In the last economic downturn, or was it the one before that, I was going into a meeting with a client when our host said, “sorry there are no biscuits today”. He explained that, every few years, sales would take a dip and the company would react by stopping the purchase of biscuits for meetings and when things got really bad, tea and coffee would also be stopped.
Right now, across the world companies are tightening their expenses policies, new rules are being issued. Unnecessary trips are being cancelled. It all looks good, a leaner more streamlined way of working with less waste is being forged.
OK, that’s the sales pitch. What is reality?
One of the strange side effects of entering a recession is the rise of the petty bureaucrat. You need people to devise the new rules, you need people to enforce them. The way this happens is quite interesting. You don’t get more administrators – that would give the wrong signs. What happens is operational managers devote more and more of their time to administering the bureaucracy. They have to spend more time justifying petty expenditure or getting other managers to pay for it.
The effect of turning managers into administrators is that they spend less time managing. Their staff get less direction, the overwhelming message that is presented is that costs must be cut. Staff behaviours change to avoid being seen to be spending. The focus goes from doing the right thing to not being seen to be doing the wrong thing and, guess what, operational performance drops.
Barriers are put in front of people travelling, there are less meetings and those that occur have fewer attendees. This is seen as leaner decision making but it is decision making where the experts needed to advise the decision makers are absent and disenfranchised. Decision making and communication suffers and operational performance drops.
Barriers are placed in front of people working with other projects and departments on an ad hoc basis, every hour must be accounted for and every request for help must be formal and approved. Communication and collaboration suffers and operational performance drops.
How should the organization react?
Before acting, organizations need to think through the effect of the changes that they make and fully understand the impact on the organization. A failure to think of an organization as a balanced eco-system where every action has a knock on effect will result in the law of unintended consequences executing with vengeance.
The first step is to believe that the workforce want the organization to survive, they have a basic level of intelligence, they understand that waste damages the organization, they can be disciplined, and they are motivated to do what is best. This is a foundation for self governance of costs rather than imposing blunt and counter-productive rules and procedures. Giving people responsibility motivates and encourages self sacrifice, taking it away destroys motivation and encourages self interest.
There will be unnecessary victims of the current downturn. The road to organizational decline and lay-offs is paved with good intentions.