You can think what you want about Trump’s tariffs. Is it a genius 4-D chess move or a colossal blunder based on a fundamental misunderstanding of economics?
Whatever your opinion, no one can deny that the tariffs have led to massive uncertainty in workplaces all over the world. Stock prices are cratering. Some countries are implementing counter-tariffs. Companies like Volkswagen have paused all exports to the US and announced layoffs.
On the one hand, this is absolutely a tough situation for many workplaces around the world in all kinds of industries. On the other hand, instability and uncertainty have become more the norm than the exception here in the 21st century where it feels like the business world lurches from one massive crisis to the next: The dot-com bust, the financial crisis, Covid and now this.
Even if the tariffs have now been postponed, are you willing to bet that there won’t come a new disruption to businesses again soon? Or maybe several in a row?
Which raises the question: How does a company best weather a storm?
And it’s clear what companies normally do: Slash costs and lay off staff. Until the crisis is over and the numbers look more reassuring, all talk of being a good workplace is put on hold and no jobs are safe.
The economic downturn we may be entering is setting off alarm bells and panicked responses in many leaders. If you can keep your head on straight, you have a unique chance to steer clear of three classic blunders that many of your competitors are planning to commit.
Blunder #1: “Times are tough, so we’re cutting back on all expenses on employees!”
You start by decimating the education budget and then you continue by cutting social events, the free coffee, and everything else that is seen as “superfluous luxuries.”
A Danish company decided to cancel the annual company Christmas party due to tough times. They saved about 100 bucks per employee, but it cost them dearly – very dearly – in hassle, negativity and trouble from employees who had been looking forward to the party. It is not difficult to calculate how much money the company saves by cancelling a party or the free coffee. But have you calculated what it might cost?
And if you are forced to save money, it does not have to be worse because it is cheaper. Accenture Denmark had a tough year in 2003 and was forced to rethink the annual company summer party. Normally it was a big affair held at some fancy restaurant or hotel. That was completely out of the question in 2003, so what could you do?
They held the party in the office instead and had the brilliant idea of having the company’s partners (i.e. co-owners) staff the bar. At first, the partners weren’t very keen on it. They were known more for their long work hours, dark suits, and business manners than for their abilities as party animals.
The party committee cornered a few senior partners and got their support, which convinced the others to give it a try. The party was a hit! Not only was it more fun than traditional parties, but suddenly the partners were available to all the employees who could just go up to the bar and order a gin and tonic from them. The employees loved it and, perhaps most surprisingly, the partners loved it. They had to be forced out of the bar when their shift was over!
So it can actually be an advantage to have to save money – as long as you put good ideas and creativity into making sure that it is still fun for your employees to go to work.
Crisis blunder #2: Layoffs
The other classic crisis blunder is mass layoffs. In the early 2000s Southwest Airlines was the third largest airline in the world and the most profitable. After September 11, 2001, the entire travel industry was extremely hard hit, and many airlines quickly laid off 20% of their staff.
This presented Southwest with a challenge. They had never had a mass layoff in the company’s history, and they would go to great lengths to avoid one. Top management held an emergency meeting at their headquarters in Dallas, where they drank buckets of coffee and analyzed potential cost-cutting plans. They first scrapped a number of growth plans, deliveries of new aircraft and a renovation of the headquarters. But they rejected any idea of mass layoffs.
Their then-CEO James F. Parker said, “We are willing to suffer damage, even to the stock price, to protect the jobs of our employees.” The result was that Southwest was the only airline in the industry to emerge from 2001 with a profit. At the same time, they created an unprecedented level of loyalty, motivation and job satisfaction among their employees, which continues to give them a competitive advantage.
Frederick Reicheld confirms this line of thinking in his book The Loyalty Effect, where he states, among other things, that mass layoffs “only deepen the crisis. They destroy employee trust, repel customers, and slow down growth.”
Southwest Airlines has since turned into a poor example. A capital fund bought a significant number of shares in the company, put their representatives on the board of directors and have now forced the company to do their first layoffs ever with totally predictable results: Employee engagement is gone and even many loyal customers are abandoning the airline.
In many companies, it’s a pure reflex: The crisis is coming, so they get rid of some people and cut back on everything that’s fun. It feels really good here and now because it gives the illusion of action, but in the long run it hurts the company’s competitiveness and the bottom line.
In this video I go over all the research on why layoffs actually make a company take longer to recover from a crisis.
Of course, sometimes a company is in such dire straits that layoffs are unavoidable. Then what do you do?
Hal Rosenbluth had made a provocative decision: As CEO of Rosenbluth International, a corporate travel agency employing 6.000 people, he decided that his company would put the employees first. Where other companies aim first to satisfy customers or investors, Rosenbluth made it their first priority to make their employees happy.
The results were fantastic. Record growth, record profits and, most importantly, customers raved about the service they got from Rosenbluth’s happy employees. Hal Rosenbluth explained the company’s approach in a book whose title elegantly sums up his philosophy: “Put The Customer Second – Put Your People First And Watch’em Kick Butt”.
A company’s commitment to its values is most thoroughly tested in adversity and Rosenbluth hit its share of adversity right after 9/11. Overnight, corporate travel was reduced to a fraction of its former level and it recovered more slowly than anyone predicted.
