Leading People In A Down Economy

Yes, the economy is slow to recover and things are tough all over.

But now the workforce cuts have largely been made and the question for business owners is – how do I do more with less?

The following are two major trends I’ve noted in working with small businesses (generally less than 200 employees) in the western United States:

EMPLOYEES HAVE TRANSFORMED THEIR MENTALITY…
A few years ago, the typical employee had an ‘entitlement’ mentality – they felt their employer was lucky to have him or her. Unhappy employees could (and did) pick up and leave for a better opportunity at the first sign of disappointment. The typical attitude was not that of a team player – but as an individual who is owed a promotion, salary increases and more attention. This was nowhere more apparent than the “Generation Y” workforce.

Now, things have changed completely on its axis. Everyone has worked with people and are friends with people who have lost their jobs with little hope for a similar compensation program in a future job. As a result, employees now feel privileged to have their job. Everyone knows that layoffs have been pervasive, and they could be the next to go. This will result – if managed properly – in employees who will complain less, work harder, and become more appreciative of the job they have.

BUT THEY ARE REALLY, REALLY UNHAPPY…

Employees are simply grateful to have a job right now, but that doesn’t mean they’re happy in their job. A survey from Adecco North America, released just this week, shows:

• Two-thirds (66 percent) of American workers are not currently satisfied with their compensation.
• 76 percent are not satisfied about future career growth opportunities at their company.
• Almost half (48 percent) of workers are not satisfied with the relationship they have with their boss and 59 percent saying they are not satisfied with the level of support they receive from their colleagues.

Workers are also critical of their organization’s brain trust, with 77 percent saying that they are not satisfied with the strategy and vision of their company and its leadership.

We’ve noticed the number of complaints from workers are way down. People are still being harassed and discriminated against, but they’re afraid to complain because of fear of job loss.

By the way, most large companies have laid off more employees than small companies; that’s because it’s easier to lay off workers at bigger businesses because employees at smaller companies typically perform multiple tasks.

That means when the economy starts kicking into gear, and there are more job opportunities, those employees are going to either leave or file major complaints.

WHAT TO DO?

Lead. The number one thing that business owners and managers can do is actually lead. You're a leader. You are on stage. You're not allowed to show frustration or weakness. Leaders lead - they say "here is the way I believe we need to go," and then go. This is the attitude you must take when managing change. Virtually any change breeds opportunity - the key is finding the opportunity and act on it.

Communicate. It is imperative that frequent and clear communication lead the way to your success. There is fear in the marketplace. Employees are wondering if you’re going to cut staff, perquisites, and their free coffee. Employees are heavily invested in the success of the business, and they have a right to know what you’re doing. Even saying, “I don’t know” is preferable to not communicating. And it’s more than a memo or company-wide e-mail; managers and supervisors must be empowered to candidly talk with their staffs as well.

Performance Management. If you're maximizing the people you have, you won't need so many people! You can get more done with fewer people by knowing what your people do best. Evaluate your talent. Carefully consider your need for every one of your employees. Most businesses are not maximizing each and every employee they have. There are techniques available to ensure talent maximization – so find and replicate your best performers.

In 2009, the business owner and leader who has the ability to honestly evaluate talent, performance and make the decisions necessary to sustain the business not just in the short term, but for the long term, is the leader who will be highly successful both this year and beyond.

Nevada Wage & Hour Lawsuits

We've been warning employers for several months that wage & hour compliance issues will result in numerous lawsuits this year - especially in Nevada.

It's starting to happen.

Wells Fargo & AutoZone have been sued (class-action status is currently pending) for mis-classifying employees.

With Wells Fargo, business banking specialists were allegedly mis-classified as exempt (from overtime, meal and rest breaks) when they were required to be 'on-call' on certain evenings.

In AutoZone's case, Assistant Managers were not compensated for working overtime (this is a case very reminiscent of the Long's Drugstore case in 2004).

The federal government is taking Wage & Hour violations seriously: Labor Secretary Hilda Solis recently announced plans to add 250 field investigators, increasing staff by 33%. The DOL believes 7 out of 10 businesses are not in compliance with Wage & Hour laws.

Garry Mathiason of Littler recently wrote:

No employment-law trend is more certain, universal or important than the total wage-and-hour compliance initiative and stopping the epidemic of wage-and-hour class-action (lawsuits)...

