling the goals, objectives, and milestones in your individual development plan in conjunction with the organization’s goals, objectives, and milestones. If there is not alignment, your priorities will not translate into the desired results.

If you are meeting/exceeding the expectations of your role within the organization, and following these guidelines do not result in leadership development for you, you might not be a fit for that organization. More information on leadership integrity can be reviewed in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing).

Feedback to the bi-monthly blog en