A sputtering economy is testing employers' ability to enlist workers' goodwill at a time when it's needed more than ever. Smart employers are making sure their workers know they are valued.
CHICAGO — It’s quitting time on the kind of beautiful day that tempts office workers to skip out early, but not a cubicle is empty.
Pizza is served on paper plates, but work rather than food is the attraction. Periodically someone jumps up to ring a big copper bell. All eyes turn to a white board where the bell-ringer scribbles the latest win: a job lead, a referral, an interview. Then it’s back to the phones.
This weekly ritual began in February at recruiting firm Instant Technology LLC’s downtown office after January sales dipped 30 percent because of sluggish hiring. Managers organized the Tuesday Night Supper Club — part contest, part morale-booster and drum-up-more-business effort.
“We’re all in it together,” said Vice President Elizabeth DeFazio.
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A sputtering economy is testing employers’ ability to enlist workers’ goodwill at a time when it’s needed more than ever. At plants that no longer hum with overtime, managers search for ways to keep their best employees from leaving despite offering them fewer hours. At stores where traffic is down, supervisors mete out fewer shifts to salespeople while asking them to redouble their efforts to please customers. In offices, leaner staffing means extra work for those who remain.
If the downturn is deep and prolonged, challenges will intensify because employers can’t afford to lose people who will be hard to replace when the economy rebounds and baby boomers retire in even greater numbers.
“In the past I think it was much easier to come to the conclusion that staff is first to go and we can always hire them back,” said the American Management Association’s Manny Avramidis, senior vice president of global human resources. “It’s going to be extremely hard to find qualified people if organizations cut back the human resources they’ve developed.”
Even small layoffs increase voluntary turnover, studies show, and reducing hours or freezing salaries forces all but the most financially comfortable employees to look for better opportunities. Yet people will stick through hard times if they feel they were treated fairly by an organization that offers a promising long-term future.
The Container Store, a perennial on Fortune’s best-employer list, retained several dozen middle managers during belt-tightening in late 2000 — even after their jobs were eliminated — by demoting them temporarily and laying off lower-level employees instead.
“One was a visual sales trainer who traveled and taught how stores should look,” said John Thrailkill, vice president of stores. “She was asked to return to a store as a full-time salesperson. Most people would say that’s a huge demotion. We kept her salary intact. As good as she was, we knew she would be able to deliver a huge amount of productivity in a sales role.”
Today she’s a vice president, Thrailkill said, and several others are director-level executives.
Communication is key, he added. “We don’t disclose individual salaries, but everything else, including all our business planning, even though we’re a private company, we make open to employees, even [those who work] part-time.”
An example was the meetings scheduled with employees in early January to talk about staffing for the seasonal slowdown that began in February, when an annual sale ends. Jobs and hours are cut, and decisions are based on performance rather than tenure or pay rate.
“Managers can chicken out and say, ‘I’m being forced to do this,’ ” Thrailkill said. “That’s how you lose people at a time like this. You need to treat people honestly and fairly; it’s the most important thing you can do for them.”
“[This] is one of the most challenging environments for housewares that I’ve seen in my 17 years,” he added. “What we’ve been talking to our teams about is trying not to let that get in the way of the opportunities you have today.
“It’s about keeping your circle of control in mind, the individual walking in the store today, and meeting their needs better than yesterday.”
At Home Run Inn Inc., a family-owned company that operates pizzerias in the Chicago area and distributes frozen pizzas nationwide, Mark Carlson is feeling a pinch.
The company recently expanded its frozen-pizza plant, counting on sales growth to keep the more efficient facility busy. But skyrocketing commodity prices forced price increases and sales slowed.
“We’re kind of getting hit on all ends, with the price of wheat, the price of corn oil and the price of cheese,” said Carlson, vice president of operations for the 150-employee division. “Overall pizza consumption has begun to decline, so from a labor standpoint we have all this capacity and a decrease in sales. Most of our people are running a lot less overtime. Our hourly people are feeling probably the biggest crunch.”
Home Run Inn is planning a new line that it hopes will boost sales, but meanwhile Carlson revamped pay practices to reward loyalty and hard work.
“People who’ve been there, some as many as 30 years, we gave them [bigger] increases to offset the reduction in hours,” he said.
Yet it’s not always possible to avoid pay cuts or layoffs. At the start of the 2001 high-tech industry collapse, the former DiamondCluster International, now Diamond Management & Technology Consultants, furloughed nearly one-fifth of its approximately 1,100 consultants at 35 percent of salary. Six months later, stipends were cut to 25 percent and severance packages were offered.
Chairman Mel Bergstein’s goal was to bring everybody back. That didn’t happen, but some consultants did return and work at the Chicago-based company today after staying connected through a “furlough committee” of employees that met with Bergstein and kept them apprised.
Organizational experts say such committees keep people from leaving during restructurings and downsizings because they provide better information than the employee grapevine.
“Often peers don’t know more than their own anxieties,” said Denise Rousseau, H.J. Heinz II professor of organizational behavior at Carnegie Mellon University in Pittsburgh. “Giving people a richer flow of information helps them make sense of what’s happening. It’s about seeing there is a future path for you and that the actions being taken aren’t random or made without your interests at heart.”