Employees are smart. They know when things are going well and when things are not so good. So when an organisation is having to make tough, cost related decisions, but keeping this information to the senior inner circle of managers, it's also a given that the employee group by this time suspects something is up. But they don't know what; and at the same time no one is telling them anything. So what's the natural thing to do? Speculate. Pretty soon gossip and rumour overcome facts and employee confidence in management and the company starts to diminish. This can cause organisational blow back for three reasons.

1. One of the major contributors to employee engagement is having an enjoyable, psychologically safe and stimulating place to work.  When paranoia sets in, it competes with our feelings of constructive engagement and we slip into 'survival' mode.  We see splitting of employees into 'unspoken' groups, but groups that are bound by different perceptions of the current reality.  Over time we see people actively disengaging, resigning, and even getting to the point of only looking out for themselves.  All of these actions have one thing in common...it's what we do when we are focused on survival.  Safety in numbers, putting up personal barriers and protecting oneself.                                                  
   
2. Most businesses today talk about integrity and open communication as being integral to their business. When the facts regarding the current situation, as much as they can be shared without compromising confidential organisational strategy, are not communicated in a timely manner the perception is that the workforce is not trusted to be adult enough to deal with the real situation.  The result is that employees experience varying degrees of condescension and cynicism instead of trust and communication.                                                                                                                                                                                     
   
3. All the cost optimisation measures in the world won't mean anything if you don't have customers being confident in your brand. In tough times repeat business is often the injection that keeps the business pulse ticking along given that customer loyalty can take a hit due to their own need to manage business or household costs and shop around as well.  In times of recession loyalty can often be a victim, not that it needs to be. Consumer confidence is inspired equally by a good product and human experience - the behaviours that the customer facing employees provide. Simply put; if employees are disenchanted experience tells us that service levels will take a hit. 

So how do you avoid any of these situations? 

​​Companies that weather economic storms are those brave enough to combine trust and communication with their cost management strategies.  There will be information that is too sensitive to share, so what is communicated at each level of the business may vary slightly. Going on the front foot and communicating the real situation to all employees from the outset can minimise paranoia and avoid going down the path of employee disenchantment.

There is no doubt that some employees will be upset or angry at the news. You will also have pockets of paranoia and cynicism. However this is outweighed by the fact that the organisation trusted their people enough to be open and honest. The benefits of communicating the 'what's', 'why's' and 'how's' of a situation can have some important benefits, in particular, brand protection, employee and customer confidence.

Brand protection comes about when your remaining employees, and the ones that are made redundant, continue to talk highly of the company. They can do this because they understand 'why' the company took its course action. They may not like it, but they understand. If you demonstrate empathy and caring in this painful process, there is a very good chance it will be returned.  

Communication breeds confidence. When employees know what is happening to their business, and why, they feel involved. They offer ideas as to how things can be done smarter because they know management will listen. Additionally, when those remaining have to do more with less they know why. It doesn't make the job easier, but it helps provide a healthier mindset with which to do the job. Interestingly, it also helps the employees, especially those dealing with customers, have empathy with what their customers may be going through which is a vital strength during any economic period.

When the brand is being protected, and employees are confident in what is happening and why, it is easier to inspire consumer confidence - naturally. It doesn't remove the fact that it is a difficult period, however it can ease the way somewhat for all involved.

For some organisations implementing these ideas are 'tough measures' in and of themselves because it's not something that comes naturally. However of all the 'tough measures' that could be implemented it's one of the easiest and most effective and stands the best chance of yielding positive outcomes in both the short and long terms.  

​In short...your cost optimisation strategy needs to be equally matched by a strong, and genuine, employee engagement strategy that holds trust, transparency and communication at its core.