More ominous and prescient are these words from Mathiason (and, I believe, completely true):

With thousands of plaintiffs' attorneys examining every aspect of the payroll process, employers must expect maximum scrutiny..."Every employee who is terminated or demoted, or who experiences an unpleasant workplace event, is encouraged by Internet and television advertising to seek the advice of counsel. In almost every intake interview, the attorney's questioning turns to wage-and-hour issues in an attempt to find additional claims. Inspired by the prospect of turning a small individual claim into a multimillion-dollar class-action, the organization's wage-and-hour compliance goes under the microscope."

Thanks to Las Vegas Sun.

Age Discrimination And Pay Reductions

Age discrimination lawsuits are increasing rapidly. The trend of terminated employees contemplating and filing lawsuits are also on the increase.

If you want to terminate an employee for poor performance, then do so. But don't use a layoff as an excuse. And if you replace a terminated employee with a younger one, make sure that you're doing so for proper business reasons only.

Case in point: George Carras, who was in his early 60s, worked as the chief financial officer for a shoe importing business. When management said it was terminating him because of financial pressures, he offered to take a steep cut in pay, down to $60,000. The company rejected his offer and laid him off.

Then Carras found out that his younger replacement was making more than $60,000. When he sued for age discrimination, he told the court it was obvious that economics really hadn’t been the true reason for his termination. The trial court dismissed his case, but Carras appealed.

Now the 2nd Circuit Court of Appeals has reinstated the lawsuit and Carras will get a chance to persuade a jury that his former employer fired him because of his age and not because the company was having financial troubles. (Carras v. MGS 728 Lex, No. 07-4480, 2nd Cir., 2008)

Thanks to Labor Center Blog and Business Management Daily.

Leading During Difficult Times, Part 3

In previous posts, we've discussed leading during difficult times. It's about making hard decisions and communicating them effectively.

Some new studies are now showing issues that leaders and HR departments should immediately address.

Employees across the country reportedly spend an average of nearly three hours a day worrying about their job security, according to a telephone survey of approximately 1,000 U.S. workers commissioned by the firm Lynn Taylor Consulting.

Bosses might be exacerbating employees’ fear by one simple action—staying behind closed doors; 76 percent of employees responding to this survey said that when faced with this scenario unexpectedly, it triggers thoughts of being laid off.

Now, it's about effectively managing those who stay after reductions in force. The concept that 'we must do more with less' needs to have a process in place to make sure it happens.

To Severance Or Not?

When laying off, or even terminating employees, the inevitable thought and process of offering a severance package comes up. Most businesses - especially small businesses, don't have an existing written policy on severance packages. Therefore, a severance offer is not completely thought through.

I've had two clients in the last few weeks who needed to layoff employees and they had no existing policy. Suddenly, an issue which requires a great deal of thought had to be made immediately. There was even an article in the Wall Street Journal which addressed this.

Some thoughts on offering severance:

1. Get a policy in writing now. This helps greatly with consistency and avoids any claim of favoritism or discrimination. Even if you don't contemplate layoffs, it's still an important item to have in place.
2. When you offer a severance package for laid off employees, be consistent. An example would be two weeks of pay for each completed year of service. You can't show better programs for more favorite employees.
3. Every employment attorney I've worked with says the same thing - never offer money without getting a 'hold harmless' agreement signed by that employee. Consult your labor attorney - it's worth the cost.
4. Consider paying medical insurance for several months. COBRA now requires employers to pay 65% of existing benefits; but offering to pay all of the premiums for longer is a small cost but shows you - the employer - are trying to do the right thing.
5. If you're terminating an 'older worker' (someone over the age of 40), make sure the agreement contains provision required by the Older Workers Benefit Protection Act.

When You Lay Off The Wrong People

So your business needs to cut expenses, and downsizing your workforce is a necessary component in reduction.

But who do you lay off?

It's a complicated task, and you need both an organizational development expert and likely an experienced employment attorney to guide you, because it's not as simple as it seems.

For example, an older and more expensive employee may be your first choice for termination - but there are unforeseen problems. You can't just lay off an employee for those reasons (which is why you need that OD consultant and attorney). Or, if you do, you could spend a lot more in legal fees and lawsuits than you could possibly save with the cutback.

The EEOC reports that age discrimination filings leaped 29% in the year ending September 2008. Over 25% of all EEOC claims are now age-related.

You've Laid Off Staff. Now What?

Perhaps the easiest part of reducing expenses is cutting back on staff. Because the next step - "What Do We Do Now?" is extremely difficult.

What Do We Do Now? You have fewer employees but need to have the same or better performance.

Hopefully, when reducing staff, you took the first important step which is to identify those employees who are capable of doing more and retaining them.

