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April 9th, 2020

ELEVATE PERSPECTIVE

Talent – Handling Change in Times of Crisis

By Marketing and Communications Team

During times of crisis, companies both small and large are forced to make tough decisions to ensure that business runs as smoothly as possible. Whether it’s a pandemic such as COVID-19, an economic recession, or any cash-strapped situation, business leaders have a responsibility to be aware of their team’s needs during a tough time and respond accordingly. Below are some considerations for startup leaders as they implement changes that affect their staff.

Opening Lines of Communication

Employees will undoubtedly feel uneasy and have many questions on how their jobs and lives will be affected. A critical step for any company is to open lines of communication. Heather Haas, president of ADVISA, a leadership development firm headquartered in Carmel, says, “While recessions impact most companies, leaders hold the key to helping their organizations weather the storm and bounce back stronger. Bright and resilient leaders are displaying empathy, transparency, and clarity in their communications and decision making to survive post-COVID-19.

“Point 1. Empathy. Employees and customers need empathy during times of adversity, uncertainty, and hardship. In order to lead through a crisis, spend time thinking about how others are feeling. Spend time reflecting on your own feelings. Then, express genuine sentiments of understanding and compassion in your communications. Appreciation for other people’s feelings creates psychological safety and unlocks people’s best efforts.

“Point 2. Transparency. In the absence of the brutal facts, fear is amplified, and trust is decreased. Leaders who share the facts in real-time, and in a consistent and relatable way, will build trust and create space for problem solving and creativity.

“Point 3. Clarity. To clarify something is to separate the important and urgent things from the noise. People need to know what to focus on. They need to know that they are working on things that are mission critical and essential. Leaders must offer a consistent drumbeat of communications that highlight a precious few priorities to keep people aligned and focused.”

Re-Evaluating Talent Strategy

In times of crisis, it’s important to evaluate and/or re-evaluate your talent strategy. Companies can address this in a variety of ways. Some may go directly to layoffs, while others may find unique ways to save as many jobs as possible. If your company does have to make changes to its talent strategy, being creative in your approach tends to yield the best long-term results, while maintaining positive team morale.

Below are three perspectives from local leaders on strategies and changes they implemented when faced with talent decisions. The information was provided to Elevate to be helpful for entrepreneurs, but the executives supplying the information asked that their identities be withheld as some information is sensitive and could be traced back to certain people or companies.

Perspective 1: During the Great Recession of 2008 and 2009, there was company carnage in every community throughout the country. Tens of thousands of companies went out of business and millions of people were left unemployed. A company in the testing industry with roughly 350 employees was faced with the agonizing decision of eliminating employment and dealt with this in a unique way.

The founder carefully explained the company’s situation to the employees and asked those with spouses who had a strong job, and no concerns of being let go, to consider working half-time for half-time pay. The founder then instated a tiered pay cut model by asking staff to take a 25% pay cut, management to accept a 30% pay cut, and executive management to accept a 40% pay cut. The founder took a 60% pay cut.

The company operated like this for nearly nine months. While he recalls it being painful, he kept everyone informed as to the financials of the company and how they were weathering the challenge.

At one year he reinstated everyone’s base pay. At two years, bonuses were added back. The economy improved and the company ended up rapidly growing as they gained new customers looking for services. The team’s perseverance paid off as competitors who chose not to adjust quickly to the economic changes ultimately lost market share.

Perspective 2: Startup companies may encounter cash crunch situations without the help of a recession or pandemic. A past board member of an e-commerce company located in the Midwest shared a time when the startup hired too quickly and needed to find a creative way to extend their runway until the next fundraise.

The team ultimately decided to ask salaried employees if they would voluntarily forego a percentage of their wage. This CEO went without a salary for three months and employees all agreed to a reduced salary during that time. After three months, the company reinstated the foregone salaries and went back to business as usual.

One key takeaway from the whole experience: creativity tends to always pay off and if you’re transparent with your employees, their reaction to changes may surprise you.

Perspective 3: Preparing for COVID-19 can be just like preparing for a recession. The president of a supply company in the Midwest said their company instated a similar strategy now as they did back in 2009. Some key components of the strategy include: foregoing all 401(k) company match to employee benefit plans, 25%+ pay cut for the founder/owner, salary employees will take a 10% pay cut, hourly employees are moving to a 4-day work week, and they leaned talent in key areas of the company.

In addition to the above, the company has also heightened their internal communication. They share the current standing of the company and strategy well in advance. Their goal is to ensure the staff isn’t faced with doubt, uncertainty, and immediate financial changes.

At Elevate, we understand that all companies are very different and may not be able to sustain the above strategies. For more examples of how companies have been creative, check out the following:

While creative approaches may be ideal, there are some situations where laying off employees is the only solution to keep your business afloat. If that is the case, there are optimal ways to deliver the news while maintaining good morale with your remaining staff.

Other Changes

As with any crisis, we are all forced to move toward a new “normal.” While the COVID-19 pandemic has created changes such as remote work and virtual meetings, there is a chance that these new strategies may stay well after this pandemic has passed.

Jeb Banner, CEO of Boardable, said that while he is pausing on new hires, the current staff is working remotely and staying productive with tools such as Slack and Pragli. Looking forward, Banner says he believes that companies will be building new habits including hiring and onboarding remotely, as well as implementing more virtual meetings and conferences into their normal strategies.

If considering hiring or onboarding staff remotely, here are a few resources:

One way or another, COVID-19 has made an impact on all of us, likely altering our lives and the way we conduct business and interact with talent for years to come. It’s important to remain flexible, keep an open mind, and ultimately, keep your goals and values at the forefront in this quickly changing environment.

Click here for more articles and resources on COVID-19 and managing your startup.

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