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2009 Provides a Unique Opportunity to Impact Employee Loyalty

Posted by Aaron Green  May 18, 2009 01:22 PM

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The current recession is bringing out the best and worst behaviors from managers. Management’s actions will have a significant impact on employee loyalty for years to come. Let’s take a look at some examples:

The recession provides healthy companies the opportunity to add talent that they might not otherwise have the opportunity to attract. Organizations should definitely take action and use this window of opportunity to add to staff because after the recession is over we will be back to the talent wars; the long-term demographic trends still show a shortage of skilled employees. While the temporary availability of qualified job candidates is refreshing for a change, how you handle new recruits can have a lasting effect on employee loyalty. How you handle pay rates is one example: while I would never advocate for overpaying staff, companies that get greedy and take advantage of new hires will find no lasting benefit. Companies may be able to get applicants to say yes and accept jobs at lower rates of pay than they would in a better market, but if the new hires feel taken advantage of they will leave once the market comes back. On the other hand, simply hiring someone in the middle of a recession when employment prospects are limited generates goodwill; by treating the person well and paying a reasonable salary you have a much greater likelihood of generating loyalty.

Training and Development
How you treat your current staff right now will be remembered for years to come. In this recession companies can get away with cutting back on training and employee development, but those that don’t cut back will be rewarded in the long run.
Adjust training budgets to reflect economic realities, but do all you can to retain the most effective programs. Look to develop low-cost alternatives and get creative. If you’ve ever found yourself saying “training is important at this company,” now is the time to prove it. And, if you do, it will be remembered by your current employees who will go on to tell new hires “we care about training so much that even in the depths of the recession we never stopped.”

Motivating and Retaining Staff
It can be challenging to manage staff during tough times. Traditional motivational and retention practices won’t work or may not be available. But consider the following suggestions for encouraging employee loyalty during a recession:

• Promotions: Lack of company revenue growth brought on by the recession can hinder promotion opportunities. Look for other ways to challenge and develop employees. Perhaps they can cross train and learn new skills, or maybe they can be mentored and prepared for a promotion that will come once revenue grows. The point is to continue to focus on employee development as it will yield dividends in the form of employee retention.

• Workload: We have all heard stories about companies that cut staff and spread the work around to remaining staff. When executed correctly and fairly, this approach can work well, as dedicated employees are showing an ability to sacrifice along with their companies. But if employers push this too far they run the risk of hurting themselves in the long run; overworked employees will simply leave once they get the chance.

• Incentive Plans: Incentive plans were put in place to reward and motivate. These plans can have a negative effect on morale and retention if talented employees have no chance at earning incentive dollars because of marketplace changes. Obviously it costs money to "fix" incentive plans, but this action may make sense for certain talented employees. If you underpay someone for too long, you risk losing them whether we are in a good economy or a bad economy. Broken incentive plans are a major problem right now and many highly talented employees are looking for new jobs for this reason alone. Fix the situation before it becomes a problem.

Terminating Employees due to Economic Circumstances
Termination and employee loyalty are not usually mentioned in the same sentence except in a negative fashion. However, how you go about terminating staff can have a significant impact on the loyalty of the employees who remain.

• Communication: Communication is key if layoffs are unavoidable; make sure to explain why they were necessary and how decisions were made as to which employees got laid off. And to the extent possible, communicate one-on-one to employees as to their personal employment status, i.e. you are not next, or you need to accomplish XYZ to maintain your employment.

• Outplacement, Severance, and Dignity: Retained employees will judge management on how the terminated employees are treated on their way out. Severance pay and formal outplacement assistance do cost money but are visible and valued ways for employers to show they care about their employees. If you can not afford large severance packages or the expense of hiring an outplacement firm, you can still treat the exiting employee with dignity and take some low budget steps to try to help. You can assist by identifying introduction or networking opportunities, be more generous with your time when speaking with references, and if appropriate allow access to some firm resources for a period of time.

• Boomerang hires and referrals: A boomerang hire is someone who once worked for you who is hired back at a later date. When economic times are stronger, you can then look to these proven performers as candidates to recruit back into your organization. Alternatively, if you treat people right you increase the chance they will refer employees to your organization or at a minimum be more likely to voice positive comments about your company when asked.

In today’s economic climate, the choices that employers and HR managers face each day are vast and changing. Decisions related to hiring, training, staff development, and everyday workplace management are being made against an ever-changing landscape. While some perceive that employers are in the driver’s seat and can get away with offering less or demanding more, progressive employers should focus on the fundamentals of good management and realize their actions now will have long-range repercussions on the business. There is currently a brief window of opportunity during which an employer’s efforts to maintain high standards of management practice will yield a more productive and more loyal workforce in the long term.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions . He is also a member of the board of directors of the American Staffing Association. He can be reached at or (617) 250-1000.

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Featuring human resources advice and columns from The Boston Globe's On Staffing and Hire Authority writers.