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What Leaders Must Do Next

by Jennifer Robison

It’s going to be a long, grueling road ahead for CEOs and senior executives -- even if the economy turns the corner. Here’s how leaders can manage the many challenges they’ll face.

"I have learned more about management and leadership during the past six months than I had in the previous ten years," one executive said recently. He is probably not the only one. Most CEOs and senior executives have never faced times as bad as these, and they are pushing themselves as hard as they can to keep their companies together.

There's a certain adrenaline rush to all this. But what happens when the adrenaline wears off? When it's not just two months of bad news, but 15? When every day is like the one before but a little harder, and the end isn't even in sight? That's when real leaders need to reach deep and pull out the best of themselves -- and their employees.

There's a tendency right now to freeze -- to avoid doing new things for fear of doing the wrong thing. Freezing is a mistake.

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And make no mistake, senior executives will need the best from their employees to get through the dark days ahead. Even when the GDP picks up, as some economists say it will by late second quarter or early third quarter 2009, the jobless rate may not drop until 2010 or 2011. The employees left standing will be shell-shocked, scared, and worn out. And customers will almost certainly lack confidence, which means less spending and credit.

So employees' day-to-day functions will be charged with greater weight and significance. They don't have much margin for error when their organizations have none at all. Meanwhile, employees are also laboring under the same surplus of anxiety and pressure that senior executives are, and it can take a toll on their wellbeing.

If businesses are to survive, leaders can't overlook opportunities to boost productivity and profitability -- and that means employee engagement is more critical than ever. "There's a tendency right now to freeze -- to avoid doing new things for fear of doing the wrong thing," says Denise McLain, Gallup principal. "Freezing is a mistake. You can always change tactics later if you need to and adapt when more information comes in. But the worst mistake is to overlook engaging your employees. When times are tough, leaders need all the engaged people they can get."

Big boost

Employee engagement is an emotional attachment between an employee and a workplace. It is the result of a bond that produces remarkable financial results for companies. Gallup research has shown that business units in the top quartile of engagement have 12% higher customer advocacy, 18% higher productivity, and 12% higher profitability than bottom-quartile business units.

Engagement also links powerfully to financial performance, which is a saving grace when Wall Street is in turmoil. When compared with their industry peers, organizations with more than four engaged employees for every one actively disengaged employee saw 2.6 times more growth in earnings per share than did organizations with a ratio of slightly less than one engaged worker for every one actively disengaged employee. And earnings per share for top-quartile (in engagement) organizations outpaced the earnings per share of bottom-quartile companies by 18%. (See "Investors, Take Note: Engagement Boosts Earnings" in the "See Also" area on this page.)

As much as engagement boosts the bottom line, disengagement damages it. The bottom quartile of business units have 51% more inventory shrinkage, 31% to 51% more employee turnover, and 62% more accidents than business units in the top quartile.

The same boat

All this begs the question of how to get employees engaged and keep them that way. Financial chaos and its repercussions, which leaders will be dealing with for years, don't necessarily disengage employees. In fact, they can present an opportunity to create engagement -- but only if handled well.

First, leaders need to remind everyone that they're all in it together. "Communicate what you're doing and why," says McLain. "The way you talk has to include empathy. Ensure that you convey an understanding of any hardship this may be placing on the employees. Employees need to understand the rationale for the company's decisions and how it's countering what the competition is doing. They also need to know that the company did not make these decisions lightly. Providing that information helps get everyone involved and gives employees a feeling of inclusion and shared purpose."

A practical strategy is to ask employees to contribute their ideas for cutting costs or for growing the business. Two of the 12 key elements of employee engagement measure the extent to which employees think that someone at work cares about them and that their opinions seem to count. (See graphic "The 12 Elements of Great Managing.") Telling people "We're all in the same boat" then asking them how to plug the leaks reinforces their value to the company. This approach can go a long way toward building engagement -- as long as leaders listen and respond to employee comments and suggestions.

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"Asking opinions is a very effective strategy because it enables people to feel that they're rolling their sleeves up and contributing," says Barry Conchie, Gallup leadership expert and coauthor of Strengths Based Leadership. "However, if you dismiss the ideas or don't express how those ideas fit into a strategy that will make the organization leaner, fitter, healthier, and more profitable, you could actually run the risk of scaring people unnecessarily."

Leaders should articulate a consistent and pervasive message that changes will bring long-term growth and viability.

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But the feeling of collaboration will dissipate if a team is foundering. Purposelessness also makes leadership look confused. To maintain a sense of inclusion, leaders must demonstrate momentum. "Create a focus within the company that allows you to move forward on something that brings the team together," says Shane Lopez, a Gallup Senior Scientist in residence and a leading researcher of hope. "You need to encourage a spirit of sharing and of a common purpose so that folks can move forward."

Telescopic vision

Encouraging a common purpose presupposes that leaders have a long-term goal in mind. In late 2008, as the problems with the U.S. economy began spreading worldwide, many leaders were forced into reaction mode; their focus became finding short-term solutions to each day's problems. But staying in reaction mode won't help leaders move their organizations forward.

