Executive Interviews, Elaine Eisenman on Managing Downturn without Downsizing

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Executive Interviews: Interview with Elaine Eisenman on Managing Downturn without Downsizing
June 2009 - By Dr. Nagendra V Chowdary


Elaine Eisenman
Dr Elaine Eisenman is Dean at Babson Executive Education.


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  • Send workers home without sacking them, is another oftensuggested solution. Companies are increasingly putting in place telecommuting policies to cut costs and increase productivity. Of course, this might just work largely in service and highly individualized sectors and may not work in manufacturing and where physical presence is essential. However, what are the challenges in allowing employees to work from home (WFH) and what precautions do you suggest companies should take before adopting WFH policies?
    Telecommuting has enjoyed increasing success over the past decade in many different industries. The newest industry is call centers, with the development with new monitoring technologies that allow for consistent oversight of a dispersed home-based workforce. It is important, however, to differentiate between telecommuting as a logical and acceptable work site decision and telecommuting as an alternative to firing them. I believe that using telecommuting as ameans to cut costs may end up being ineffective because it may cut out the very factors that allow for successful telecommu-ting to occur. Companies that have effective telecommuting workforces do so because they put measures and options into play that allow for the employee to continue to perform as a member of an ongoing team, to have regularly scheduled days when they are in the office, to have team members and a supervisor who understand their work situations and allow for maximum balance between required work times and flexible hours. Further, not all employees are psychologically well-suited for telecommuting and find their work inhibited by the isolation and high need for personal self-control and limit setting, and willingness to tolerate ambiguity and uncertainty. For this to be successful, managers must set clear expectations and goals, give frequent feedback and input, and also have a willingness to accept that the employee is doing real and valuable work and not believe that they are contributing less by the absence of regular "face time".

    Two additional pitfalls to consider are precedence and telecommuting following the economic downturn. Telecommuting can create morale issues with office-bound employees if the decisions on telecommuting eligibility are made on an individual versus position basis. Just as telecommuting should not be used as an alternative to firing, companies alsomust be careful to ensure it is not seen as a reward for specific individuals. Additionally, companies need to consider how they will handle telecommuting policies following the economic downturn. Will they rescind the policy when the economy becomes stronger? This can lead to disgruntled employees, similar to what occurred in the mid 1990s when employers who previously used flex schedules, telecommuting, and job-sharing to woo employees, and ended up canceling those policies when the job market tightened. Employees and potential employees severely lost trust in those employers. The bottom line is that managers need to have a company-wide perspective on telecommuting in good and tough times to ensure that productivity of all employees remains high. Insuring that all the factors are in place for success may turn out to cost as much as keeping the person in the office.

  • Is there possibly a way to manage downturn without downsizing? Of course, many argue that itís not downsizing, but rather right sizing. Are there any illustrative examples of either companies or countries not having gone in for downsizing during the previous crises?
    There are many ways to manage in a downturn and downsizing is only one of them. The real issue is about sequencing of resource needs and assessment. The danger for companies is when downsizing is the first response to any economic downturn. It is the lack of strategic understanding that can lead a company to determine that the best way to savemoney is by cutting some arbitrary percentage of the workforce in order to achieve the predetermined savings goal. And this error is intensified when the formula is based on last hired first fired, so that new high potential talent is lost. When downsizing is done in a vacuum it is completely destructive to the company. Far more important to the companyís ultimate success is to step back and evaluate the current and future success of the companyís strategy, to understand the new market landscape, to determine where the most important resources must be focused and to see how well aligned the company is with this model for success. Once this has occurred, it may be that some divisions are no longer necessary, or some practices are inefficient and ineffective or new resources need to be built to address a latent market need. The need here is then aligned to the highest potential areas for future success. When this is done, cuts can be achieved with a scalpel rather than a machete. Then, it also becomes possible, while also building employee commitment, to ask each division to look for ways to cut or contain costs as a way of streamlining the company, to identify areas of redundancy that can be consolidated or eliminated and to offer attractive early retirement packages, carefully balanced with retention bonuses to insure that the talent you need does not leave. These early initiatives allow for significant areas of unnecessary costs to be identified and serve as a base for building understanding and support for the tougher decisions that may follow.

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