Managing Through Tough Times
By Tom Ryan
At the last presentation
at the NRF convention, Mindy Grossman, CEO of HSN, and Jon Luther, executive
chairman of Dunkin’ Brands, discussed the importance of building morale and
maintaining a company’s culture when managing the current downturn.
In the session entitled “How
Leadership Triumphs Hardship,” the executives pointed to a few other keys
to managing difficult times, referencing learnings from the recent downturn.
These included preserving cash, continuing to invest in the customer experience
and innovation, and not straying from what had made a business successful.
“Headwinds only slow you
down,” said Mr. Luther. “They never prevent you from getting to your destination.”
But much of the discussion
focused on managing employees’ concerns and keeping them focused on long-term
goals.
“[Employees] were fearful
about what was going to happen so we had to be very clear to articulate what
we were doing and why we felt we were going to come out of this,” said
Ms. Grossman.
HSN stepped up its communications
to include town hall meetings every six weeks, constant web updates, and “very
visible” management. Ms. Grossman said the company’s recent success reflects
its ability to be honest and engage employees early in the downturn.
‘We had to make difficult
decisions,” said Grossman. “We had to freeze merit pay and redeploy people
but we explained why. If we were still going to invest, we explained why
we were going to do that and why we were making the choices we were making.
And I think that it’s critical. They may not like the decision that you’re
going to have to make but they understand that it’s in the best interest
of the company.”
Similarly, at Dunkin’ Brands, the challenge
was to reassure its franchisees at Baskin Robbins and
Dunkin’ Donuts, many of which “have almost their entire net worth invested
in your brand,” according to Mr. Luther.
While the parent looked into
ways to improve margins for franchisees, it also pushed to deepen communications.
“I told everybody in corporate,
‘Yeah, I want to save a little money but I want you out in the field. We
don’t ring a cash register in Canton, Mass. [Dunkin’s headquarters]. They’re
all done out there so show up in front of the franchisees.’ ”
On the one hand, those communications
involved showcasing “wins,” such as any new store opening or community award
for a local franchise. But it also included open-honest communications.
“It’s one of the easiest
things to walk away from because it’s hard to do and you have to force yourself
to do it,” said Mr. Luther. “But that’s what gets you through the tough times.
You’re telling people we can’t contribute as much to your 401K or your merit
pay isn’t going to go up. But the message is ‘We’re going to keep your job’
and that inspires people to say, ‘They’ve got me in their mind. They’re going
to take care of me.’”
Mr. Luther also said that
companies should seek to redeploy jobs to more critical areas first before
exploring layoffs to preserve a company’s culture.
“You have to take a holistic
view,” said Mr. Luther. “Make sure you stay true to your strategy, protect
your culture, and communicate whatever you can.”
Discussion
Questions: What lessons were learned over the last year about managing
in difficult times? What are the best ways to support morale and a company’s
culture in such times?
It was good to see/read the discussion above by these leaders on the importance of their people, and how they responded over the past year. Not every retailer followed suit, and their turnover rates show it.
At the top of the list for me (and it’s reflected in the comments above) is to continually remind your people how important they are. That’s an easy message to get across, but one that’s just as easy to lose and forget when you’re in crisis mode. Does your staff know how important they are? Do they feel it? Do you show it? Easy stuff, but it’s the basis of driving employee engagement.
Luther’s comments stem from a career-long practice of listening to associates and customers, and seeking ideas. At the same time, he continuously has shared his organizations’ visions and strategies, as well as how the firms are progressing.
More importantly, via his example setting, Jon has taught others the value of “walking around management,” and the great benefits that everyone involved in the organization enjoys. Simple. Effective. And, a model that would help other retailers move their ‘Grades’ given by associates and customers alike, UP.
It may be hard to believe, but it’s actually the managers and owners in retail that set the morale tone in the store. Store-level leaders must keep an upbeat and positive tone and manner if they hope to keep their people motivated. Open communication is also critical to keeping productivity up. Lack of information or knowledge will add fuel to the rumor bonfire. Having daily meetings will keep your team informed at all times. Also, remember to have a documented, open door policy. The staff should have access to management or the owner to discuss whatever is on their minds.
It’s nice to hear positive comments executives are making about communications and how important people are in the corporate equation. It’s one thing to talk about it at an industry conference and quite another to put it into practice.
The fact is that many companies are using high unemployment and economic uncertainty as a sword hanging over the heads of their employees. The attitude is “if you don’t like it, we can get someone to replace you in a minute.” The bad economy is being used as leverage for short-term cost cutting rather than an opportunity to communicate long-term goals.
This is very short-sighted and will no doubt come back to bite you in the end.
