Eddielogic

– Thoughts on Strategy and Management

What employees do in an economic crisis – paradox things!

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An economic crisis is a period full of risks and uncertainties – not only for businesses but also for their employees. Naturally, people develop different strategies of coping with such a situation, depending on their skills, personal attitudes and their employability. I recently found two pieces of information with two completely different ways employees tend to react to the current market situation. The funny thing is, both writings have the world ‘paradox’ in the title.

The first one is a post on The Economist, called Take the Plunge – Paradoxically, now may be a good time to launch that start-up. The author basically introduces three new business books about start-ups. However, the title and the first paragraph give us the first options employees might follow now – to launch their own start-up. It reminds us that great companies like General Electric or burger King were born in a recession and states that tough times in the economy often heave been the best times to start a new business. In a recession businesses are more reluctant to invest in risky new ideas, which open up opportunities for en-trepreneurially minded people.

The second option, which was more surprising for me, came from a press release about a recent Deloitte-survey ‘Economic turbulence has created the talent paradox: 80% will stay with current employer in the next year’. This is explained in more detail in their Talent 2020 survey. ‘four out of five (80%) employees surveyed report that they plan to stay with their organizations over the next year—a significant 45-point swing from 2011, when nearly two in three employees surveyed (65%) were planning on leaving their organizations.’ However, Deloitte warns employers ‘to neglect their retention strategies out of a false sense of security’, because ‘companies’ most critical employees are also those with the most opportunities for movement’.

Paradoxically, I don’t find these trends that paradox. Think of an employee whose employer maneuvers through a worldwide financial and economic crisis. The future prospects of the particular company he works for is about as uncertain as that of most other companies. In this situation he has basically three options: do nothing and stay with his current company, move on to another company or quit his job and launch a start-up. All of these options imply various degrees of risk.

He risks to be made redundant at his current employer. However, the same may happen to him at any other company. The difference is that he can better asses this risk in his current job because he knows what is going on there, is networked and may hear some rumors early. Such inside knowledge is more difficult to obtain for a potential employer. Hence, as long as the rumors don’t imply too much danger, staying is not a bad idea.

I think I don’t have to elaborate in detail about the risks involved in starting-up a new business. Nevertheless, as indicated in the article mentioned above, an economic crisis may open up new market spaces for entrepreneurial-minded people.

Conclusion

In the result, companies and their HR departments are well advised to have an eye on their employees’ sentiments and expectations. A company that wishes to retain its key personnel or major parts of its workforce (for instance because it fears a shortage of skilled people in future) is well advised to react now. Companies should establish a detailed and open communication about their current situation, their assessment of their future development, and their plans for their workforce. By open communication I mean really honest and trustworthy words, not the usual PR-HR-pep-talk.

As for those employees who quit their jobs to start-up their own business, those who plan to do something related to their former jobs deserve special attention. I would recommend every company to treat those people somewhat like the big consultancies do with their alumni – let them go in friendship, stay in contact, offer help, and encourage them to enter a business relationship with their former employer one way or the other. Such new start-ups can become valuable new suppliers, customers, or collaboration partners.

Opportunities may range from common research projects to the creation of new value adding services for the company’s offers. The investment in such a relationship does not even have to cost very much. Depending on the situation it may be enough to establish some business contacts by recommendation, to offer limited access to the company’s research facilities, or to cooperate in some business functions from sourcing to sales. Thus companies can still profit from their alumni’s creativity. At the same time they are sending out a signal to their remaining workforce that they care and treat everybody fairly.

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