Keeping Morale Up in a Downturn

In tough times, leaders can't afford to be anything but totally transparent

Our company, like many these days, is experiencing lower earnings and the termination of many good employees. How do we build morale and give workers some sense of confidence in the face of poor financial results? — Anonymous, Maryville, Tenn.

Our first piece of advice might be the hardest for you to follow, if you're a normal human being with feelings and emotions, a career of your own, and a mortgage to worry about. It concerns not something you should do right now but the one thing you must not do. And that is act scared. Yes, times are uncertain, and you're probably wondering if the bottom is here or still months away, and how it will affect everything you've worked and planned for. But as a leader, the minute fear shows on your face, you'll lose your people's positive energy, which, as you surely know, you need more than ever to get to the other side.

Don't get us wrong. The last thing we would ever tell a manager to do is fake it. To a staff in a state of heightened awareness, phony smiles backfire and assurances that "everything will be O.K." fall flat. So when we say don't act scared, what we mean is don't be scared. With your top team, put together a plan that positions you for the future and protects you through the perils ahead. Figure out the right size for your company in the worst-case scenario. Determine which programs can't be eliminated because they'll help you compete when the economy recovers and which ones fail that test. Bottom line: Get your house in order so you're not improvising or hanging on hope. Lead with vision and a firm grip on reality.

At that point, and only then, can you start to build morale and instill confidence. How? By relentlessly applying two fundamental managerial principles that matter all the time but are essential in times of turmoil: transparency and differentiation.

Now, we realize we don't need to tell anyone why transparency makes sense. Most managers know from experience that employees get more pumped when they understand where the company is going, why, and what role they play in getting there. But an awful thing tends to happen to information-transfer in a downturn. Managers choke: It's as if they can't bring themselves to deliver hard news without leaving out pieces and fuzzing the lines.

In the worst example of this kind of cowering, CEOs who are spooked announce that there will be 10,000 layoffs but neglect to mention where, when, or who will be affected, leaving employees to twist in the wind for weeks, or months, until the ax finally falls. How enervating. Some executives clam up so tightly during a crisis that their people learn of layoffs or other changes via the media or the industry rumor mill. Talk about killing trust! Your only antidote to this tendency is to be out there all the time, with all the facts, first, complete, and accurate.

You've got to put the same vigor into differentiation. Don't panic: We're not going to make the case, again, that 20-70-10 boosts performance and makes sense in every business environment or that you need to take care of your best no matter what. Let's assume that's a given and instead talk about the piece of differentiation that often gets ignored in downturns, which is how it applies to expenditures and investments. Too often, when the going gets tough, managers spread limited money around, rather than choosing programs to generously fund in order to prepare the company for the future and ones to sacrifice for the greater good. They'd rather keep every program on life support, perhaps because equal opportunity suffering offends fewer people. But that approach sets the entire company back—including your best, most promising businesses —and communicates nothing about how the future will look. So much for building morale and confidence.

We're not saying this is easy. Downturns make people edgy, leaders included. But downturns also let leaders test their mettle. Replace your own fear with knowledge, redouble your transparency, and commit to differentiation for both people and expenditures. You won't be able to tell your team when the turnaround will arrive, but it's the best chance you have to keep them plugged in until the day it does.

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