First we need to get rid of this myth of the economy being in a downturn. This makes it sound like retailers’ sales have declined through no fault of their own. Only poorly run retailers experience downturns. Retailers need to accept responsibility for their downward trends.
The economy is always good. Retailers need to opt into good economy business practices and the problems are solved. This usually involves taking action. When a retailer doesn’t take proper action during economic change, they end up having pity party town hall meetings, confusing employees.
Let me get this straight. In “turbulent times” what you do is communicate honestly with your employees and franchise holders and tell them how important they are. I just wish the article told us what to do in good, smooth, profitable times!
When Mr. Luther of Dunkin’ Brands said “You have to take a holistic view,” he was absolutely right…but the scenarios and strategies described here are anything but holistic. When, oh when, oh when are we going to wake up to the realization that “managing” employees isn’t a matter of spraying them with the motivational version of WD40 when they start squeaking?
You tell people how important they are because you know–or at least suspect–they don’t feel important. And why would that be, I wonder?
It seems that every retailer out there talks about the value of their employees but looking at the responses to the survey questions at the time I am writing this, 72% gave management a D or an F and 18% gave them a C. In today’s world, C’s are no longer a passing grade. So most retailers are flunking when it comes to Walking the Walk.
Why are so many retailer/employers missing the message? Culture is what you do and not what you say.
Employees at all levels are looking for what I call the 7 R’s and 1 C:
1. Recognition
2. Respect
3. Reward
4. Responsibility
5. Rules (Just not dumb rules)
6. Revelry (Fun)
7. Relationships
COMMUNICATIONS (Good or bad, they want to know what is going on.)
Listening to your employees and trying to make sure they realize you are there for them and that the Enterprise needs to function as a collective team…and that the team begins and ends with them.
Winners in the marketplace seemed to have one thing in common: an organizationally pervasive focus on their competitive positioning. Retailers as diverse as WMT and Urban Outfitters were winners by not straying from a competitively successful positioning and continuing to focus on excellence in those areas.
One of the biggest lessons of the very long growth period was the temptation to stray from core competencies. The recession forced spending cutbacks, which forced overhead reduction, which forced a retrenchment into core disciplines.
Beyond that, a commitment to success was critical. From Kraft to Kohl’s, players with a sustained commitment to marketing remained in the forefront. In today’s retail, you have to market to create foot traffic (or eyeball traffic), and the winners did that.
Organizationally, all of the points made by others are valid. Communication, transparency, flexibility, and a coherent vision that seems both practical and idealistic. One of the most often ignored facts of human motivation is the need to believe in something greater than the details of our daily life. An idealistic and powerful corporate vision in the midst of recessionary fear gives employees something to attach to that is beyond their moment-by-moment existence. In times like these, a lot of those moments are unpleasant. Leadership studies have proven conclusively that without a greater purpose, those unpleasant times sap morale, productivity, and commitment.
“This too shall pass” is a phrase to be remembered from the past year. Too often, business reacts to hard times in a knee jerk fashion and executes layoffs and expense cutbacks only to rebound in both areas 18 months later.
Open and direct communications are impactful and executives would be well advised to make a list of questions that they would want answered if they were in the audience. Anticipating these questions “will I be able to keep my job” and providing answers proactively is simple to accomplish but goes a long way to maintaining employee morale.
I liked the “headwinds” comment. If companies “persevered” rather than “panic,” the impact of economic cycles on the employee base would be mitigated.
Doing so would help the brand longer term as well.
A quote attributed to Ronald Reagan goes, “When your neighbor loses their job it’s a recession, when you lose yours, it’s a depression.” In my world, depression is much closer; it’s not just your neighbor, it’s the person in the cubicle next to you and the one down the hall, etc. Terms are irrelevant. Call it what you wish–recession, depression, downturn, etc–it’s reality. There is no change in sight.
Most counties around my world are reaching 25% unemployment if they aren’t there already. Should 10% unemployment return to these areas, folks might be singing “Happy Days are Here Again!” Interpret this as a pessimistic point of view? Hardly. It is reality. It could be decades or never, before even a reasonable rate of unemployment is ever reached again.
As a result, the key motivating factor is as mentioned, “Just be grateful you have a job.” Or, as also mentioned, I have actually heard these words uttered, “If you don’t like it, we’ll replace you in a heartbeat.” Consider that what it is, but nevertheless it is motivating even in its most negative form. In my region, this has been the case long before what has been termed as our current recession was uttered. It was here in this region for quite some time prior to it being even noticeable nationally.
