How to avoid death by a thousand cuts

Feb 02 2009 by Nic Paton Print This Article

Managers staring desperately at their wages bill and beginning to think the unthinkable should be careful what they wish for. Because cutting staff carelessly or callously can lead to a much greater exodus than you intended and a collapse in morale and performance.

Latest research from U.S think-tank the Center for Creative Leadership has added to a raft of recent evidence suggesting that laying off workers - particularly if done haphazardly - can lead to a sharp slump in productivity and the loss of valued, experienced workers just when you need them most.

Its poll of 1,700 workers carried out between March and December 2008 found much higher levels of motivation and commitment in companies with high levels of trust between colleagues.

Workers were also more likely to say they believed their company was doing well financially if they enjoyed high levels of trust in the workplace.

What's more, those who trusted their colleagues and managers were more likely to say they believed their company was socially responsible.

The findings chime with recent comments by management consultant Tom Peters on's Fortune Small Business Section.

Asked to give his take on the art of the layoff, Peters Ė author of more than 15 books including In Search of Excellence and The New World of Wow Ė slammed the practice of across-the-board cuts and multiple layoffs.

"If you really want to kill morale, have layoffs every two months for the next two years," he argued.

A much better approach was simply to be as open as you could be. "Rumours are always worse than reality," he said.

He added: "Show more thoughtfulness than ever before, because you are going to inflict serious mental damage on the large number of people you get rid of and stress on all the rest who may have their hours or pay cut or think that they're going to be next."

This recognition that showing people the door can send tremors right the way through the rest of your organisation is not new, of course.

Back in December, a poll by recruitment firm Kenexa found that those left behind after a round of redundancies were generally more disenchanted and demotivated, and more inclined to view their boss in a negative light.

And a month earlier research by pollster Sirota Survey Intelligence emphasised that the challenge for managers in a tense and unpleasant environment was not to forget to focus on the welfare, productivity and engagement of redundancy "survivors".

With the psychological contract between worker and employer at best under deep strain and, at worst, broken completely, teamwork and productivity could quickly collapse, as could the willingness to put in extra hours or go the extra mile.

Trust can take years to build up and be lost in a matter of moments, yet it is one of the few things in a recession that does not cost financially and, if cultivated, protected and maintained, could pay huge dividends in the future, argued Dr Jennifer Deal, senior research scientist at the Center for Creative Leadership.

"Measured in terms of both corporate reputation and staff productivity, trust is one of the few investments likely to pay off in a recession," she said.

"Trust may not be the most obvious investment in dark economic times, but it is perhaps the wisest," she added.

"Fundamentally, the ability of an organisation to function efficiently enough to survive through the current crisis rests almost entirely on the willingness of employees, managers, and executives to trust each other," she emphasised.

"This means trust both that the work will get done and that motives for managerial decisions are fair," she advised.

"If this willingness to trust is absent, an organisation is fraught with conflict, much slower, less efficient, and definitely less viable in an economic crisis," she concluded.