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Improving Employee Morale to Weather Economic Turbulence

| Blog | February 10, 2012


To think that capital is the only casualty of businesses during tough economic times is to make a big miscalculation. Though financial losses may be the most obvious result, money is only the paper-thin surface that obscures other and deeper consequences that often arise during an economic downturn. At the forefront of these issues is employee morale, which has been proven to fluctuate parallel with economic trends. And while low employee morale can become an issue even within companies that aren’t experiencing turmoil, this problem particularly becomes amplified for companies that are undergoing restructuring or downsizing efforts. This will have long-lasting ramifications on a business’ bottom line.

Stephen Balzac

Stephen Balzac

However, the good news for many business managers is that improving employee morale can be simple and cost-effective with enough well-meaning effort, says Stephen Balzac, who works as a professional speaker on leadership and business management, as well as the author of The 36 Hour Course in Organizational Development (McGraw-Hill). According to Stephen, employee morale is amongst the most important and underappreciated aspects of running a business – in part because it can’t be easily measured in charts and graphs. But as any good business leader will attest, having a high employee morale will inevitably lead to higher profits.

So to give some practical advice on the subject, Stephen Balzac shares some of his experiences improving employee morale:

What is the key to building employee morale?

SB: The first and most important way of building employee morale is your own enthusiasm: the manager who can remain upbeat and positive about the future serves as a bell-weather for employees. Conversely, the manager who is in the dumps will drag them down. Praise from a manager who is positive, upbeat, and confident goes a long way; sadly, most businesses do not invest in the manager training to make this work even though it’s cheaper than the cost of low morale!

[Then], focus on successes. Take the time to sit with each employee and go over the year’s successes. Build them up; when you build people up, morale and motivation both increase.

What are some practical ideas can one use to improve morale?

SB: Take a break from the daily routine to do something fun: a movie, department lunch, etc. Don’t make the event contingent upon anything; rather, make it a random “thank you for your efforts” event.

[One way I like] to increase morale in people is to get them tickets to a movie, play, or musical performance — of course, you have to know your employees well enough to know what they’d like. If you don’t, well, maybe that’s why you’re worried about morale in the first place! Dinner at a nice restaurant for an employee and spouse/significant other is yet another powerful way of increasing morale and motivation; make sure you cover babysitting for employees with kids.

How can an office deal with cutbacks while simultaneously improving employee morale?

SB: If you are looking at cutbacks, the good news is that you can apply many of the techniques I described without any real changes. Most of the techniques don’t involve any cost at all (enthusiasm, focusing on success). While it can cost some money to take the department out to lunch or a movie or treat someone to dinner, at that point you’re looking at priorities: where is the money being spent? You have to decide if it’s a priority to take care of your employees or use the money for some other purpose. If nothing else, consider it part of your advertising budget: after all, if you have unhappy, disengaged employees, your advertising dollars will be wasted anyway. Put another way, if you want engaged, loyal customers you need engaged, loyal employees.

What is the best way to approach employee layoffs while not damaging morale?

SB: If you’re looking at layoffs, the most important thing is to be totally upfront. Be as transparent as possible: lay out the problems the company is facing and invite employees to contribute ideas for the solutions. For example, perhaps layoffs can be avoided by having everyone agree to a temporary salary reduction. Demonstrate that you have skin in the game: as CEO, reduce your salary and/or perks first (HP did the shared reduction approach as a way to avoid layoffs and it was very successful at maintaining loyalty and morale). Shared sacrifice gets people pulling together. Putting the sacrifice on others only gets people pulling apart.

It is very common to tell employees that layoffs will be targeted at the poorest performers or something similar. The problem with this approach is that you are immediately telling your employees to compete with one another. If I’m worried about my performance, maybe my best strategy is to make sure you fail dramatically.

Once layoffs have occurred, it’s even more important to be clear about what standards were used and how employees can avoid future layoffs. You must be specific: vague comments like, “work hard,” don’t cut it. You need clear standards and you must encourage employee participation in avoiding future layoffs. Again, the goal here is to encourage employees to pull together as a team, not get into an “every man for himself” attitude. If you can get them pulling together, morale and engagement become infectious. If it’s “every man for himself,” nothing you do will really matter: cynicism is also infectious, especially if it appears to be coming from the top.

Though all companies will inevitably experience turbulent times, the moral of the story is that a little effort can go a long way towards improving employee morale, which will ultimately help a company stay afloat during economic storms.


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