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Cutting to

WIN
6 STEPS FOR GETTING EMPLOYEES
ON YOUR SIDE DURING COST CUTS

BY DAVID GROSSMAN ABC, APR, Fellow PRSA


I
t was a classic corporate communicators’
nightmare. First, the CEO calls a meeting to
discuss the company’s decision to cut employee
benefits, even though the company – AOL –
had just posted its best earnings in a decade.
Then, that same CEO, Tim Armstrong, The message couldn’t have been worse.
blames the cuts on higher health care Naturally, it was followed by a deluge of bad press,
costs, in particular two AOLers who including a Slate column written by one of the
had “distressed” infants. Armstrong mothers of the “distressed” babies. That mother,
argues that the infants’ health care Deanna Fei, the wife of an AOL editor at the time,
crises required the company to pay said her daughter may not have survived without
$1 million each in insurance claims. the extreme medical intervention she received.

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Let’s set aside the fact that Armstong—who took
home $12 million in pay in 2012—felt the need to
announce a cut in employee benefits on the very
day that he touted the best quarterly earnings in years,”
Fei wrote in Slate. “For me and my husband—who have
been genuinely grateful for AOL’s benefits, which are
actually quite generous—the hardest thing to bear has
been the whiff of judgment
in Armstrong’s statement, as
Her reaction was typical of the if we selfishly gobbled up an
critiques that followed, and while
Armstrong later apologized for his obscenely large slice of the
comments, the damage was done.
You want to think Armstrong is just
an outlier. Yet the truth is that bad
collective health care pie."
communication on such a critically
important topic – cost cutting
measures – happens all the time.

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In another example, a top executive at Microsoft
recently announced deep layoffs with an incredibly
bad memo. He didn’t even announce the layoffs
until the ending paragraphs of a long-winded
corporate strategy note packed with jargon.
Stephen Elop, the executive VP of Microsoft’s devices and services business unit, was sharply criticized
in the press, not just for burying the lead but for beginning the 12,000-person layoff memo with an upbeat
“Hello there.” He squeezed in the point midway through the 11th paragraph with such corporate speak as:

We plan to right-size our We plan that this would result These decisions are
manufacturing operations in an estimated reduction difficult for the team,
to align to the new strategy of 12,500 factory direct and and we plan to support
and take advantage of professional employees departing members
integration opportunities... over the next year... with severance benefits...

Writing for CNBC, career coach Marie McIntyre, summed up much of the anger over the memo:
“Did Mr. Elop really believe that if he saved this disturbing news for the end, no one would notice?”

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So, how do corporate leaders and communicators
avoid such serious mistakes? To help you navigate
through similar times of change in your company, we
have 6 basic steps. These strategies will help ensure
you’re communicating your changes in the most
effective way. By doing so, you’ll win more of your
employees’ support, which is vital for inspiring and
engaging employees through challenging moments.

1. Use a Smart, 2. Build a Strong 3. Emotionally 4. Consider 5. Align All 6. Communicate


Fair Process Business Case Connect with Appearances Leaders on Specific Direction and
Employees the Message Actions for Employees

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THE BACKDROP
Before getting into our steps, let’s quickly review the cost-cutting climate in
corporations today. First, cost cutting is a major trend. Seventy-six percent of
respondents to a recent Deloitte Consulting survey said they expected their companies
to reduce costs over the next 24 months. However, an even more important point
from that survey of Fortune 1000 companies is this: cutting costs is no longer just
a strategy to help companies survive during tough times, as it was during the
recession. Now, budget cuts are considered a smart move for even the healthiest, most
successful, growth-focused companies. According to the Deloitte study, “Save to grow:
Deloitte’s third biennial cost survey,” the top three drivers for cost management are:

TO GAIN FOR REQUIRED TO ADDRESS


COMPETITIVE INVESTMENT IN “UNFAVORABLE
65% ADVANTAGE 54% GROWTH AREAS 35% COST POSITION”

Talking to employees about cost cuts is a difficult job for leaders and communicators, yet it’s vitally important
to get it right, especially now that it is such a big part of the way businesses function.

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WHY GETTING IT RIGHT MATTERS
While it’s clear that cost cutting can be an effective strategy, it’s also obvious
from the Deloitte study that poorly communicated budget cuts can have a
big impact on employee morale, as well as a company’s ultimate results.