"Important though those day-to-day decisions and issues are," says Conchie, "leaders need a longer view. It's easy to become embroiled in short-term considerations. But leaders should articulate a consistent and pervasive message that the changes the organization is going through will bring long-term growth and viability."

That brings us to another benefit of engaged employees: Because of their emotional stake in the wellbeing of their company, they have a detailed view of what's possible, what's necessary, and what can be cut -- which can save leaders' time and company resources. "Tell your employees the outcome you want," says McLain, "and let them get there in their own way."

To align employees with leadership's vision and get to the outcomes you want -- all while fostering engagement -- leaders must make workers partners in the strategy. When they do this well, senior executives often see a boost in hope and a collaborative spirit.

"Figure out what's truly to be feared and what's to be dealt with in a constructive way. Then make sure that folks know everything they need to know and that they're moving in a positive direction on this project and making some good things happen," says Lopez. "Then you need to start building innovation and momentum, looking over the horizon. It boils down to managing the uncertainty we have without being condescending to employees, and then pointing out something on the horizon and saying 'Go that way.'"

Talk therapy

When things first get rough, a leader's responsibility is to manage the uncertainty, as Lopez says. But after a while, uncertainty can become a kind of numbing dread. It's difficult to navigate the emotional needs of people in either state, especially when senior executives are feeling the same. Meanwhile, the 24/7 news cycle is often bombarding employees and customers with grim news and speculation.

The way to combat that onslaught of bad news is to get there first. To maintain employee engagement, senior executives should be the first to share news -- good or bad -- with employees. That communication should be open, transparent, proactive, and honest. "Explain your mistakes and course corrections, or the rumor mill will churn out panic and second guessing," says McLain. "Do not let the rumor mill be the way employees learn about changes. No matter how bad the news is, people will always think of something worse unless they have accurate information from leadership."

And at a time when many companies are forced to lay off workers, the employees who remain face the double challenge of doing more work -- and while mourning the loss of their coworkers and friends. "Consider how the people who haven't been laid off feel about the future of the organization. Initially, they may feel a sense of relief that they still have a job. But that's temporary, because their next question is 'If we hit another difficult time, will I lose my job?'" says Conchie. "Leadership has to articulate clearly and pervasively the long-term benefit of downsizing -- that if they don't downsize, the company may actually go out of business. In that case, everybody loses their jobs."

Optimism is critical. A good way to prove your optimism is to double down on people and products.

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Meanwhile, remember that managers are your primary conduit of communication to frontline employees. They need support like never before because they may be feeling as uncertain about the future as the people they manage. "Leaders shouldn't assume that managers know what to do in these times," says Scot Caldwell, a Gallup learning solutions consultant. "They don't always know what's expected of them. Be open, honest, and transparent. That's always important, but in times like these, leaders need to be proactive with their accountability and openness."

Save the best

In the end, perhaps the best thing leaders can do for their employees, their companies, and themselves is to remember that things will get better. "It's hard to get by without hope," says Lopez. "And nothing gets done without it." It's even hard to develop engagement without hope: Gallup has found that 69% of employees who strongly agreed that their company's leadership made them "feel enthusiastic about the future" were engaged in their jobs, compared to just 1% of employees who disagreed or strongly disagreed. So foster a sense of optimism -- and keep your most talented people with you to prepare for better fortunes.

"Optimism is critical. It shows that there's a future beyond this," says Tom Rath, Gallup global practice leader and coauthor with Conchie of Strengths Based Leadership. "A good way to prove your optimism is to double down on people and products. Under these conditions, think how to best use the bandwidth you have to prepare for the future. It will give you a payoff when the economy comes back. It will show your people today that you believe in the future of the company -- and that you're ready to meet it when it arrives."

Leaders also must consider carefully which employees to retain and develop and which employees to reposition or let go. Making these tough decisions requires knowing how employees have performed in the past and how they've responded to challenging situations. For companies that are struggling to do more with fewer employees, an effective strategy is to continue to develop the most talented people. "You won't have as much time and money for training as you did before, but don't stop investing in the best," says McLain. "That's how organizations begin to beat their competitors."

And that's the other payoff of engagement. Engaged employees are often the ones who most deserve development and who will do the most with it. They'll keep a company moving forward when times are at their worst. And they'll be poised to help their companies take advantage of better conditions when the markets open up.

"Leadership matters more now than ever in creating confidence in employees, customers, and Wall Street," says Rath. "On an individual level, open communication and investing in people pays off. The best companies are developing their high-potential employees. Some are downsizing, but they're keeping their top talent at every level. So look closely at people and be smart."

Change

Until the end of 2008, most companies were focused on growth, and they concentrated their strategy, energy, and will on getting bigger and stronger. Now, many organizations are forced to downsize. They have fewer customers, reduced budgets, smaller workforces, and fewer growth opportunities. But the one thing that no company should jettison is efforts to engage employees.

It may be a while before the global economy starts to rebound. Businesses that want to be positioned well to capitalize on an improving economy should continue actively managing one of their most valuable assets -- their engaged employees. Preserving or augmenting engagement isn't easy. It takes commitment from the top. But the return on engagement almost always outweighs the investment. "Worldwide, the best companies realize they can't afford to ignore employee engagement," says Rath. "But then, the best companies never did."

Gallup


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