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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STYBEL PEABODY LINCOLNSHIRE assists
companies in managing the senior executive assignment cycle ™. There are 114 Lincolnshire offices around
the world. Core services include retained search for positions touching the
Board, coaching senior executives to be Board Savvy, and helping senior
executives craft new chapters in professional careers. For further information:
STYBEL PEABODY LINCOLNSHIRE
Tel. 617 371 2990