According to the study, the biggest High engagement levels have proven to be leading
barrier to effective cost cutting was “lack indicators of financial performance and other positive
of understanding.” As a result, stronger business results by such diverse organizations as Gallup, the
communication was cited as the third most Hay Group, Aon Hewitt, Dale Carnegie, Modern Survey and
important “lesson learned” from companies others. For example, Towers Watson has studied the strong
that embarked on cost cutting over the 24 relationship between superior financial performance and
months they examined, behind implementing effective change management and communication for the
effective change management practices and past decade.
setting realistic goals and objectives.
In its 2011-2012 report, Towers Watson found that
At the same time, if your cuts are communicated organizations with highly effective communication and
well to employees, your chances of engaging change management practices are more than twice as
and retaining your workforce are far greater. likely to significantly outperform their less-effective peers.
A large body of research connects higher In its 2013-2014 report, Towers Watson found that the
employee engagement scores to important best performing companies are 3.5 times more likely to
outcomes, such as better talent retention, higher significantly outperform their industry peers through a deep
productivity levels, and increased bottom line. understanding and appreciation for employee culture.

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1.
Use a
Smart,
Fair Process
8
W
henever a company is considering cost cuts or
a restructuring, it’s important to engage employees
early on in the process. Research tells us that if we
involve employees early, we help build buy-in for
a company initiative and greatly increase the odds
that it will be well received. Employees can also help
spot ways to tackle unnecessary or wasteful costs.
It’s not easy for frontline managers to get workers’ It’s also smart to engage employee
support for cost cutting, but when they do, many “ambassadors” on your teams.
say they get valuable tips on measures they never Whether they’re part of a formal team
considered on their own. of ambassadors or simply some of your
most vocal company supporters, engage
them early. After explaining the challenges you face as a company and
how employees might help you articulate and even navigate change, these
ambassadors can work on the front lines to generate buy in. Building that
team of ambassadors over time can be an especially wise way of creating
1.

a wide base of employee fans to outspokenly defend and support the


company’s long-term vision and goals.
Use a Smart, Fair Process

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CASE Jim Goodnight, CEO of SAS—a leading business
$TUDY
analytics software vendor—is a prime example of a
leader who believes in engaging employees in the
company’s vision and mission, even in tough times.

In a recent article Goodnight told Crowley that his philosophy

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for Fast Company, then was simple, and it’s one he has stood
writer Mark C. by since the founding of SAS in 1976: #
Crowley detailed
how Goodnight
handled the Respect for
stresses of the
recession. In
the new ideas
January 2009, at a time when
companies around the globe were
that come out
slashing jobs in record numbers, of employee’s
Goodnight held a global webcast
and made a famous announcement brains. The philosophy has also paid off in
1.

to employees. He told them they business results. SAS ended 2009 with a
would not lose their jobs. As Crowley 2.2 percent increase in revenues over the
Use a Smart, Fair Process

described, Goodnight simply asked previous year. The company has actually
employees to be vigilant with seen consecutive revenue growth every
spending and help the firm endure year since its founding. The company
the impending economic storm. culture of respect for employees and
their contributions is renowned. In 2012,
SAS ranked No. 1 on the World’s Best
Multinational Workplaces list from
Great Places to Work.

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2.
Build a
Strong
Business Case

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T
he Grossman Group has worked with scores
of companies facing tough business cuts. The
best organizations take a similar approach to
cuts by explaining to employees that short-term
cuts now can secure the company’s long-term
success and a bright future. Boiled down, the
idea is this: Save now to grow later.
A restructuring initiative can also be framed as The Harvard Business Review highlighted one organization’s smart approach in
an opportunity to use resources more effectively, building its business case. HBR looked at Banner Health, one of the nation’s largest
freeing up time for employees to be creative and health systems, and its work in capturing nearly $70 million in savings between 2012
innovative and achieve even better outcomes. and mid-2013. According to HBR, Banner’s leadership held town halls and invited
people from across the system to collaborate on the cost reductions. “In making
the case for change to its 36,000 employees, Banner’s leadership described how cutting costs would enable the system
to invest in new initiatives,” HBR reported. Those plans included a network of community-based outpatient clinics
to help Banner “better coordinate, standardize, and integrate care delivery, eventually improving population health.”
2.
Build a Strong Business Case

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CASE One Fortune 500 client of ours created
$TUDY
a corporate productivity council to ensure
the company was forward-looking and
setting itself up nicely for future growth.

Some employees were part of the council.