Rosenbluth tried everything in their power to avoid layoffs. They cut expenses. Staff took pay cuts and so did managers and executives. But in the end they had to face it: Layoffs were inevitable and they decided to fire 1.000 out their 6.000 employees. How do you handle this situation in a company that puts its people first?
In his book’s most moving chapter, an epilogue written after 9/11, Hal Rosenbluth explains that though layoffs don’t make employees happy, not doing the layoffs and then going bankrupt at a later date would have made even more people even more unhappy.
Hal Rosenbluth recounts how he wrote a letter to the organization explaining the decision and the thinking behind it in detail. The result was amazing: People who’d been laid off streamed into Hal’s office, many in tears, telling him they understood and thanking him for their time at the company.
Rosenbluth’s letter also contained a pledge: That those remaining at the company would do everything they could to bring the company back on track so they could rehire those who’d been laid off. Six months later, they’d hired back 500 out of the 1.000 and the company was solidly on its way to recovery.
Blunder #3: Giving up on employee happiness
Crisis blunder number 3 is very simple: Giving up. Many people believe that when a crisis hits a company, it becomes impossible to create job satisfaction.
Don’t fall into that trap. It’s precisely when a crisis hits that your company needs everyone to do their best, and studies document that happy employees are more innovative, efficient, loyal, and motivated. So cut back on everything else, but don’t cut back on employee happiness.
Of course it’s easier to be happy when everything is going swimmingly, but people can still be happy at work in a crisis. It takes determination and focus, but it can be done. Surprisingly, a crisis can make people happy at work, provided that it becomes a reason for people to focus and pull together – rather than an excuse to give up.
How do we create employee happiness in a crisis?
Economist Paul Romer has wisely said that “A crisis is a terrible thing to waste.” Companies that can maintain their focus on employee happiness in hard times can not only weather a storm better, they can come out of tough times stronger and with even higher levels of productivity, innovation and employee engagement.
I have previously written about some great examples – my favorite is absolutely how Xilinx used the dot-com crisis to increase their market share and employee loyalty.
Here are the three ways to do it.
1: Create and maintain positive workplace relationships
Good workplace relationships are the foundation of happiness at work and in hard times we need more than ever to feel that the people we work with see us, support us and care about us.
We know from a tremendous amount of research than when people feel alone and isolated, it really hurts their mental health, happiness and resilience.
So in hard times it is especially important for managers to take time to check in with their employees, listen to them, help them and generally show them that they are valued.
2: Appreciate employees for the great work they do
In tough times, individual employees and teams are still doing their best and working hard. Company results are down because of the latest global crisis, not because of a lack of effort from employees.
And managers should recognize those efforts and clearly
If employees experience that their hard work goes unnoticed and unappreciated because the company is not achieving its financial goals (due to the market, not due to their work), they quickly lose all motivation and pride in their work.
3: Communicate, communicate, communicate
Employees deserve to know exactly what’s going on – the good and the bad. Leadership
That’s exactly what they did at Xilinx when they were facing the company’s biggest crisis ever.
CEO Wim Roelandts organized meetings with his entire management staff and the managers below them as well. He knew, that when employees had questions, they wouldn’t come to him or the VPs, they would come to the managers closest to them, so it was important that they knew what was happening and remained optimistic.
This is not easy, as Wim readily admits. “I didn’t know any more than anybody else what was coming and so the tendency is to close your office door and don’t talk to anybody because if you talk with someone, they can ask questions that you don’t know the answers to.
But that’s actually the wrong thing to do, you have to get out there. You have to talk with people and even more important you have to force your management to get out and talk, talk to people, tell them when you don’t know but also tell them all the things you know and good friend to give people some hope that things will get better soon.”
Incidentally, these types of events also help maintain workplace relationships because they give people a chance to connect and talk openly.
The upshot
Every single company in the world is going to face tough times. And not just once but again and again.
And when that happens, most companies fall into crisis mode and abandon all attempts to be good workplaces.
This is a mistake. Not only does that hurt employees, research shows that it actually makes the company recover more slowly. Or not at all. Losing employee loyalty and innovation can absolutely kill a workplace.
The best workplaces on the other hand find a way to keep employees happy and productive in tough times and they can not only survive a crisis, they can emerge stronger, more profitable and with more loyal and engaged employees than before the crisis.
That’s what happened at Xilinx. I asked CEO Wim Roelandty what his proudest moment in the whole process was and he said that one day, about two years after the crisis when Xilinx was back on track, Wim was just arriving at the office when he was approached by a female employee who happened to arrive at the same time.
She told him this story:
“My husband got laid off and so yesterday evening we had a family meeting with the children. We had to tell them that their father had been laid off and that we had to do some savings and had to be very careful how we spend money, to make sure that we get through this tough time until dad finds a job again.”
One of my children asked ‘but mom what is going to happen if you get laid off’. and I was so proud to say that I work at Xilinx and Xilinx doesn’t lay off people.”
Your take
What do you think? How is your workplace handling the current uncertainty? Is there any attempt to keep employees happy and productive or has that been left by the wayside?
