Carl Fey: How to Motivate Employees in Times of Crisis

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Carl Fey, a professor at the Institute of International Business at the Stockholm School of Economics, provides advice on how to benefit the company and keep employees motivated during a financial crisis.

In times of crisis it is easy for leaders to have their attention drawn to important external events including interaction with key customers and analysis of how to respond to the new situation. Though attention to external events is crucial, in times of crisis it is even more important than ever that some attention remains inside the company. Indeed, for employees to respond effectively to a crisis that will be challenging for all, it is critical that employees remain motivated. Unfortunately, however, motivation is difficult to maintain at high levels during a crisis. To assist with this problem, this article suggests ten strategies to help employees remain motivated in times of crisis.

1. Encourage employees to look for opportunities in negative events.

Undeniably, an event such as the current Russian economic crisis is an unfortunate event for most, but often such events also provide some positive opportunities. For example, the 1998 Russian financial crisis provided a chance for many local producers to become more cost competitive with foreign producers because exchange rate changes increased the cost of foreign imports. An important role of a leader in such times of crisis is to look for positive opportunities the crisis creates in the sea of negative events. Leaders should also energize employees to search for more opportunities resulting from the crisis. Furthermore, times of crises also can ease making internal changes. When all is going well, employees ask why do we need to change? In a crisis, employees more readily accept the need to change. Thus, a crisis can be a good time to make changes to internal management practices that improve the organization’s effectiveness.

2. Be open and provide employees with information.

Nothing makes humans feel more uncomfortable than the unknown. Even knowing for sure that everyone’s wages will be cut by 15% is normally easier to deal with than knowing that times are tough but not knowing what will happen. Thus, it is important for managers to share plans with employees and keep communication open. Information is an important source of energy that assists in motivating employees and in keeping their trust in times of crisis. Employees are much more ready to accept bad news if they feel that their leaders are open and honest with them in the process of arriving at and deciding on the bad news. Since in times of crisis decisions are often challenging and somewhat controversial, it is also good to share with employees as much information and logic that determined these plans. Better yet, managers can involve employees (or at least middle managers) in the decision process so that plans that are decided on become their plans not just your plan. Focus groups and town-hall meetings also assist in soliciting employee ideas. It is much easier for employees to accept an idea that they had a role in creating.

3. Clarify expectations for employees.

Leaders need to spend more effort in setting correct employee expectations in times of crisis.

It is important that leaders explain to employees their expectations for them. Such clarification takes away much uncertainty associated with the external turbulence. Unfortunately, in times of crisis significant changes often occur, and in the rush to focus on what is needed by the new external world, some managers forget to clarify for employees what is expected of them in this new situation.

4. Organize cost-saving competitions between departments or groups.

Most companies find it necessary to cut costs in times of crisis. One way to add some fun and motivation is to have cost-cutting competitions between departments or teams and give an award (or a percentage of the cut made) to the team that was able to cut costs the most. Often having such competitions between cross-functional teams organized just for the competition is an effective way to implement this strategy as cost-cutting is often best conducted with a holistic view of the organization.

5. Lead by example and be involved in the organization.

It is important that top managers lead by example. This means, for example, that they too cut costs when they ask others to. Even more importantly, top managers should remain motivated and convey a positive vision about the future of the company, thereby shielding employees from some uncertainty. Managers should be honest about current difficulties, but should show employees that the firm has a good future and that employees are an important part of that future. Continuing to mention exciting and positive long-term goals (e.g., IPO in 2012) and not only focusing on short-term negative events can also be useful for keeping spirits up. In times of crisis it is also important that leaders remain visible (as opposed to focusing only on analysis or external meetings) as employees need to see their leader more than ever. Often having a chance to share concerns and suggestions with their leader helps employees feel better, safer, and more comfortable. In short, company leaders must stay or become involved in their organizations in times of crisis. A case in point is that of New York mayor Rudolph Giuliani legendary move to go to the World Trade Center site shortly after the September 11th terrorist attack. His attempt stay visible and involved is widely suggested to have helped improve the crisis situation in that city. Also, managers should remember to extend expressions of concern for employees’ well being. Such actions go a long way in a meliorating a crisis. Giuliani, for example, attended many funerals despite all he had to do in the weeks following the September 11th tragedy.

«Crisis can be a good time to make changes to internal management practices that improve the organization’s effectiveness.»

6. Reward greatness

In times of crisis it is easy to focus only on cutting costs; however, it is also important to reward outstanding achievements at least through words and ideally also monetarily if that is part of the firm’s culture. Nothing is more demotivating than to have done something really great for the firm which in more normal times would defiantly be recognized and rewarded by the firm, but have nobody recognize it because this occurred during a crisis. It is also important to make sure to retain stellar employees during a crisis and to keep them motivated. If downsizing is needed, if possible be sure it is the underperformers who must leave the company first.

7. Crisis is an ideal time for training key employees.

During a crisis many companies have a decrease in sales and thus experience some overcapacity of personnel or slack time. Thus, this may be an ideal time to run a management development program for some key people in your organization as these people may have more time. Choosing a program that is modular and spread out over a longer period of time (e.g., two years) will also help retain key employees since most people are keen to complete a good training program which they start. When the crisis ends, a larger number of attractive job offers elsewhere will likely be available for key employees, but a desire to complete the training program will be one more reason to stay at the company. Providing some training on how to lead in times of crisis can be a particularly useful component early in such a program or even as an independent program. Attending such a program can increase a manager’s effectiveness and significantly decrease a manager’s stress.

8. Think outside the box.

Times of crisis can be good times to think creatively and to try nontraditional approaches that employees may actually really like. For example,if decreased sales have led to overcapacity of employees, you may try offering employees the chance to work 80% time for 80% pay. Some people prefer this opportunity to a standard 100% arrangement. You may also consider offering employees a chance to get several extra weeks of vacation during which you pay 30% of salary. Some companies have also cut backon the amount of office space they have to save money during the crisis and allowed employees the chance to work at home some of the time staying in contact via phone, computer, the web, etc.

9. Organize economical corporate team building events to create team spirit.

In a crisis it is easy to focus on only the business issues that must be decided and on cost cutting. In times of crisis, however, it is more important than ever that employees work well together as a team and thus from time to time it is useful to have an economical corporate team-building event. In times of crisis, employees are quite open to having low-cost versions of such events. Good informal information flow that such events facilitate is very beneficial at these times. The important issue is that people from throughout the company have a chance to interact together and improve teamwork. Indeed, it is important to realize that when people come to work, their need for friendship does not end and friendship motivates. Corporate team building events also have the benefit of strengthening the corporate spirit which is important to motivate employees to go the extra mile for the firm.

10. Follow periods of turbulence with periods of certainty.

Often in times of crisis layoffs are needed. In such crises, many companies initially incorrectly make the very minimal number of layoffs and then continue to layoff employees step by step for a period of time. Far better is initially to make a few more layoffs than are essential and then to have a period of no layoffs after that. Ideally, managers should try to guarantee that at least for some period of time (e.g., six months, or one year — whatever is possible) that there will not be more layoffs. This procedure can energize workers at a stressful time. If such a guaranteed is impossible, at least managers should try to organize the process such that a period of layoffs is followed by a period of no layoffs.

This introduction was published as part of the first issue of Talent Equity Newsletter "Leadership and Crisis".

To read all the other issues, please follow the link to TE Newsletters page.

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