Everything in the company suddenly goes slower, a growing in-effectiveness, an increasing in-efficiency, less innovation and a decreasing motivation.
In the same time all measures, internal reports and audits shows that everything goes better, improves and promises a bright future.
The effect comes if the cost saving is perceived by the employees as something that can lead to a personal suffering beyond their control, i.e. lay-offs or replacements. That causes a growing fear and a lurking feeling that the company may exclude me or my friends from “the family”. The safety for the employees is threaten. Simoon Sinek expresses this so well at TED in http://www.ted.com/talks/simon_sinek_why_good_leaders_make_you_feel_safe
With the uncertainty about the future, fear will grow and trust will disappear; – Is the company planning to exclude me?
It will trigger our own “defense” system and we can start to see the symptoms in the company:
Fear over Trust Symptoms
- Projects will report more “green” – as being a project with issues is not good under those circumstances.
- Teams will lower their ambitions to make sure they look successful
- Less experiments as failures may have implications.
- Blame – more important to find someone guilty than fixing the problem
- Overestimated business case to save a product from being discontinued
- Underestimate technical challenges as it might lead to a discontinued product
- Departments will report “on-track”, “actions done” and “green” to avoid being the department with head count cuts.
All this represents hidden costs that most likely will exceed the potential save in cost!
When the company is in it’s biggest need for accurate knowledge (to save costs) the data can’t be trusted.
More expensive actions follows…
As this isn’t enough. As all “green” reports compared with actual outcome is a bit suspicious, it’s time for audits where those symptoms are questioned. Not just that the audit costs money but now the focus from teams, managers, project- and product managers is to come out as “winner” in the audits. Showing off as the best team, most efficient organization, most reliable project and vital and promising product. Just when the focus should be on good ways to save costs we are competing internally. The behavior can’t be blamed, if you fear to be cut out you will defend your situation. When fear goes in, transparency goes out.
Not being honest and tell the truth becomes the norm in the Company, between employees, managers, organizations, sites, teams and projects (actually in any interaction).
Only option for a company in fear is for top management to decide what to cut in a top-to-bottom, command and control manner. Decisions now based on false information.
Those decisions can easily be quite expensive.
It can be argued that a cost saving decisions is a short pain we have to live with, like a twitch of a patch. It hurts and then the rest of us can go on as normal. Problem is that people don’t forget that you once have abandon a family member. The loyalty and trust will not return in many years. Internal competition and “green painting” reports will continue. I have experience from the collapse in year 2000 and it took 10 years to restore (if it is really restored) openness in the company again.
It’s a huge invisible cost!
There are other ways to save costs. There so much gain by keeping trust between people and between the company and the people. If my job is not at stake. If we are in this together, I might even suggest that my position, my project or my products is probably the best one to cut, something you never get in the first scenario.
The loyalty people starts to feel can boost motivation and efforts with a magnitude. This company will not sell me out – I will do beyond my best to contribute.
- See Chip Conleys TEDx talk SuperHuman or Super Human. Note how Joie de Vivre handle a down turn. https://www.youtube.com/watch?v=RgdAhQbzQRU
- Read Scanias 4-day solution 2010 ( http://newsroom.scania.com/en-group/2009/12/02/new-agreement-on-four-day-week-for-12000-scania-employees-in-sweden/
- Harward Business Review on the subject https://hbr.org/2015/01/a-no-layoffs-policy-can-work-even-in-an-unpredictable-economy