Yet, take a look at who is winning. It’s not all negative or even slightly pessimistic for some. On January 7, Costco posted same store sales increases of 9% on increased foot traffic of only 5%. Explain that? On a visit there on Sunday, January 10, it was so busy at my local store that all lanes were open and the shortest line had 7 customers. I was waited on by the store assistant general manager that opened up the last lane available. When thanking him for opening the lane, his response was, “I love it–glad to do it.” Why? The answer is generally visible on every associate’s face. It’s culture. It’s success. It’s reward. Their customers were smiling and not at all surprised by the lines. They waited patiently. Why? Because they saw the efforts in front of them servicing the lines. Were those efforts heroic? Nah, just darn close to it. (At least heroic in a ‘retail’ sort of way.)
Those simply maintaining or managing their failure in the ways I mentioned above simply don’t and never will get it. You can’t create a ‘People Culture’ just by communication or by being open and direct. Culture is created by living it and executing it. It’s nurtured further by reinforcement, reinforcement, and reinforcement. The action taken by the assistant general manager at Costco was living it and reinforcing it and communicating it in its best form–by example.
These times are survived and thrived in by those that were doing and continue to do those things that foster greatness before during and after such a time as this, no matter how defined. Costco isn’t the only example. There’s a story behind all of the retailers discussed yesterday that hailed high marks in customer service. Some of those stories were told here. All of them were in large part a result of culture. Many of them will likely report on increased sales as Costco did. All of those that achieve it did it not by being the lowest price–not by a long shot. They did it in ways that are fun, inspiring, exciting and experience-rich. All of which had little if anything to do with the economic times. Their performance proves out the theory that it is all about the experience. The experience they provide has rewards. Those rewards are shown in most, if not all of their sales reports for the last periods. They’re also shown on the faces of those who work there and shop there. How’d that happen?
This is all about culture. Employees are quick to see a disingenuous message from on high on how much they are appreciated. This has to be done from day one of the franchisee or employee. Apple, Whole Foods, etc, have brands and cultures that cultivate teamwork and cross-enterprise support in good and bad times. People want to be a part of those organizations. There are great franchises, too, but it is the building of the brand that takes real, genuine commitment and time to cultivate. Look at the most valuable brands today, and see why people want to be a part of them.
Managing through tough times! When is retail not tough? When should companies not treat their employees as most important, engaging, motivating and empowering them? When should giving employees respect, and expecting them in turn to respect the customer? How are employees released when they are unaffordable, and are they brought back when income improves? Where are the priorities and how do they change from good times to tough times?
It seems that strong, visionary companies, with motivated employees can avoid the worst of the tough times by standing by a positive strategy and culture that does all the best for the people of the company, to allow them to offer the best to the customer.
John Luther has always been a stand up guy. He doesn’t mind working and has never relied on “silver bullets” to solve problems. When people are hurting, a hug and handshake go along way. Taking off your coat and pouring a few cups of coffee doesn’t hurt either. The restaurant industry was built on people who know the real meaning of service. They do it better than anyone else. Name me one other industry where many employees work for less than minimum wage and pin their income to the service they provide to the individual customer.
Even where the employees are paid minimum wage or better, service is measured in seconds. The average QSR can tell you how many minutes and seconds it took to deliver a value meal to a counter or drive through customer last Thursday at 12:42pm. Taking care of the customer and giving the employee an opportunity has been the hallmark of the restaurant industry forever. If only retail could learn the lessons that have made foodservice a success.
These are good rules to follow, and good examples to set, whether the times are good or bad. Which company would not want to better manage their costs? Why wouldn’t Dunkin’ Brands be listening and managing their franchisees at the lowest levels? HSN should have been tightening its belt regardless of good or bad times. They have profits to report to their shareholders, and being able to reduce costs has a direct impact on these profits. These examples should be followed all of the time, not just when times are bad….
You win with people regardless of the economic landscape. Sharing information with them and treating them as people rather than assets or resources will always build a strong relationship with them. If a person feels personally invested, then you can bet they’re more likely to stick around when the economy turns for the better and other jobs are available.
It’s good to see that the leaders at the top of the organization feel this way but it needs to be pervasive through every part of the company to be truly effective.
Being relevant in a time of crisis. Employers that have stepped up (which does not mean more money) and done more for their employees and communities have create more employee loyalty. The first step with that is communication. Keeping your employees well informed helps to fight fear. And, appreciation is so important. Constantly look for ways to let staff know that they are appreciated and valued. That can be as simple as looking them in the face and telling them that more often.
Finally, keep doing some fun events. You can do events that people enjoy without spending much money. Do a Christmas party that is pot luck instead of catering. These are just a few ideas and this is really a great time for the great companies to step up.