The Ultimate Balancing Act: Driving Out Cost While Investing in Growth
First do no harm
I went to my traditional internist the other day to talk about some nutritional guidance I received from an “alternative” practitioner. With a not so subtle scowl on her face, the traditional doc said: “First do no harm.” While I was disappointed in her ability to think creatively about my health, it occurred to me that this abstraction of the Hippocratic oath could double as a guiding principle for employee communication.
These are, as the Chinese proverb goes, interesting times…particularly when it comes to engaging employees. We are seeing more and more companies pulling all kinds of levers to drive cost out of their operations while simultaneously pursuing strategies designed to produce growth. Buried deeply within these organizations, it can sometimes feel to employees like their company is schizophrenic. Squeeze out cost while investing in growth? How in the world do we contract and expand at the same time?
And yet, this is exactly what the majority of CEOs are seeking. According to the 2013 US CEO Survey: Creating Value in Uncertain Times by PriceWaterhouseCoopers, “CEOs are seeking more from operational leaders than holding the line on costs. They’re also being asked to create value and contribute to growth.” With about two-thirds of those surveyed expecting some level of strategic change and changes to the organizational structure in the next 12 months (see Figure 1), now is the time to think seriously about how to engage employees in what seems at face value to be conflicting priorities.
Communicate openly – employees deserve it…and they can handle it
Messages about cost out and growth may seem contradictory. They’re really not – if the company and its leaders are extremely clear in communicating the direction and they see the link in freeing up resources from one area in the company in order to fund growth initiatives in others.
The most successful leaders practice three simple and fundamental principles when it comes to engaging their employees around these priorities:
- Communicate openly and clearly about the company’s strategy.
- Share the rationale for change.
- Keep the customer front and center.
While these practices are always important, the complex and sometimes confusing dynamics operating within most organizations today make them downright indispensable. We find that while employees may not agree with all of a company’s decisions, particularly the ones that have a negative impact on them and their co-workers, they’re far more likely to respect their leaders and do what is asked if they understand the basis for the actions. Leaders often forget that employees are adults who in many cases run their own households. They understand the basics of revenues and expenses, and most are actively involved in addressing their own life challenges while balancing their household budgets.
Don Devine, formerly CEO of American Standard Brands (ASS) and now President of Custom Building Products, is a role model in this regard. While leading ASB through two acquisitions and a double merger, Devine was laser-sharp in his focus on a short set of clear messages, and passionate about educating the workforce about the financial basics – what it was going to take to turn the business around.
More leaders could take a page out of Devine’s book. The 2009 / 2010 Communication ROI Study report by Towers Watson found that while companies designated as highly effective communicators do a much better job of using communication to effectively connect with the workforce than the low-effectiveness companies, “there is room for improvement by all participants in communicating more effectively.” Figure 2 reveals just how much room there is, from explaining the basics to keeping the customer front and center.
Cost-cutting used to be a cyclical activity, with many organizational communicators we know in the habit of pulling out their “belt-tightening” messages every year at the start of the fourth quarter. However, these measures, which at one time seemed to be a quick fix to a moment in time, may be here for good. According to PriceWaterhouseCooper’s 2013 US CEO Survey, 81 percent of participants implemented cost-cutting measures last year. In 2013, 71 percent are planning to do so. “In an environment of pricing pressure and slow demand growth, every element of direct and SG&A expense is getting a fresh look…CEOs seek opportunities for competitive advantage in their operating models to offer customers more and to do so at a lower cost.”
Remember – it’s about the people
It’s important to remember that behind all of the strategies, priorities and objectives are the people. And people are both emotional and rational, meaning they adapt to change at different rates of speed and in different ways. Particularly during periods where there is great ambiguity – before all of the questions have been answered – some may act out of fear or insecurity. Great leaders and managers understand this and work hard to be clear, consistent, respectful and compassionate in their words and actions. Larry Bossidy (former Chairman and CEO, Honeywell and best-selling author) said it best: “At the end of the day you bet on people, not on strategies.”
For more information, feel free to email me at tracy@on-the-same-page.com.