In identifying employees who can do more - look at attitude (desire) and aptitude (ability). Communication (as always) is key - those employees are going to be doing different things and more of them.

The employees who stay need to understand why they're there and what their role is.

Employees who stay after a layoff are even more valuable now. There is some guilt (why did I stay and my friends have to depart?), a lot of trepidation, and no small amount of concern and fear.

It's up to the employer to alleviate those concerns and allow the business to move forward.

Communicating in a Recession

The most important thing an employer can do in this economic downtown/recession/potential depression is communicate with employees. It's one of the cornerstones of my trends for business leaders in 2009.

Because your employees have a vested (albeit self) interest in your success, they deserve to know what's happening and what you're doing about it.

In fact, one of the best things you can do is survey your employees and find out what they'd do to cut costs and improve performance in the short- and long-term.

Note - I said communicate 'with' employees, and not just 'to' employees.

This article in cnnmoney.com offers more advice.

Alternatives To Employee Layoffs

When consulting on potential workplace layoffs, the first thing I try to do is get an employer to quantify how valuable an employee is. For example, when the economy eventually rebounds, what will it cost that employer not to have that employee there?

It's easy to make a rash decision to eliminate jobs, but the long-term consequences can be significant to a business.

Now, the California Employment Development Department has issued a "Guide For Worksharing Employers" - an alternative to employee layoffs. It’s an Unemployment Insurance program, which allows certain employers to reduce employee hours while the employees collect partial unemployment insurance benefits.

The program may help employers with cost-cutting as well as keep key employees. and avoid the mad hiring dash later.

An employer may be able reduce the employee workweek from five days to four - which results in a 20% reduction. The employees would be eligible to receive 20 percent of their weekly unemployment insurance benefits—and are spared the hardship of full unemployment.

There are qualifiers - but this is a good example of yet another alternative that should be considered when contemplating employee layoffs.

Pitfalls of Reductions-In-Force

We're presently working with a number of clients on reducing their workforce. There are a number of organizational development issues related to a RIF (such as who stays, who goes, what does the company look like after the reduction and how will all the tasks continue to be done).

But there are a number of compliance issues as well.

Baker Donelson has a good piece on some of those pitfalls.

A reduction-in-force is not simply "let's eliminate 'x' number of positions"; it takes careful decision making; excellent organizational development consultation; and a good employment attorney.

Management and Business Trends For 2009

2009 is shaping up to be a challenging year for small businesses with a world full of unknowns. The businesses that succeed will be those who can quickly adapt to change; embrace unknowns; and innovate.

Successful small business owners don’t look at this recession as a challenge – they look at it as an opportunity. Your competition is going to struggle, but that doesn’t mean you have to.

For the purposes of this article, we’re defining a small business as one who employs between 1 and 500 people. Here are our predicted employment trends for 2009, and ways you can use these trends to sustain and improve your business for the long term.

1. Employees have transformed from an ‘entitlement’ mentality into a ‘privilege’ mentality.

We’ve observed over the past several years that employees have generally viewed their employment as that of entitlement – they are owed by their employers for the work they do. With a robust, growing economy, that means they can pick up and leave for a better opportunity at the first sign of disappointment. It also means their attitude is generally not that of a team player – but as an individual who deserves promotion, salary increases and more attention. This is no longer the case. Everyone knows that layoffs have been pervasive, and they could be the next to go. This will result – if managed properly – in employees who will complain less, work harder, and become more appreciative of the job they have.

2. Adapting to change is key to success.

Change is one of the most misunderstood and feared actions in business. No one knows how to deal with it well. When things are going well, you don't want change. When things are going badly, change can't happen fast enough. To employees the fear relating to change is simply the fear of the unknown. People get into comfort levels and resist mightily when someone or something attempts to break that comfort zone.

Regardless of whether it's good or bad change, it rests upon management's shoulders to incorporate the changes with a minimum of difficultly. The first thing to do is find a way to make the change work for you and your employees. What can you do within your power to mitigate the negative aspects of the change? How can you emphasize the positive aspects of change, if any?

Next, realize that you're a leader. You are on stage. Your team will know your nuances, so you're not allowed to show frustration or weakness in front of them. Leaders lead - they say "here is the way I believe we need to go," and then go. This is the attitude you must take when managing change.

Some people never accept change. They are the ones who have to leave or they become so jaded and negative they no longer are functioning members of your team. When change happens, it happens. End of story.

Virtually any change breeds opportunity - the key is finding the opportunity and acting on it. Focus on the positive.