They helped Created Established key They also built a productivity communication
set company productivity initiatives for the plan so the entire workforce could understand
productivity goals measurements company to undertake the company’s path forward
2.
Build a Strong Business Case

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3.
Emotionally
with
Connect
Employees

The Grossman Group — 312 N. May St. Suite 101 — Chicago, IL 60607 — p. 312.829.3252 — YourThoughtPartner.com 14
D
ifficult times prompt difficult questions from
employees, so it’s important to always be prepared
for them. The first questions will likely be:
“How am I affected? Will I lose my job?
What does this really mean for my future?”

To combat the anxieties, leaders should develop a At the same time, employees need to feel inspired and emotionally
clear vision for the company’s future and communicate connect with the company’s mission. One study from Booz & Co.
the direction clearly and regularly to employees emphasized this point: “Executives can accept cost cuts based
in inspirational ways. It’s about painting solely on a financial business case, but employees require
a picture that employees can buy into. an emotional case as well.” The study, entitled: “How
Consider scheduling several to Cut Costs – and Get your Employees to Help,”
3.

one-on-one talks with managers pointed to possible emotional arguments, such as:
and their teams and managers
and individual employees.
Emotionally Connect with Employees

In these more intimate


conversations, managers can
address employees’ concerns directly,
and reassure them that they are valued
and have a future with the company.
These meetings are also great Freeing up funds Streamlining Bringing in outside
opportunities for giving employees to fuel the creative processes to eliminate providers/contractors
better background on why changes process and realize barriers to doing what to allow employees
are happening and the role they can the company’s mission employees love to do to focus on what
play in strengthening the company. they do best

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CASE The Grossman Group worked with a hospital
$TUDY
group immediately following a merger. At the
time, the management team knew that employees
of the different groups needed to feel like valued
members of a new, combined company and
speak with “one voice” for the company.
3.
Emotionally Connect with Employees

Through a strategic internal communication


approach, the hospital identified messages
for a diverse set of employee groups to
ensure that they resonated.

Importantly, the listening sessions also unearthed many long-


standing issues that would have inhibited the merger’s success
if they weren’t addressed. This work also helped to ensure the
messages had credibility with the rest of the workforce. The
result was that each employee could better understand his
or her role in contributing to the organization’s success and
made employees feel genuinely part of a greater goal.

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4.
Consider
Appearances

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W
hen making tough announcements
regarding layoffs or a restructuring,
carefully consider the timing of
your announcement, and also think
about how employees might receive
contradictory messages. For instance,
don’t announce deep cuts around the
same time that you award top leaders
hefty bonuses, or after an expensive,
4.

perk-filled management meeting.


Consider Appearances

Even small decisions – such as cutting out


free coffee or sodas to save dollars – can make
employees worried, angry and disengaged.

It’s also important to consider the vehicles you


use to communicate changes. Massive email
announcements regarding substantial job cuts
are never a good idea; an all-employee meeting
allowing employees to raise questions is better,
followed by other, local meetings.

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CASE Employees at one company in a cold-weather
$TUDY climate received an email telling them that, as
a cost-saving measure, the thermostat in their
work areas would be turned down to 65 degrees.

Outraged that they would be expected


to deal with such an environment, the
employees worked all day in the office
dressed in coats and ear muffs—hoping
to get the message across to leadership
that they clearly weren’t happy with
the new policy.
4.
Consider Appearances

Some employees took another, more practical approach. They called local authorities
to find out if there were rules about proper workplace temperatures. In this township, the
temperature in work spaces was to be set at 72 degrees, even higher than the thermostat had
been set before. As a result, the clumsy attempt to save money became a losing proposition
for the company. Armed with the information about thermostat requirements, employees
forced the company to reverse their decision and spend even more on heating costs.

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5.
AlignAll
Leaders on the
Message
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S
etting a “tone from the top”
is always a great approach
for getting employees to
rally behind something you
want them to believe or do.
During times of change,
leaders at all levels need
to be speaking in a clear,
consistent way about
the organization’s
5.

new direction.
Align All Leaders on the Message

When different managers speak about the changes in different


ways, employees get confused and turned off. Before any changes
are announced to the entire workforce, management meetings can
help leadership understand the strategic direction of the company
and get their questions answered. From there, leaders can present
a unified front about the company’s goals and vision for the future.

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CASE A leading hospitality organization worked
$TUDY
with us after selling one of its business
segments, which represented about
30 percent of the total business. Surveys
at the time showed employees felt out of the
loop on the new direction of the company.

Employees reported frustration with Employees weren’t part


a lack of communication from top of the process and the
leaders regarding company changes. company didn’t target its ENGAGEMENT SCORES
5.

