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Demonstrate Loyalty Before You Demand It
C Mahalingam (Mali)
Thursday, August 7, 2008
All businesses are subject to cyclical changes; there is no escaping it. Honeymoons do not last forever; nor do depressions in the cycle. They come and go. In the last couple of months, we have all been reading about a slow down in the economic growth in the U.S. and the consequent reduction in IT spends fuelled by the subprime crisis. Its impact is being felt in the business results announced by many IT firms.

Prior to this, the depreciating dollar was not any helpful to the predominantly export-oriented IT industry either. It has its devastating impact on the margins of the companies. And as a result, all the hell breaks loose.

Bad business conditions take its inevitable toll on the peoples’ side of the business. Job losses in significant numbers hit the headlines of the newspapers every day. In the last three months alone we read about three or four IT majors showing the door to thousands of employees. And there are companies that are shedding jobs but are smart enough to do so without much of public glare! On the one hand, these companies are handing over pink slips to a significant chunk of employees. On the other, there are massive cancellations of offers issued to the campus pass-outs or repeated postponement of the joining dates shattering the hopes and dreams of these boys and girls.

Well, the point here is not why companies are doing this - issuing pink slips and canceling campus offer letters. This can be argued as a business necessity (and in the larger interest of one of the stakeholders, namely the share-holders). The issue I would like to focus on is how some of these companies interpret their behavior. Lacking the courage to admit what is obvious, i.e., a weakness in business performance, they put up masks and claim that they are ‘only getting rid of their poor performers.’ Poor performers must go, no arguments against it. That some of these companies are suddenly waking up and discovering that they have several hundred ‘poor performers’ does not seem to cut any ice, especially since they have been claiming year after year in their annual reports and in their jazzy presentations to the analysts that they have a ‘high performance culture’.

It is a matter of shame that the poor performance of the company (due to bad economy or whatever other reasons) is sought to be displaced and misrepresented as the poor performance of the people. The worse part is that ordering people to pack up and go home and branding them poor performers is like rubbing salt into the injury. In some sense, those that take such a public stance (that they are cleansing the system by getting rid of thousands of bad performers) lack moral courage. When leaders do not come clean on this, there is pretty little they can expect in terms of loyalty from their employees. What goes around comes around. You get what you sow.

It is pretty plain, simple, and straight forward. Acknowledge bad business conditions, admit poor performance of your business, and let the employees know that some tough business calls need to be made and some jobs will go away. Think of alternative ways of managing the issue, while keeping the job losses as the very last resort. Let me share two examples of exemplary handling of the bad business scenario and business performance. One was in an MNC with a large presence in India and the other was in the case of a small 250 people startup in a niche technology area.

Case 1, Large Multinational Company

The corporate headquarters sent a communication to all the employees acknowledging deteriorating business conditions and reinforced their commitment to avoid laying off employees as long and as much as feasible, while not ruling the same out. They offered four options to their employees to choose from, which would help the company to tide over the difficult times:

*Take a salary cut of ten percent
* Surrender 12 days of vacation accrued in the employee’s credit
* Take five percent salary cut and surrender six days of vacation; and
* I do not want to choose any of the above options due to personal conditions

Many employees chose one of the first three options while as may be expected anywhere, a handful of employees chose not to participate in the cost-cutting program by choosing the fourth option. The entire process was done with complete confidentiality so that no embarrassment was caused even to those that chose the fourth option.

Case 2, Small Indian IT Services Company

The Bangalore headquartered company stood out in sharing with their employees that the business performance was bad and deteriorating due to market conditions in spite of the great people they had, and that they were compelled to let some people go in the larger interest of the employees and customers they were serving. Individual employees who were let go got a letter signed by the CEO himself which stated: “you have been a great asset to the company and a good performer. But for the presently prevailing business conditions, we would not have let you go. And please rest assured that as soon as business conditions improve, we would love to have you come back and rejoin us. We will keep you informed of the business conditions and our performance from time to time.”

Now, what a sharp contrast is seen between the ways companies do things when it comes to dealing with people under difficult circumstances. Moral emptiness comes out glaring. People loyalty can never be one sided. It is neither a morally right move nor even a smart move business-wise. Some food for thought for leaders, particularly those that lack a proper understanding.

What can the leaders do, so that they can go to bed with a clear conscience? Well during the dot com bust not too long ago, some leaders showed us the way. Here are things they did:

Communicate, communicate, and communicate: They increased communication rather than shrunk it. Provided business updates and company specific financial updates. Created hope with opportunities for managing the difficult situation. They spread cool energy as much as possible rather than hot energy by presenting the possibilities and opportunities for saving costs and increasing efficiency.

Cutting down on corporate waste: They ruthlessly cut down on the corporate waste like senior executives using corporate jets, flying first and business class, staying in 7-star hotels and throwing parties at revolving restaurants.

Created options short of job losses: They looked at alternative ways of managing cost pressures and kept the job losses to nil or minimal except where it became completely inevitable.

Cared for soft-landing those laid off: They provided outplacement services through competent consulting firms, announced decent severance polices, arranged for career counseling sessions, and made the experience as little painful as it could be. How can the impacted employees manage a potential job loss? Again lessons from the dot com days are very useful.

Here is how many of those laid off managed the situation.
Keeping skills current: While being exceptionally good specialists, they remained good generalists in many other skills as well.

Keeping their spend under control: Living a life out of tune with the means, living out of the power of the plastic money, and such others were quickly reversed.

Keeping an open mind for opportunities: Accepting a job with a lesser salary in the present company or outside in a smaller company and with a not so very sexy job title became a reality.

Saving for the rainy days: Good old wisdom, but often forgotten. So, back to basics is helpful not when hit, but when the going is great.

As much as business cycles are a reality, the leadership in organizations will come under scrutiny for what they stand for. So will the flexibility and humility of the thinker-creators whose fortunes nosedive without notice. Nature, of course, is the nice healer provided that both the leaders and the led remain good-natured.

The author is the EVP & Chief People Officer, Symphony Services. He can be reached at mahalingam.c@symphonysv.com
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