Friday, March 6, 2009

Communication and Engagement

We have heard the refrain from money mangers that the stock market leads the economy by 6 to 12 months. A turnaround in business will be preceded by significant upward market movements. The absence of such movements suggests that a recovery is at best likely to occur at the end of calendar 2009. Employers heading into budget planning for calendar or fiscal 2010 are likely to be looking past significant additional headcount reductions to other means of cost management designed to position them for recovery and future success.

A recent Watson Wyatt survey of 245 large US-based companies attracted attention recently by reporting that despite 61% of participants thinking a recession would continue for the balance of this calendar year, the number of companies planning future headcount reductions dropped to 13 percent (fully 10 percentage points below the number predicting cuts in December). In part this reflects the quick triggers of managers in reducing headcount (especially variable headcount) along with the limited availability of excess staff to reduce.

Instead managers are actively looking at reducing costs including salaries, raises, incentive pool funding, retirement contributions and working hours. In addition the pressure to transfer increasing health care costs to employees is significant and will doubtless play a role in the President Obama's health care debate.

The challenge with any of these actions is to find a way to implement the cost reductions while insuring continued engagement of employees. Employers who oversee an engaged workforce are much more likely to emerge in a strong competitive position. The efforts being made across the board to hold onto critical talent speaks volumes about the degree to which employers now understand that their human assets are their most important assets.

Unfortunately too few employers have translated their understanding into communications that have an impact on engagement. Often as not employees are heard to say we will accept these cuts because we feel lucky to have a job rather than identifying how the cuts and their job performance tie to the success of their companies. This lack of connection not only makes them vulnerable to poaching when the turnaround begins but also highlights the missed opportunity associated with a lack of appreciation of the drivers of economic performance for their employer and themselves.

Now is the time to begin communicating and educating employees on the key drivers of business success and how they play a role in guaranteeing company performance and their own future. Communication provides an opportunity to make the link explicit and to derive the rewards from the enhanced line of sight.

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