Dave Ulrich: Role of HR during Economic Slowdown

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In an exclusive conversation with Dave Ulrich, the Rensis Likert professor of business at the Ross School of Business, University of Michigan and co-founder of The RBL Group.

Dave has published over 200 articles and book chapters and over 30 books on organization, talent, leadership, and HR… He edited Human Resource Management 1990-1999, served on editorial board of 4 Journals, on the Board of Directors for Herman Miller, and Board of Trustees at Southern Virginia University, and is a Fellow in the National Academy of Human Resources. He is sharing with us his perspectives on how HR adds value to the business…

Dave Ulrich has been ranked the #1 Management Educator & Guru by Business Week selected by Fast Company as one of the 10 most innovative and creative leaders is one of 21 people in the Thinker’s Fifty Hall of Fame and named the most influential thinker in HR of the decade by HR magazine

Q- Dave, unfortunately, the 2020s started with Global Economic Slowdown blues, how do organizations prepare themselves?

Economic cycles are cyclical! Being older and having lived through both ups and downs, we can learn from these cycles. In the last downturn, a colleague taught me, “a downturn is a terrible thing to waste.” With the public visibility of a slower economy, downturns can be an opportunity to prune and focus on customers, products, services, strategies, and people. They offer a context for making tough decisions that will prepare the organization for the inevitable upswing. The goal in a downturn is to respond quickly and boldly to gain market share by differentiating from competitors.  Preparing for the slowdown comes by sharing information with employees about what is occurring in the marketplace, creating retrenchment plans that respond to multiple scenarios, and gaining personal resolve to make the required bold decisions with fairness. 

Q- What are the best HR strategies during the slowdown as any organization to survive?

As noted above, a downturn is a terrible thing to waste … use this context to prune and streamline. Do not do general people cuts (e.g., 5% across the entire organization), but targeted cuts (and even expansions) based on the strategic agenda. In the last downturn, one successful company did strategic downsizing by actually growing some areas (e.g., customer interface and R&D roles) while making deep cuts in others (e.g., staff functions). Focus all HR practices on results more than activity. Using “guidance” logic, hire and train people who deliver the right results and pay employees even more for results, not activities. Move more of compensation to base salary than incentive tied to growth and profit and tie incentives to long term more than short term goals.  Reengineer key processes to streamline them and remove waste. Most important, in all the changes in a downturn, make choices by living the values of the company. Some have said that when under stress, people often swear in their native language. Likewise, in a downturn, organization leaders revert to their core values.  Make sure that those values of how to act and behave will be reinforced in the tough requirements of a downturn.

Q- Organizational downsizing is one of the highly prevalent consequences of slowdown which is hurting. How can HR make downsizing less painful?

When downsizing, move quickly and boldly. Don’t wait and debate; act decisively. If you have to remove headcount go deeper faster than shallow slower.  For example, if the business requires a 5% reduction in headcount, go 7 to 8%. One firm goofed by going 3%, then 4%, then 5% over time and the morale dropped in each downsizes announcement. Be bold and make the decisive moves. Obviously, treat those who leave with great respect, but pay even more attention to those who stay and help them feel great about staying. When removing people also remove low value-added work so that those who remain are not having to make up work of those who left. One firm cut 10% of the people but kept all the work so the remainers, while grateful for work, having to make up the work of others. Engage remainers to define the future and how the downturn enables bold business moves. Finally, explain over and over and over again “why” the downsizing has to happen. When employees who leave and stay know the why the more readily accept the what.

Q- How to keep employees motivated after downsizing?

The basic principles of motivation apply in both up and down markets. But, they often get higher visibility in tough times. Why people are motivated has been studied for decades, with the foundational learning that individual motivation depends on the individual. While there are some general principles of motivation, each person customizes for his or her personal drives. Given this, try to find underlying factors for how to better engage your employees. We have focused lately on three key drivers for engagement: believe, become, and belong.

  • Believe means helping employees have confidence in the organization’s strategy and be clear about how the organization’s agenda is consistent with their personal agenda. When employees find more meaning from work, they are more motivated. 
  • Become means building a growth mindset through training and development opportunities. When employees have opportunities to learn and grow, they are more motivated. 
  • Belong comes from building a community where people throughout the organization enjoy working together. When employees work with peers who are collegial and form a strong team, they are more motivated.

Again, each employee may have a different personal weighting for believe, become, and belong, but using this simple typology may lead to improved motivation or engagement.

Q- Any last few words for our readers?

Learn, learn, and learn some more. There are some truisms about how to ensure learning:

  • Never be satisfied with the past, but focus on creating the future.
  • Be curious about what is happening and why. 
  • Work outside of your comfort zone; stretch yourself with new challenges.
  • Fail forward by improving on each mistake, but celebrate success and savor progress. 
  • Deliver value to all stakeholders, don’t just perform activities.
  • Maintain the constant mindset that the best is always yet ahead. 

Thank you, Dave!

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