MANAGING ‘HUNKER DOWN’ OPERATIONS: a Board and Management Perspective.
In response to a seemingly unending business slump, companies have three major strategic options. What are those options and what are the implications for management?
One option is to alter the strategy itself and get into new products/services. A second is to exit from the marketplace with dignity. This exit is often called being acquired by a larger player. The third option is to "hunker down" in the hopes of being a survivor when the business climate changes.
Hunker Down is not necessarily the option of unimaginative cowards. It may be the Board’s most realistic option.
Few institutions have the time or the financial resources to alter fundamental strategy in the midst of a recession. It requires a “bet the company” philosophy that some Board members will not go for and many employees will rebel against: the new strategy may often be viewed as having the unintended consequence of cannibalizing the market for the existing product line rather than creating a new customer population.
Exiting the marketplace through wind-down or being acquired may inspire little share-holder enthusiasm.
Hunker-down may be the default strategy.
If a Board buys into a Hunker Down strategy, how does one attract, retain, and motivate good talent?
The first stage of "hunkering down" focuses on downsizing the employee population, better cash flow management, and tighter inventory control. During this phase, senior managers often sound like cheerleaders for Weight Watchers: "We've Got to Become Lean” and "We've Got to Get Rid of That Fat!"
The emergence of a trimmer and more efficient organization completes this first stage of a Hunker Down. The second stage consists of managing those employees who are survivors of the first stage. At this second stage, one often finds:
• High Stress Levels. Employees must perform their regular jobs; they must also perform the jobs of others who were let go.
• Lack of Confidence. Employees are unclear about the company's future and their own future with the company. They seldom accept management's assurances that layoffs are over. A "hunker down" decision assumes no major strategic shift in market focus. Some employees will view this decision as a fatal decision.
• Personal Financial Concerns. Salary increases are now barely keeping up with the cost of living. Variable compensation is often non-existent and not worth counting on. Corporate benefit program reductions can result in actual downward economic mobility.
A key management task during the second stage of hunkering down is to instill an esprit de corps marked by high customer responsiveness and technical competence. These twin goals must be accomplished among employees who are experiencing high stress, high uncertainty about their futures, and personal financial difficulties. In addition, this spirit must be developed among employees who may be reticent about complaining about their high levels of stress, their uncertainty and their poor family finances. They fear management will retort with, “At least YOU have a job. What are you complaining about?” That statement does keep people quiet. It does not relieve their concerns.
What kind of manager is best suited for a Hunker Down operation?
A management role model for "hunkering down" might be Colonel Potter in the popular television series M*A*S*H. The M*A*S*H unit consists of many key professionals who would prefer to be working elsewhere. These professionals had to function in a highly competent manner under battle conditions----an environment that is both stressful and unpredictable. Few of the Army's traditional methods of reinforcing behavior (medals, promotion, etc.) would motivate these civilian health care professionals like Hawkeye.
As a manager, Colonel Potter successfully managed to keep morale up while insuring operational effectiveness. What are the lessons that Colonel Potter has for managers in the second stage of "hunkering down?"
Keep Status Images Low. Beyond the mandatory insignia of rank, Colonel Potter managed to avoid images suggesting that he is better off than his fellow soldiers. Management status symbols are particularly obnoxious to employees during "hunkering down." For example, talking about how difficult it is to purchase
ski tickets at Vail this year will not go down well among employees finding it difficult to pay the new contribution on health insurance. It might be time for the CEO to go out and least a new Lexus, but is that the right symbol employees want to see at the parking lot?
It would be a mistake for CEOs to assume symbols do not matter. We find some corporate leaders extraordinarily insensitive about what they consider to be small "perks." For example, it is not a great idea to be talking in front of secretaries about that wonderful restaurant the CEO found on his last business trip to San Francisco.
Personal consumption issues unrelated to business should be treated discretely in a Hunker Down operation. For example, we knew one CEO who managed to trigger a major defection among his middle management ranks when he was discussing the problems of purchasing a new boat a few weeks after he informed the staff that there would be no bonuses that year.
Party Time. During times of crisis, Colonel Potter could usually be found with his troops in the operating room...not in the office writing memos. He was often an active participant at M*A*S*H parties. If not out with customers, CEOs should be strolling around the plant as often as possible. Learning the names of employees can be extraordinary important during times of stress.
In the absence of ability to provide employees with significant financial rewards, take every opportunity to celebrate competence. These opportunities could include the obvious (Free Movie Tickets for Employees and their Families When the Company Exceeds Sales Goals for the Quarter). It is also useful to celebrate minor movements in the right direction. Examples in this latter category might include “Fred Kept a Key Customer Account That was On the Verge of Leaving.” In this situation, all employees might get a coupon for pizza or salad. It is also good to have small-scale employee celebrations as often as possible.
The point is that employee competence during a period of high stress should not be taken for granted. Celebrations of competence should be done as often as possible, possibly in lieu of the expensive Christmas party. Another example of celebrating competence might be the Hero of the Month Party. All employees get pizza, salad, and soda. The Hero of the Month gets a framed picture with the President with a suitable inscription plus a plaque.
Quantity Over Quality.
The quality of the celebration is less important than the quantity of events that celebrate achievement and help produce that critical sense of espirit de corps.
Colonel Potter was generous in complimenting his staff for jobs well done. Try a liberal dose of genuine compliments. Trinkets of appreciation can be warmly appreciated. Examples include sending flowers to an employee the day after a particularly hectic encounter with customers, letters of appreciation, a certificate that allows the employee to take someone out for dinner and a show, etc.
Roses Won't Pay the Mortgage
Of course, roses won't pay the mortgage. The goal of "hunkering down" is survival. Once revenue and retained income begin to pick up, the CEO should welcome demands for higher salaries. These complaints can only mean one thing: it's time to get the Mercedes out of the garage!
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