To: ABC Company Executive Team; a brief prepared by Steve DiGioia to address the circumstances for which I am contracted.
For 3 consecutive quarters gross revenue has dramatically fallen, investor concerns increased and net profits all but evaporated. The Executive Team has implemented a series of temporary cost cutting measures to reduce certain expenditures, some examples are; suspension of free employee meals and offsite health club membership, placing a cap on expense account use and reducing some PTO (paid time off) benefits for a select group of employees.
I am tasked with recommending actions and implementing measures needed to roll-out a new program of reduced benefits. It is also my responsibility to inform employees of ABC Company these changes will be in place until future profitable market conditions allow a return to prior status. See below my recommendations.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
“As entire industries fall to the economic recession there appears to be significant emphasis placed on ensuring that organizations make good choices to not only manage the current condition but to look forward to what will be needed when the predicted ‘bounce’ in the economy occurs. This is where people management becomes critical as organizations make the difficult choice of downsizing or making other cuts to fit the current demands and to stay profitable.
They must ensure, however, that they retain the talent they require to not only sustain the business but also to be able to rebuild when the time comes”.[1]
Herein lays the challenge. For the last 3 quarters of fiscal year 2017 we have seen a gross revenue reduction of 27%, equating to over $572,000.00. During this time commission-able employees of ABC Company have seen a substantial reduction in pay; non-commission-able employees have had their hours cut; management has already reduced certain corporate expenditures while putting a hold on approved upgrades to employee equipment and planned training. Understandably, these are needed actions to sustain ABC Company through these difficult times.
ABC Company is proud there have been no lay-offs and they have retained their talent as recommended above. The long term viability of ABC Company is in the hands of loyal employees willing to sacrifice for the good of the company.
But how long do you believe this will last?
As reported by statista.com,
“Wages and salaries in the United States have increased over the last three decades. Between 1979 and 2010, the median weekly income of full time wage and salary workers grew from $241 to $747 U.S. dollars.”
ABC Company has grown along these same lines but that is no longer the case.
I have not been provided with documentation or an analysis of the market conditions that have led to the present financial condition nor has the leadership team been able to come to a consensus on a viable conclusion on why.
This leads me to believe the factors leading to the company’s downturn are more internal than external. Until ABC Company can identify the conditions leading to its present financial situation I do not recommend any future cuts that would directly affect the employees.
I understand this presents a direct conflict to my main stated task as the primary person responsible to roll-out the next wave of cost-cutting measures.
Let me explain.
According to a 2013 Gallup study[2],
seven out of 10 workers in the US say they aren’t fully engaged at work, meaning they aren’t working to their fullest potential. The resulting loss of productivity can cost companies between $450-$500 billion a year. Plus, according to research by the Dale Carnegie Institute[3], 80 percent of employees who aren’t happy with their supervisors claim that they’re disengaged and ultimately, less productive”.
As the leadership team of ABC Company you are at the helm of a great organization with a long tradition of excellence, community involvement and positive employee relations. I firmly believe that any further reduction of services that may directly touch employees, ie; cafeteria perks, health club memberships, transportation reimbursements, overall work hours, etc. will create the opposite reactions you seek.
At a time when we expect, and in some cases demand, the employees to perform to a higher degree to help the company, the planned reduction of services will have a much more detrimental effect; I dare say it will be a “train wreck“.
“Morale is often linked to issues such as motivation, trust, leadership, fairness, commitment, empowerment and more often than not it is implied that morale is something that organizations must pay significant attention to.
Morale happens when you create a trusting environment where supervisors communicate with agents in an honest, direct and inspiring way. Click To Tweet
By assuming that there is a common, taken for granted understanding of morale, organizations are taking steps to improve and maintain something which is at best ambiguous.
The desire to measure, maintain, and affect morale is attributed to an increase in profits, commitment, productivity, performance, and individual and group happiness suggested to accompany a higher level of morale within an organization. Recent studies have shown that the stock price of organizations with high morale may increase faster than organizations where morale is less positive. It has been suggested that employee ownership leads to higher levels of morale and employee commitment, while other studies suggest that there is a link between productivity and morale.[4]
During the 3 weeks I have spent researching the financial reports and meeting with the leadership team of ABC Company I have also interviewed numerous full and part time employees. My findings are that a major determining factor to this current downturn is the lack of productivity from disenfranchised employees.
They, as I, see senior management routinely delegate responsibilities to already overworked hourly employees. Employees work in less-than favorable conditions with antiquated equipment while asked to produce 10-12% over the previous year’s 5-7%.
Leadership travels to offsite retreats which are later promoted in employee newsletters while the ability of most employees to take their children to an amusement park or a movie is limited because of their reduced work hours.
So, what is the quickest method to stop the financial bleeding? Many believe its best to have reduced employee benefits to save money, I disagree.
It is highly recommended to suspend any further reduction of services to employees. During this time leadership of ABC Company must take an active role in standing shoulder-to-shoulder with their line employees and rebuild their trust. Understand that the future of the company will only be assured by management and non-management working together during these trying times.
The hard times must be felt by all. Nurture the good will that, in times past, led to the successful shoulders this company is built on.
Leadership must focus on revenue spent and lost on the executive perks, waste and their refusal to reinvest in the company. Less attention must be spent on areas that do not produce revenue or productivity.
If ABC Company ever expects to outsmart your competition and return to profitability it is advised that leadership develop a systematic program of easy to implement and highly visible actions focused on raising employee morale. These actions, implemented in earnest, will once again allow the employees of ABC Company to feel a sense of belonging and show how they are appreciated by leadership.
Happy, content & appreciated employees don’t happen by accident, nor does a successful business. Click To Tweet
These are my findings. I am available as needed to discuss further.
Sincerely,
Steve DiGioia
[1] Employee Morale During Times of Economic Downturn By Jonathan Yumol, April 2016
[2] “State of the American Workplace”, a 2013 Gallup study
[3] http://good.co
[4] Employee Morale During Times of Economic Downturn By Jonathan Yumol, April 2016
