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Managing Talent in a Recession

Keeping Employees Engaged in a Downturn

Many employers, perhaps most, have been struggling over the past few years to put together a good workforce and then hold onto it. The financial crisis threw their actions into reverse, focusing them on cost-cutting and, in many cases, layoffs. Unfortunately, the challenge of holding onto a good workforce and keeping employees motivated doesn't go away in a recession. While the immediate risk of people quitting certainly declines, the chance that employees could end up demoralized, stop producing, and then jump ship when the economy improves is important to recognize.

How do we keep employees engaged in a downturn? We should begin by thinking through what causes them to be disengaged. We know that there is a relationship between individual commitment and organizational success, but the relationship runs in both directions: Commitment leads to better performance, but organizations that are successful also create commitment among their employees, since everyone wants to be part of a winning team. In a downturn, when it looks like the organization isn't winning any longer, it is easy to lose commitment. Layoffs make the situation worse by creating another set of worries for employees: "Why did I survive," and "Will I be next?"

Address Perceptions

The first thing to do, therefore, is to address perceptions about the downturn in organizational fortunes. One sure thing about organizational life is that when we don't know what is happening, we make up explanations. And those explanations tend to be worse than the reality—more conspiratorial, more hopeless. It is important to tell people what is going on as best we know. What happened to put us in this situation, and most important, what is our plan for getting out of it?

People are much more forgiving of problems that are caused by factors outside the organization, so in the current worldwide recession, they are unlikely to blame management for business downturns and layoffs. But expect them to be much less forgiving of management that uses the current context to drive layoffs or other unpopular changes that are not caused by the recession.

Beyond explaining the current situation and presenting a credible plan for addressing it, managers that have had to lay off employees need to explain to the remaining employees why they survived and how they fit into the recovery plan. The worst situation for employees is when they believe that their survival was a matter of luck. First, that's likely to leave them feeling guilty about keeping their jobs when their peers lost theirs. Second, they will be panicked by that thought that they could be next. Fnally, employees will spend their energy either hunting for another job or frozen by fear.

Building Commitment in a Crisis

These steps simply mitigate some of the damage that the downturn does to employee engagement. There may also be positive steps we can take to build commitment and engagement even in a business crisis.

To do that, it is important to remember that what good employees want are opportunities to advance, to learn new skills, and to take on new challenges that lead to bigger and better jobs in the future. These opportunities build commitment and retention. Business crises create lots of needs, and especially when there are layoffs, there are fewer people to handle them. This is the perfect opportunity to create stretch assignments, the kind that force us to take on new challenges and grow in the process.

The important point here is to "stretch," not overwhelm. Pushing employees into the deep end with problems that are too great for them to handle does no favor to them or to the organization. An appropriate stretch assignment is one that builds on tasks an employee has already handled and, at a minimum, gives a worker the opportunity to call the lifeguard (the boss) for help. What can make a stretch assignment truly great is to get support and guidance along the way and to debrief it at the end: What did you learn from this experience?

Stretch assignments also build morale and commitment, letting employees know that what they are doing in this time of crisis is truly important to the future of the operation. That sense of significance associated with their tasks helps build commitment to the organization: I helped it survive, I care what happens to it in the future. Both sides end up better off in the process.

Peter Capelli is the Director of the Center for Human Resources at the Wharton School.

Peter Capelli is the Director of the Center for Human Resources at the Wharton School.

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