Cut (the Waste) and Build (the Value):
Proactive Steps to Survive a Recession

By Jay Forte

Call it a slowdown or a recession, the impact is nearly the same - our businesses are challenged and we have become desperate to find ways to respond. We feel the urge to cut expenses, eliminate programs and benefits, and put customer and employee development on hold. Our knee-jerk reaction to this slowdown pressure encourages us to do all of the wrong things.

True, we must eliminate wasteful spending; it should never take a recession to drive this thinking. We must always assess the impact of our spending on performance to determine its return and effectiveness. However, in today’s intellectual environment, this review process is not strictly empirical. Today, we must also assess how recession decisions affect employee morale, engagement and performance. Sure, cutting a percentage of the 401(k) match or deleting a holiday gift program may cut expenses from the bottom line. But they may also have a more significant longer-term impact on profitability as employees disconnect from the organization.

Loyalty is the key to success in any type of economy - employee loyalty and customer loyalty. Employees must be loyal to create loyal customers. So, as recession-inspired actions cross your desk, be sure to evaluate them not only for their bottom line impact today, but also know their impact on your employees and their level of engagement for tomorrow.

We are in an intellectual economy; the industrial age is all but over in the U.S. as much of manufacturing moved offshore. We are left with the intellectual or service economy. The success of this economy now rests in the minds and hearts of our employees - those employees who choose to build strong relationships with customers, or not. Our success rests with those employees who are matched to their roles so that they are excited and engaged about making a difference in their work, or not. Our success rests with those employees who actively and innovatively think to drive new services, responses and opportunities for the business, or not. Value in our workplace is in the connectedness and performance of the employee; this value does not respond well to industrial age expense cutting as the solution to a recession or slowdown.

Today, the employee chooses his degree of commitment based on the things he experiences in the workplace. In effort to cut expenses, be aware of the impact on the employee, his attitude and therefore his engagement. A couple of dollar savings today may significantly affect the employee engagement and quality of workers in the future. To recession-proof your company in an intellectual age, consider this “cut (the waste) and build (the value)” strategy:

• Most businesses are service-based, which means employee-related expenses are the greatest expense captions on the Income Statement and therefore the first to be targeted for cuts. Review all employee-related expenses and assess those that do not make a significant difference to the employee; survey employees to determine the benefits that have greatest value. cut those that do not add value; build value by adding small high-impact benefits at a time when the rest of the business world is cutting. The positive emotional response to an “addition” at the time of cuts cannot be underestimated.

• Senior management should feel the effects of the first cuts. In an intellectual age, employee loyalty is critical. If employees see that all cuts are at their level and not first with those who are more significantly paid, they will not buy into the changes. This will be evident in the quality of their work. The goal is to make changes AND win employees into continued performance. cut senior manager perks and compensation; build rapport by sharing information about this first round of changes with all employees. Employee support will be significantly improved as they see all levels of the organization change in response to the challenges in the economy.

• Cut wasteful perks such as company meetings with no real agenda, or golf or social outings with limited (business) purpose. Instead, build by hosting a sales or company meeting with a clearly defined profit purpose; use a powerful performance speaker and create specific individual performance requirements from the meeting. Follow up with employees to implement changes. Cut the bar bill and the fancy meals; build performance by spending on speakers, coaches and tools to build performance, then hold employees accountable for using what they learn to implement new ways to drive results.

• Be honest with employees about difficult times; share the numbers so that employees understand the critical financial picture. Many times employees are willing to make cuts and changes when they see the reasons and are given the facts. Cut limited and hearsay communications; build rapport by being honest with employees and sharing the facts. Also, send a letter to employees’ homes to be sure accurate information is shared with families as well. Employee loyalty is affected by what spouses and partners feel about the organization as well.

The most significant way to recession-proof your business is to change your understanding of the roles of employees. As author Tom Peters says about today’s economy, “We are in a brawl without rules.” So cut the old definition of employee that requires them to just show up and do what they are told. Instead, build a powerful recession-proof workplace by allowing employees to own a larger portion of the results, ideas, policies, and services. Offer education, skill development and learning to expand employees’ perspectives and invite opportunity thinking. Encourage employees to take performance risks to win customers, invent efficiencies and see possibilities instead of limitations. Get more from each employee by igniting his performance by spending in areas that drive engagement.

The recession is here; recession-proof your business by remembering where value is - in your employees’ hearts and minds. Cutting expenses that impact this may save a dollar today but will cost you $10 next week. Be wise by understanding that today’s intellectual workplace does not respond in the same way our manufacturing or industrial age workplace did. To combat slowdowns in that era, expense cutting was key. Today, spending wisely, holding employees accountable for performance and building a more positive workplace is the key to surviving and thriving in a slowdown economy.

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