A Worker’s Perspective of the Impact of an Economic Crisis
Our nation is experiencing two crises. The first is the coronavirus itself and its threat to public health. The second is the economic devastation created by the shutting down of major sectors of our economy. Much of the attention by federal, state, and local governments has been focused on protecting workers and the public from the disease and on ensuring that people who have lost their jobs have enough money to sustain themselves until shuttered businesses open again. We hear a lot about companies that are struggling and the ravages of the disease and its toll on human health. But much less attention has been given to what happens to workers when this crisis leads to the loss of their job and livelihood.
Being laid off is nothing new to workers in America. Our history is replete with companies that lay off workers at the first sign of an economic slowdown. This has led to job security consistently being named as the number one concern by workers. The fear of losing one’s job has many meanings to workers. These include loss of identity as a breadwinner, feelings of despair, depression, disruption of family life, and negative feelings toward the company that laid them off. Job insecurity has fueled industrial warfare between unions and management--at a huge cost to companies and workers.
The plight of workers who have lost their jobs due to economic slowdowns has not deterred companies from making layoff decisions. Most have rationalized their decision by placing responsibility for their workers’ well-being on unemployment benefits to serve as the safety net to pay workers on layoff. But unemployment benefits do not compensate for the psychological damage and family disruption caused by layoffs. Here is the typical business response to economic slowdowns:
1. Cut all “unnecessary” expenses
2. Eliminate all overtime work
3. Freeze all hiring and salaries
4. Lay off workers in line with sales revenue
One can only imagine the fear that workers and their families go through in anticipation of the layoffs that are likely to follow any business downturn.
The following is an example of an excellent auto worker who had been laid off by his company. Henry G. is family oriented. His family enjoyed vacationing together; they were able to save for his children’s education, and his family owned a home and a car. They lived modestly, not only taking care of their basic needs but enjoying the benefits of family life and hoping for the future of their children. Then came the layoff. Henry became agitated and irritable over losing his job. He felt he had lost part of his identity. He worried that he could not continue to take care of his family. His hope for their future faded as he was forced to use his savings to pay current bills. He felt vulnerable and helpless to earn money because no one would hire him, expecting that he would return to the auto plant when called back. The economic disruption led to family anxiety. Arguing and emotional reactions were frequent. This once close-knit family went through the stages of grieving due to the loss of their life as they had known it when Henry had been employed. Eventually, Henry was called back to work, but his family life never recovered fully.
Could this tragedy have been avoided? We believe a healthy culture, one that believes in its people and is aligned with their needs, can eliminate much of the uncertainty, pain, and suffering of employees when business conditions worsen.
Here are four proactive steps businesses can take that will have a positive impact on their employees’ job security:
1. Commit to Transparency. Brutal honesty on what is going on with the business and frequent updates on its financial health and its key performance indicators are invaluable.
2. Provide Better Forecasting of Business Cycles. Tracking micro- and macro-economic indicators can help predict business downturns, thereby giving the business and its employees time to plan for how they will adapt to changing conditions.
3. Strengthen Safety Nets. Creating counseling and financial support mechanisms for employees when there is a business downturn is reassuring.
4. Appreciate the Financial Value of Employees as an Asset. This can be done simply by changing the balance sheet to add employees as a value-added asset. The intended effect is for management to see clearly how their employees contribute to their bottom line and therefore think twice before eliminating a valued asset. Laying off employees may reduce expenses, but this practice simultaneously eliminates a performing asset that may not be easily replaceable when business improves.
It is hard to ignore the financial and personal toll that losing one’s job has on people. People are often the first cuts made when businesses decide to downsize. We have suggested ways of mitigating this loss by better and more transparent communication, forecasting and preparing for a business decline, and a new way to value employees as an appreciating asset rather than just another expense on a profit and loss statement. Companies with healthy cultures embrace the spirit if not the practice of the suggestions offered here.
Purchase Unleashing Human Energy through Culture Change, here: http://tinyurl.com/y69nn5d2.