Small Business

Don't Let the Recession Overwhelm Your Staff


Give employees whatever reassurance you can so they'll stay focused on the most important issues

In a recent column in The New York Times, Dr. Gregory Berns explained his fascinating work using brain-scanning technologies to understand how we make decisions. He detailed one experiment in which he placed research subjects in an MRI scanner and administered a moderate electric shock to test the brain's fear system. The key to the experiment, he wrote, was that subjects had to wait for the shock—and he varied both the strength of the shock and the length of the wait. He noted that in some subjects, the parts of the brain associated with processing pain lit up well in advance of the actual shock. His interpretation of the results? "Worrying eats up a lot of brain processing power that makes other mental tasks more difficult."

When times get tough, it's up to leadership to make sure employees are focused on the most important issues. Left to their own devices, those whose mortgages are underwater and whose 401(k) accounts have evaporated will probably spend more time fretting than they did during the boom years. Add to those worries declining revenues and potential layoffs, and a company can quickly find worrying eating up a huge portion of employees' time. So what can a leader do to counteract employees' worries? Consider these suggestions.

1. Move quickly and decisively to guarantee the health of the company. The best way to get people to stop worrying is to quickly address what they are worried about. Employees aren't dumb—if a company's overhead is too high for its projected '09 revenue—they know it and worry about it—though they will be unlikely to discuss it with leadership for fear that their job might be one that is eliminated.

Another reason to move quickly: Bern's research suggests that for many people, the anticipation of pain is worse than the pain itself. When given the choice, almost all of his subjects preferred to get the shock right away rather than having to wait for it. And nearly a third of people feared waiting so much that they chose a bigger shock right away rather than a smaller shock later. Remember that Tom Petty lyric, "Waiting is the hardest part"? (For more on the advantages of moving quickly, see my previous column.

2. Push people to play offense. Berns found that the parts of the brain which became active in his experiment are the same parts which light up when someone is faced with the loss of something they are attached to. Though the link is not clearly understood, he reasons that "when the brain senses pain or anticipates loss, we tend to hold on to what we have." This effect has been obvious these past 60 days as consumers have clamped their wallets shut, liquidated stock portfolios, and fled to Treasuries.

What is less obvious is that when times get tough, employees tend to play defense—they retreat to old ways of thinking and acting at the very time new approaches are required. In Berns' words: "The most concrete thing that neuroscience tells us is that when the fear system of the brain is active, exploratory activity and risk-taking are turned off." Leaders who don't take steps to switch these processes back on—to get their people playing offense—are going to find their companies suffering more than others in the downturn. Once a leader has determined how much revenues will drop, she should get a broad cross section of the organization actively involved in identifying ways the business can respond.

3. Channel the energy of crisis. Rahm Emanuel, chief of staff for President-elect Obama, has become famous for saying you never want to waste a crisis. He's pointing to another key fact about an individual's response to difficult times. While it is true that many people become more risk-averse under stress—challenges also push some to become more willing to do things they wouldn't normally do.

In companies where leaders move rapidly to protect the health of the company and push employees to play offense—employees often demonstrate higher levels of persistence and commitment than they did in less turbulent times. That additional persistence and commitment in turn often push them to consider new ways of thinking and acting. For example, in my company's attempts to increase efficiency at a large food distribution company, I've seen results of our efforts suddenly accelerate as the economic environment has deteriorated. Employees seem to sense how important producing results has become, and the challenges they face appear to have reduced political posturing and created focus around a handful of initiatives that promise to provide the best relief for a growing pressure on profits.

Wise leaders understand that the most dangerous part of an economic downturn is psychological. You need to make sure that as consumers close their wallets, employees don't close their minds.

Keith McFarland is author of the #1 Wall Street Journal bestseller The Breakthrough Company: How Everyday Companies Become Extraordinary Performers. He is founder of McFarland Strategy Partners.

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