|
Executive Interviews: Interview with Elaine Eisenman on Managing Downturn without Downsizing
June 2009
-
By Dr. Nagendra V Chowdary
Two countries stand out as having
the most developed and systematic
approach: Japan and Germany, which
both provide government subsidies
to companies who keep on workers
even though there’s little or no work
for them to do. Both have recently
extended their schemes.What is your
assessment of such a tacit support
from government? Do you see merit
in this approach or do you think this
would end up doing more damage (in
the long term) than the short-term
good?
This approach is highly problematic
for several reasons. First, when workers know that they have jobs
regardless of whether they have
useful work or any level of expected
contribution they frequently “retire in
place.” They begin to believe that they
are entitled to salary and benefits
merely for showing up, rather than
for anything more. Very quickly all
motivation dries up, and there can be
little hope of recovery from the fact
that there is continuing compensation
for lack of drive and motivation to
contribute. Then, when things
change, and work is required, there
will be anger and resistance that they
must actually do something to be paid
the same pay as they were paid for
doing nothing. This is a very slippery
slope and one that, once begun, is
difficult to get away from. A second
critical failing in this reasoning is the
impact on innovation as a basis for
climbing out of the turbulence.
Germany and Japan, in particular,
have far less entrepreneurial activity
than other developed economies.
This lack is reflective of highly
restrictive laws and cultures that
essentially punish risk-taking. For
companies to become innovative and
grow during downturns they must
have the ability to be nimble and
flexible in response to rapidly
changing market conditions.
Additionally, companies need to be
able to create new ways of addressing
both new and latent opportunities.
Being forced to keep an
underperforming and bloated
workforce prevents the company
from moving quickly to address the
needs of new markets. In contrast to
this approach, Schmidt-Hebbel, to be
discussed in the next question, offers
a far better strategy for recovery. OECD’s chief economist, Klaus
Schmidt-Hebbel argues forcefully that
governments should do more to
retrain workers and overhaul their
labor-market policies to ensure that
once recovery comes, new jobs are
created in sufficient numbers to
swiftly bring the jobless rate back down again. Should governments
adopt job-preservation-schemes or
should they concentrate more on jobcreation-
schemes? On the private
industry side, this challenge
translates into the fact that the most
short-term thinking is to cancel
training and recruitment of good
quality people externally. Should
companies stop hiring fresh talent?
Should they stop imparting the
crucial skills required for their
employees to become quality
employees?
This market downturn is different
than any that we have experienced in
our work lives. As a result, it is clear
that the nature and focus of business
will be fundamentally different than it
was before. This coming reality was
evident even before the markets
crashed as businesses struggled to
manage global teams that no longer
worked from central locations during
consistent time zones. That change,
coupled with the growth of
outsourcing and the introduction of
the millennial generation into the
workplace have required a
considerable rethinking about how
companies are led and grown. Under
those conditions alone, it would not
be possible to simply create static job
preservation schemes in which
employees are taught to simply think
and behave the same way they did in
the past. To be static in highly
dynamic environments is a sure road
to failure. When one overlays the impact of the
market crash on this scenario, it
becomes self-evident that the
companies who are able to thrive and
prosper in the future are those whose
invested in developing their work
forces to learn how to lead change;
how to manage and exploit
uncertainty as a basis for innovation;
how to become entrepreneurial in
thought and action so they can create
opportunities rather than merely find
opportunities; how to manage across
global matrices; and how to perform the new skill requirements – in short
all the new ways of thinking and
acting that are essential for success
when the downturn ends. As we
have seen in the growth of our
business at Babson Executive
Education, there is a very high return
on the investment of educating
people to think and behave
differently than they have done
before. In our classes we work with
participants to look at the growth
opportunities in their company based
on a clear assessment of competitors
that may not yet exist. We teach
executives how to proactively find
opportunities that will enable their
companies to grow and compete in
new markets. They return to their
companies well-versed in looking for
growth as a basis for future success.
Contrast this workforce with a
workforce that has simply been
allowed to continue doingwhatever it
has done before without any
investment in its growth and ability to
think about the world differently.
Once the downturn ends, this
workforce will be unable to adapt and
adjust to the new requirements of
competition and performance. The
company will still be locked into old
frameworks for success that will not
apply to a changed and more
competitive environment, and by
allowing this to occur, these
companies are insuring their own
failure and ultimate demise.
|
