“We are in unprecedented times!”
That is the declaration that I have heard over and over for several months now, and it is usually the start of an announcement about cutbacks, site closures, and redundancies.
In many aspects, we are in unprecedented times. The complete change to social relationships and economic situations has literally turned the world upside down since March of this year.
But in some ways, we have been here many times over the years. Economic downturns have happened in a cyclical way throughout history for a variety of reasons. Every decade we witness major events that affect our economy, including the recent 2008 global banking crisis that we now know as the ‘credit crunch’.
In economic terms, the simple equation business leaders must always have in their mind relates to ‘supply versus demand’. In essence, the question to answer is ‘can we make more money than we spend?’ This simple equation is the basis of many board discussions every day in every private, public and third sector organisation globally.
It is estimated that 80 percent of business market value is now accounted for by “off balance sheet” assets. What it means is that most of a business’s value lies in its human capital – or, in plain English, its people.
The pertinent question is… do you view your people as an asset or a cost?
Your response is critical for your long-term commercial success.
On August 3rd, 2020 I officially became co-founder and business owner of a startup along with 7 friends. It’s a first for me, and an exciting decision that we didn’t take lightly. We went into it with eyes wide open, knowing that every day we would need to answer the demand vs supply question and aware that one day demand for our services might stop.
Whilst we cannot control when our customers stop buying, what we can do is control 3 things:
1. Maximise performance
Maximise the revenue in our business by supporting each other to achieve optimum performance. Over the past twenty years, my colleagues and I have worked with top FTSE250 organisations to spot opportunities in their performance data that means they can leverage performance in a different way, which in turn leads to significant commercial benefits.
2. Innovation
By tapping into the experience and knowledge garnered through working with our clients we can continually evolve, changing, adapting and growing to meet demand and reflect changes in the customer and business landscape. It’s no coincidence that when you type innovation culture in to Google, you are met with multiple articles from Mckinsey, Harvard, KPMG and Accenture on how creating a culture where people want to show up, leads to employees, not leaders, constantly pushing the organisation forward.
Google once reported that it creates more customer solutions from its employee innovation day once a month than the remaining days in the month! Innovation day was set up to allow employees an opportunity to work on any (work related) project they choose. According to Dan Pink, mastery is one of the biggest motivators available to us. And Google have tapped in to this brilliantly.
3. Climate
Creating a culture characterised by low attrition, high discretionary effort, optimised working conditions and innovation. We are choosing to treat our people like a family, sharing our successes as well as our pain collectively. A group of U.K. researchers have provided the first scientifically controlled evidence of the link between happiness and productivity.
The study found that “happy people” are about 12 percent more productive than “unhappy people.” A business that facilitates employee happiness, through creating the right climate, means lower turnover and better company performance. Employees are loyal, customers are happier, and companies perform better.
I can honestly say that in our business, we will focus on, and prioritise, these principles because we know that it’s the right thing to do. They are also the foundations from which we will achieve commercial success.
There are many organisations that follow these principles and we have worked with some great ones over the years. There are also organisations that treat people as a number in a cost centre, and in troubled times take that cost out of the business to fix short term commercial goals. If you are wondering who these organisations are, turn on the news today and see if you can work it out!
There are literally thousands of news stories and articles right now about companies that have treated their employees terribly through this pandemic. Bleeding them dry, no compassion, treating them like numbers and dropping them without an ounce of loyalty to their service and contribution.
Forbes Magazine and HBR have all been quoted recently with headlines reading…
‘How you treat your employees during this pandemic will define your brand for decades’.
Wow! If this is true (and I believe it will be) then organisations have some big decisions to make right now about how they navigate their way out of this economic period of downturn and instability.
Dr. Catherine Oliver, of the Department of Geography, University of Cambridge has created a database containing over 300 organisations in the UK summarising whether they have treated their people well or badly, and it has been retweeted over 400 times! Think how many people are using this data to influence their buying decision over the coming years.
A recent piece of Bloomberg research suggests that customers that use your product or service for more than 100 days are more likely to be loyal to you. I know this doesn’t apply to all types of consumer-facing businesses, but it makes a point that customers can move their business anywhere at any time. Can organisations really afford to make poor choices around how they treat their people?
Dr. Oliver’s database shows many sectors with organisations at both ends of the scale with regard to how they treat their people. Interestingly, there are 2 well-known kitchen and bathroom suppliers in Dr. Oliver’s database which are of particular interest to me because I have worked with one of their competitors.
The contrast between how these two organisations treated their people during lockdown couldn’t be starker.
The data shows that one of them, Wren, wouldn’t provide hand sanitizer for office-based staff, treated employees appallingly and then made 700 redundancies hours before the furlough scheme kicked in. Their competitor B&Q told vulnerable staff to quarantine for as long as needed whilst still on full pay. Unwell employees were also paid as normal if they needed to self-isolate and all staff were advised that if stores had to close during lockdown, they would continue to receive full pay.
Of course, these two organisations could have completely different commercial situations, however there are some basic principles in here about how to treat people, whether you need to cut costs or not.
Now I am not naive here, I get it. I understand the commercial pressures that CEOs, Directors and Shareholders are feeling, however there are different ways to ensure organisational survival as well as the protection and safety of your people.
The people that work for your organisation are your family. I am sure we all know somebody who has been made redundant or been treated badly by their employer during these times. No doubt it has hit us hard when it’s happened to us or someone we love. Losing our job or being treated badly at work is very emotive and with suicide rates and mental health issues at very high levels, organisations and leaders have a duty of care to their people and how their actions impact on the protection and safety of our society.
Every day I hear of another household brand that has taken steps to reduce costs for a chance of short-term survival. Another business that has looked at its costs versus its revenue and has made a judgement that costs are too high. The formula is simple, remove big costs, slash budgets and spending, close sites and remove people from the organisation to get the cost line below the revenue line.
It’s ok to right size your business and sometimes it’s a must, but there are many other things you can look at changing first. If you are going to cut jobs now, maybe take these things in to consideration as they could define your brand in the next chapter of your journey.
At the start of this article, I talked about 3 of the controllable factors we believe are important when maximising the potential in your people. Points 2 and 3 were about innovation and climate. The rest of this article focuses in on the first point that I made about maximising the performance of your workforce.
Find out how to drive commercial results through people in your organisation here.