3. Wage & Hour lawsuits will become even more prevalent.

Your house needs to be in order before you take action. Labor lawyers are changing their practices to focus solely on wage and hour lawsuits, which are easy to prove and violations are myriad in businesses throughout the United States.

Employees everywhere are reading about the huge sums of money ‘won’ by disgruntled ex-employees filing lawsuits against their employers. The major focus will be on exempt or non-exempt status, meal and break periods and whether an ‘independent contractor’ should properly have been classified as an employee.

Think it can’t happen to you? Or is your excuse that you’ve never had it happen to you before?

All it takes is one employee to talk to an attorney. Ask Wal-Mart, Starbucks, Electronic Arts, and the thousands of small businesses that have paid hundreds of millions of dollars in the past year. If you’re going to terminate or reduce an employee, they’re going to look for a way to get money – especially in a dismal job marketplace.

4. The opportunity is now to do more with less.

If you're maximizing the people you have, you won't need so many people. You can get more done with fewer people. How? By knowing what your people do best. Evaluate your talent. Carefully consider your need for every one of your employees. Most businesses are not maximizing each and every employee they have. There are techniques available to ensure talent maximization. Find your best performers. Decide you can best support you and your efforts both over the next year and the next few years.

5. Businesses that communicate effectively are those who will succeed.

There is fear in the marketplace. Employees are wondering if you’re going to cut staff, perquisites, and their free coffee. They’re wondering what you are doing to sustain your business this year. It is imperative that frequent and clear communication lead the way to your success. Your employees are heavily invested in the success of their business, and they have a right to know what you’re doing. Even saying, “I don’t know” is preferable to not communicating. And you need to do more than put out a memo or company-wide e-mail. Your managers and supervisors must be empowered to candidly talk with their staffs as well. The last thing you need is to lose a great employee simply because they didn’t know what was happening in your business.

Before you consider cuts, survey your employees: What benefits would you cut if we needed to? You will be surprised that the suggestions you get. The things you think employees hold dear are not necessarily the ones they believe are important.

6. Adversity breeds innovation.

Too many businesses over the past several years have become complacent. And that complacency (“we’ve always done it this way”) has failed both businesses and employees. When times become difficult is the exact moment to innovate. I never saw a successful manager who didn't take a calculated risk now and again, or who was not considered an innovator. On the other hand, I've seen many average managers miss becoming great because they were afraid to make a mistake. Great leaders do not avoid or fear trouble: they embrace it.

Put together groups of your employees into focus sessions. Ask them what they would do if they were in your shoes. Encourage participation and never denigrate an idea. At this time – any idea is worthy of exploration.

Your competition will be inert this year. The best way to excel over your competitors is to honestly re-evaluate your business. Solicit the advice of your employees and make no pre-conceived notions of them.

For my book, I developed a list of hallmarks of great managers of people. Several years later, they are even more appropriate for business owners and leaders:

• Vision. They know where they want to go and, equally important - they know how to get there.
• Communication. They are world class communicators.
• Equality. They treat employees the way they want to be treated and they are no more demanding of others than they are of themselves.
• Decisiveness. They can make decisions quickly, are accountable for those decisions but are never so rigid they are wed to those decisions.
• Leadership. People want to work for them. (There's a big difference between liking someone and wanting to work for someone).
• Knowledge. They know their position, their industry and what their employees do better than anyone else.
• Accomplishment. They get things done.
• Style. They are not so entrenched with their professional lives they forget that a quality personal life is the most important thing to most people.
• Commitment. They are committed to the success of their business unit, of the people who work for him, and to the company they work for.
• Temperament. Employees want to work for a person who has a great temperament – someone who isn’t moody or subject to numerous highs and lows, but one who has an understanding that he or she is always on stage, because employees are always looking at their leaders to set high standards of both temperament and judgment.

In 2009, the business owner and leader who has the ability to honestly evaluate talent, performance and make the decisions necessary to sustain the business not just in the short term, but for the long term, is the leader who will be highly successful both this year and beyond.

Managing Layoffs

A lot of large businesses have been laying off employees, and small and medium-sized businesses are doing the same.

The difference is that (generally speaking) large corporations have large teams of attorneys and HR specialists managing that process, while smaller businesses do not.

If you're considering laying off employees, slow down. The process is fraught with potential for lawsuits if not managed properly.

We have gained many clients in the past few months who wish to layoff segments of their workforce, and doing it properly is key.

If this is a consideration for you, read this article from our friends at Jackson Lewis first.