The organization’s track record for diverse employee audience,


communicating its strategy was poor many of whom didn’t speak
Align All Leaders on the Message

and leaders and employees knew it. English. To address those


concerns, a comprehensive
communication program to drive culture change
2X
was developed, helping leaders engage with
employees better. As a result, the company
achieved remarkable business results – the best
performance in its history. Annual employee
engagement scores showed double digit gains.
Clearly, setting the tone from the top was a BEFORE AFTER
game changer for the company as it worked to
transform its business climate and its results.

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6. Specific
Communicate
Direction and
Actions for Employees

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I
t’s easy to speak in platitudes and general terms
when you’re looking to inspire change inside an
organization. But the problem is those general
messages get lost amid all the other sources
of information flooding employees today.
6.
Communicate Specific Direction and Actions for Employees

The best way to get employees' It’s especially helpful to tell credible Helping employees feel a sense of
attention is to give them a simple stories about leaders and employees pride about being more efficient
action plan – the specific things they who’ve successfully navigated the with resources is also a great
need to do every day to help achieve changes. For example, stories of strategy. The message should
the outcomes you’re pushing for. leaders who’ve done smart things be clear: wiser use of resources
During a restructuring or in the midst of to cut costs or be more efficient allows the company to focus on
layoffs, getting that kind of direction is are helpful. In this way, employees what matters most, and gives the
critical for keeping employees focused have something to work toward organization – and its people – a
on their work. Otherwise, it’s easy to and a concrete idea for the kind of better shot at long-term success.
get lost and caught up in rumor chains. behaviors you’re looking to drive.

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CASE As we’ve pointed out, just asking employees
$TUDY
what they might do to help the organization cut
costs to stay competitive can be an extremely
powerful exercise. A Chicago catering company,
Tasty Catering, has received many accolades
for its work in this area.
6.
Communicate Specific Direction and Actions for Employees

CRITICAL NUMBERS Over a catered lunch on a weekly basis,


employees meet to go over the company’s
“critical numbers,” or the money spent
that week across all departments. Those
numbers are prominently displayed
for the entire staff to review and offer
suggestions for changes that could affect
the company’s bottom line. When profits
go up, employees also receive bonuses.
For this smart business practice, Tasty
Catering was honored by the organization
WorkforceChicago, which recognizes
exemplary employee business practices.

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FINAL THOUGHT$
Clearly, companies are in the midst of a cost-cutting
trend, and it will only continue. Regardless of the
health of a company, it’s now seen as smart business
practice to continually review spending and find new
and better ways to be more efficient. We all need to get
used to this new reality. Still, communicating change
in the right way has never been more important.
Without employees on
your side, change will be
THE BOTTOM LINE: much rockier and your
Since we all communicate whether
we want to or not, it’s in our best chances of success limited.
interest to do one thing: Get it right.

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Contact us Follow us Find us Email us
312.829.3252 @ThoughtPartner www.YourThoughtPartner.com Results@YourThoughtPartner.com
David Grossman, ABC, APR, Fellow PRSA
David helps leaders drive productivity and get the results they want through authentic and courageous
leadership and communication. He’s a sought-after speaker and advisor to Fortune 500 leaders,
and author of the highly-acclaimed books, You Can’t NOT Communicate: Proven Communication
Solutions That Power the Fortune 100, and its follow-up, You Can’t NOT Communicate 2.

David counsels leaders at top organizations to unleash the power of strategic internal
communication and drive performance. Clients include AOL, DuPont Pioneer, Eastman Chemical,
GlaxoSmithKline, HTC, Johnson & Johnson, Lockheed Martin, McDonald’s, Microsoft, Motel 6,
Nielsen, Symantec, and Tyco to name a few. He’s Founder and CEO of The Grossman Group,
an award-winning Chicago-based strategic leadership development and internal communications
consultancy, and teaches at Columbia University, NYC. David has been featured in:

Imagine having your own personalized business Available at www.YourThoughtPartner.com/Book


messages and stories in the palm of your hand.
Our leadercommunicator™ platform is now available
for the iPad or tablet, enabling leaders to have quick and
easy access to their core messages. Not unlike a political
platform, the award-winning leadercommunicator
platform is a customized tool for senior leaders to help
them develop and articulate strategy, drive change,
and engage employees to achieve business results.
It's never been easier to ensure leaders stay on track
with the messaging they want to drive.

p. 312.829.3252 ● e. Results@YourThoughtPartner.com ● www.YourThoughtPartner.com ● © The Grossman Group

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