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Feature Article
September 2001

Maintaining Employee Motivation In A Deflated Stock Market


Slowdown... Downturn... Deceleration... The shell shock following the meteoric rise of the technology industry is all you've been reading about. Well, your employees are reading the same articles, and their productivity is being impacted by the same sense of paralysis. With the economy experiencing a downward spiral, start-ups squirming for VC funding, and IPOs being pulled, many start-up employees that once dreamed of inflated stock options are having a harder time motivating to put in long hours at the office. If the parking lot at your start-up is empty before 9am and deserted by 5:30pm, this article is for you.

Keeping employees motivated to maintain the relentless hours required at a start-up when stock options don't result in instantaneous gratification requires a more savvy manager than it did in the late nineties when the "get rich quick" mantra became king.

The dream of millions of dollars resulting from a short-term investment of 80 hours a week for one to two years with a hot start up company is faltering as a new reality emerges. Market analysts are returning to age-old business fundamentals as the metric for corporate success -- changing the return on investment for employees with stock options into a three to five year investment. Without millions of dollars in quick money, some employees are rethinking their work ethic.

How do companies manage their employees' expectations in the changing environment? And how do they keep them motivated to put in the extended hours that have made the start-up culture in the U.S. so successful -- creating "fleet-of-foot" companies able to beat large companies by moving faster, and providing innovative technology quicker.

While each start-up culture is different, keeping employees motivated during a slowing market is a universal challenge. Following are several suggestions to keep your employees putting in the hours while the market weathers the storm.

Fiscal responsibility dictates that cutting costs is a critical component of weathering an economic downturn. Travel budgets are often the first to see the effect of more conservative spending at a start-up. Employees often take these types of cost cutting measures in stride, understanding the need to save corporate resources, after all the employees are investors in the company too. The backfire happens when company management appears to be immune from the cost cutting measures. Employees will catch on to the fact that they are flying Po Dunk airlines and sharing rooms at the Cheap Inn, while their leadership is flying first class and taking limos to their five star hotels. Employees that are conscientiously trying to save the company money while their management is living high on the hog will stop working endless hours for said company.

Let's face it, the rank and file were never the source of many of the large expenses being modified, so if the management team isn't following the new cost cutting measures, it is likely that the bottom line isn't changing all that much. Cost cutting has to start from the top in order to ensure that it does not impact employee morale and ultimately productivity. If employees are expected to travel cheaper, evaluate costs when making business decisions, freeze hiring, receive special approvals, etc., the same rules and expectations must be enforced across the organization, all the way to the CEO. An executive management team that practices what they preach will gain the loyalty and respect of their employees -- basic requirements to keep them motivated.

Revisiting the budget is a common sense measure for companies facing tougher economic times and slowing growth. Often, the first thing to go is the budget for programs that in an accounting person's mind appear to be "fluff." These programs, which often include company meetings, retreats, training, orientation, newsletters, and intranet development, are slashed from the budget without a second thought.

However, it is these programs that were designed to encourage various departments to get to know each other, develop a team culture, make the employees aware of corporate objectives, and ensure the company employees are all working towards the same goals. E-mail as a corporate communications tool is not sufficient to ensure that the management team is able to identify morale issues, communicate goals, and measure progress toward corporate objectives.

Two things happen with the employee communications budget gets cut. First, employees are no longer linked to each other or the executive management team, which leaves them feeling out of the loop and disconnected from the company. Second, the management team is no longer able to gauge the pulse of the company, offer accessible face-to-face interaction with the larger employee base, or influence the employees' drive towards corporate objectives. The end result is an employee base that feels they have no connection with the company they are working long hours for.

If you think your employees haven't calculated what their options are worth after the latest round of funding, if you think they don't read industry news, and if you think they aren't talking to each other about whether working this hard is worth it, you are seriously underestimating your employees.

In times of trouble, employees rely on each other as a metric for how well the company is doing. One bad apple can poison an entire bunch when times are bad. Employees that do not have executive direction in times of uncertainty spend much more time talking about exit strategies, gossiping about corporate wellness, and surfing the Internet than they do working.

Keeping employees insulated from negative forces outside of the company is impossible. Talk to your employees like adults and you'll find they are much more willing to rise to the occasion and support the company in good and bad times. While it is unnecessary and often counter productive to share every business detail with the employees, it is necessary for the executive team to share changes in the market environment, new factors in customer accounts, and other related information that will influence or change corporate goals and necessarily corporate behavior.

Employee buy-in is critical to ensure that the company can move forward strongly despite economic pressure external to the organization. Employees that understand why they are doing something, or why the environment has changed, are able to move forward to execute on the modified strategy rather than wondering what the point is. Employees lost in "Why am I doing this, if I wait long enough the directive will change anyway" are a direct result of management teams that aren't communicating honestly or consistently with their employees.

Disgruntled, tired, and disillusioned employees will quit. When the market is good, this type of attrition causes a minimal blip for employees, who are often glad to see the grumpy guy go. However, in a down market, anyone's departure rates a crisis, turning from water cooler gossip to possible corporate melt down. The executives fly in, damn the leaving individual, and then pretend the person never existed.

Attrition happens in good and bad times, hiding it, lying about it, or ignoring it will just magnify its effect when the market is bad. Employees looking desperately for signs of the company's stability will take employee attrition to mean things are crumbling if their management team doesn't quickly address the issue. Often a simple e-mail that acknowledges the departure to the employees affected and offers an open door policy to those that want to discuss it is enough to diffuse the situation.

Lay-offs have also become common phenomena when the market slows. Business 101 dictates that during a market slow down, there is an opportunity to determine who your star players are, and who is destined for the bench. Companies often use "lay-offs" to eliminate employees with consistent performance issues, however the term alone can wreak havoc among the employee base. Lay-offs often connote an arbitrary effort to get rid of people to save money. The announcement or even rumor of potential lay-offs will have every one of your employees spending their day sending out their resumes rather than working.

Instead, if there are impending performance related employee cuts, let people know that you are enforcing the performance review process. Employees not meeting the expectations set for them by their managers, and not pulling their weight, will be let go. This will scare the bejeezus out of some employees, the ones that have been slacking, but it will also act as a motivator. Those employees that are consistent performers know who they are, and are not threatened by this type of action.

Managers are being put to the test. The ability of the management team to keep the company moving forward while the market is stalled will separate the A players, from the C players. The management team is solely responsible for ensuring the productivity of their people during a market slow down, an effort much more difficult than when the economy is booming. In order to fight the natural reaction to hibernate during the storm rather than keep on moving forward, the management team must constantly and consistently communicate market changes to their employees, explain the impact these changes have on the company, provide solutions and explain shifts in strategy, reset expectations realistically, and be examples. An executive cannot expect the employees to work twelve-hour days and not notice that the management team is spending their time on the golf course bemoaning their stock portfolios.

The market turmoil high-tech start-ups face today is certainly not permanent. However, the days of "getting rich and getting out" are gone, and management teams need to alter their approach to motivating their employees. Ensure that the employee investment in the company remains secure, and has the potential for considerable long term pay off, but also make it clear that the value of that investment is directly tied to their on-going contribution to the company's success. The key is to make certain that every employee understands that the success of the whole endeavor relies on each individual's dedicated participation.

Shannon Pleasant is director of Corporate Communications at General Bandwidth. General Bandwidth is focused exclusively on developing solutions that meet or exceed the exacting requirements of the largest service providers. Their flagship G6 platform gives service providers a logical migration path to a unified, packet-based network that enables them to deliver differentiated services while reducing capital and operational expenses.

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