We’ve all heard it: “It’s time to tighten our belts. We need to reduce waste, cut costs and eliminate unnecessary spending.”
I remember how a former CEO used to announce every January that it was time for the “Austerity Program,” as a way to cut costs. Note: the Merriam Webster definition of austere/austerity: stern, monastic self-denial, grave, no scope for pleasure.
Most people rolled their eyes because they knew that cutting costs did not apply to him and by June, it was usually forgotten. As the VP of Human Resources, I was well aware of the cynicism and suggested that most people aren’t motivated by austerity and perhaps we could create a profit maximization program that could be more inspiring and achieve the same end result.
He looked at me like I had 2 heads.
Don’t get me wrong – I’m all for eliminating waste and creating efficiencies. But isn’t management’s job to manage the people and the processes? Aren’t managers supposed to be good stewards and accountable for making sure the right people are in the right jobs, delivering the right product or service?
Unfortunately, companies often use layoffs to reduce costs so there is a good quarterly bottom line. And in the end, there is usually a resentful workforce that is doing double duty and picking up the pieces of the work left behind by those laid off… with no additional pay, often working long hours and many without overtime pay… yet management gets a bonus for controlling costs.
Not only is this kind of approach uninspiring, it sucks the life-blood out of people.
I’m wondering: At this time of record stock prices and the lowest unemployment rate in 18 years, why all the hoopla when we’re faced with massive income inequality and very low employee engagement? Here’s a chilling quote from a December 2017 Gallup blog titled Dismal Employee Engagement Is a Sign of Global Mismanagement:
“According to our recent State of the Global Workplace report, 85% of employees are not engaged or actively disengaged at work. The economic consequences of this global “norm” are approximately $7 trillion in lost productivity. Eighteen percent are actively disengaged in their work and workplace, while 67% are “not engaged.” This latter group makes up the majority of the workforce — they are not your worst performers, but they are indifferent to your organization. They give you their time, but not their best effort nor their best ideas. They likely come to work wanting to make a difference — but nobody has ever asked them to use their strengths to make the organization better.”
It goes on to suggest 3 excruciatingly simple ways to correct the problem:
- Set expectations and hold people accountable
- Train managers on performance conversations
- Have a system to select the right managers.
It’s ironic because many leaders think they’re so smart by cutting costs but under these kinds of conditions, people leave to work for an organization that values their work and contribution. And it’s the people who have the highest skill set and/or the greatest potential who leave first. Then the company is left with marginal performers who are disgruntled and disengaged.
There Is A Better Way
I had a chance to hear David Abeles, CEO of TaylorMade Golf speak about how the company chose to deal with the recession of 2008. Instead of hunkering down and cutting costs, as the COO, Abeles and the leadership team chose to “double down and invest in technology and infrastructure,” trusting that they would be ahead of the competition when the recession eased up. By 2013 they had become the market leader and revenues had jumped from $600 million to $1.2 billion and Abeles moved on the be CEO of another company.
But by 2015 he was asked to return as CEO because the company was losing money and employee engagement was almost non-existent. During that 2 year time period, the focus had been on cost controls. He said the culture was low energy; priorities kept shifting; there was no clear direction or vision and no management accountability. Everybody was busy, but not doing anything related to a strategy or vision. (Does this sound familiar?)
Another transformation and reinvention was required.
Having a 5-pronged approach, there was a massive overhaul that relied on vision, creativity, innovation and courage in everything from technology to product design and distribution, their operating model and culture. Their mission stayed the same: to be the “best performance golf brand in the world” but how they achieved this was transformed to adapt to changing times.
NOTE: while these changes did reduce costs by over $100 million, they streamlined and introduced a revolutionary new product line that was priced significantly higher than previous models. Sales went through the roof and they improved profit margins by more than 10%.
In addition to increased sales, employee morale and engagement sky rocketed because their ideas were being heard and people at all levels were included in the process.
We all know that it’s only a matter of time before we face another recession. Hopefully it won’t be as devastating as 2008.
Are you prepared? Are your managers accountable now? Are they good stewards managing people, resources and processes?
How will you respond? Will you react by creating a culture of scarcity? Or will you have the courage to be proactive and create a new vision to prepare for the future?
Marty Stanley, CSP, was part of a leadership team many years ago that followed their leader who said: “We refuse to participate in this recession!” And for the next 18 months, Marty guided managers on how to streamline positions and processes, coach employees on performance and develop and enhance skills to raise the bar on leadership, customer service and technology. After the recession, the company was positioned for growth and expansion. That company is now Humana.