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February 10th, 2009
Are Employers Missing the All-for-One, One-for-All Moment?
The recession is bringing out the Three Musketeers in us.
In contrast to the it’s-all-about-me culture prominent earlier this decade, an all-for-one, one-for-all mentality is on the rise as Americans see friends, loved ones and sometimes themselves become casualties of the downturn. But it’s not clear employers are seizing on this trend to the benefit of their workers and their own bottom line.
Evidence of the collectivist shift can be seen in the popular rage over excesses by prominent individuals. Consider John Thain’s luxury wastebasket or Tom Daschle’s combination of unpaid taxes and chauffeured ride.
Part of what boils people’s blood about these guys is that they seemed to take the public for a ride. Thain, Merrill Lynch’s former CEO, benefited from a taxpayer bailout. Daschle converted his years of service as a U.S. senator into a lucrative career of consulting while failing to pay his fair share to Uncle Sam.
Anger about executive compensation in recent years has a similar root: Why, when so many are pitching in, should the top dog get so much of the payoff? In fact, incentive programs on Wall Street that doled out huge rewards for individual performance seem to have contributed to shortsighted, reckless behavior that helped trigger the financial collapse and ensuing downturn.
Barack Obama’s election in November amounted to a vote for a more mutual response to our troubles. His rival John McCain struck populist themes at times, but was tied to the Republican Party past of trying to solve problems largely through the individual pursuit of wealth in free markets.
A shift toward a social sensibility among Americans has been under way for some time. A 2007 study by the Pew Research Center for the People & the Press found signs of growing public concern about income inequality and a pattern of rising support since the mid-1990s for government action to help disadvantaged Americans.
The recession seems to have intensified feelings of being part of a team—and this extends to the workplace. Workforce Management blogger Ann Bares recently called my attention to a study by Towers Perrin along these lines. The survey of 469 employees found a growing sense of “shared destiny” with employers, with 76 percent of respondents in the December survey saying they were personally motivated to help their company succeed, up from 69 percent four months earlier.
A similar attitude showed up when employees were asked to name factors most important to their work experience. Working for a successful organization with a strong future made the list of top five factors for the first time, Towers Perrin found, while maximizing earnings fell from the top-five list.
But, as Bares asked, are companies paying attention? Are they taking steps to capitalize on this more communal mind-set? It seems to me firms might do things like move away from merit-pay plans that heap rewards on stars to the exclusion of more average performers. They might freeze salaries, including executive pay, or cut compensation across the board to avoid demoralizing job cuts.
“Morale might actually improve through a collective effort to save jobs,” management scholar Peter Cappelli wrote last month.
But, he said, very few companies are taking steps like cutting hours or pay to stave off layoffs.
Numbers back up that observation. The drop in U.S. payroll employment accelerated last month, with nearly 600,000 jobs lost in January. Yet average weekly earnings of production and non-supervisory workers rose, on a seasonally adjusted basis, in both January and December.
Are firms missing this Three Musketeers moment? I’d welcome any feedback or examples.
You can leave a comment here or e-mail me at efrauenheim@workforce.com.
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My husband works for FedEx Kinkos and they have demonstrated the \\
Posted by: mbrooks | February 17th, 2009 at 7:56 am
Good article and I like the direction you are going–spot on. Cannot say I am excited about the analogy of pay inequity in the U.S., but I do agree that employers are missing the “Three Musketeers moment.” In our company, it would not make any sense to cut pay–the problem is a lack of work–but the idea of a cut in hours makes a lot of sense. The savings would be immediate and it would help alleviate the idle time some are experiencing–just sitting around waiting for something to do. That in itself is demoralizing. Even though I probably wouldn’t loose my job in a layoff, I would be willing to take a cut in hours for the “greater good.” Am sure most would feel the same way.
Posted by: Paul | February 17th, 2009 at 5:00 pm
Apparently my earlier comment did not post correctly. I just wanted to comment that My husband’s company, FedExKinkos, has been demonstrating the “all for one” spirit you describe. They cut hours rather than cut jobs. Much better to have a little less in your pay, than no pay at all.
Posted by: mbrooks | February 18th, 2009 at 10:22 am
Yeah, nothing builds morale like ending merit increases. I just love knowing that the useless complainer sitting next to me will be getting the same compensation. *snort*
Posted by: Eric | February 20th, 2009 at 8:03 am
Acco Brands’ (an office products supplier that laid off 500 employees last year) decided to cut its 2000 employees’ wages by 47% rather than layoff additional employees. While such a drastic move defies conventional wisdom that lay offs are the best way to immediately reduce labor costs, I applaud Acco for taking a more constructive approach. Rather than lose anymore of its talent, Acco decided to make a play for team unity and, if the pay reduction was done right, it was the better decision.
As the economic crisis continues to deepen, other companies are facing the same issue as Acco: how to most effectively reduce labor costs? If the decision is to reduce wages rather than layoff Employees, here is the Pay Reduction Blueprint to follow so the morale of the entire workforce is not destroyed in the process:
1. Before there is a reduction in wages, there needs to be a selective layoff to eliminate The Others (20% of the workforce who should have been fired before the current economic crisis). If the low performing members of the workforce remain employed and there is a pay reduction morale/performance will suffer.
2. Before implementing a pay reduction, know the financial relief the Company needs to get from a pay reduction and get it. There is only one bite at this apple. Reducing pay a second time is a disaster for morale/performance.
3. There needs to be Employee buy in for the pay reduction. This means effective communications about the need for the reduction in pay before it occurs. Include the Employees in the process, and stress “we are all in this together.” Employees want to participate. Let them.
4. A drastic pay cut must be temporary. Employees need to know that, in the future, there will be an opportunity to recover from their economic loss.
5. The monetary sacrifice must save jobs. After the pay reduction there can be no further layoff of Employees or Employee morale/performance will be destroyed.
6. Really Share the Pain. If you expect Employees to accept a pay reduction and still be High Performance, the pay reduction must extend to every Employee from the President/CEO/Owner down. However, high paid Employees need to take a greater pay percentage reduction than the Front Line Supervisors and Employees. Employees know a reduction of half of a $250,000.00 salary does not hurt as much as a 50% reduction of a $40,000.00 salary.
7. There can be no Corporate Prima Donnas. If there are Corporate Prima Donnas (see definition above) in the organization after the pay reduction, they will destroy Employee morale/performance.
A company can do more than the six steps in the Pay Reduction Blueprint, but cannot do less and still retain the high level of Employee morale/performance necessary to keep the Company successful.
Posted by: Paul Glover | February 24th, 2009 at 8:02 am