With even the Wall Street bankers being forced to show restraint, the days of bonuses and fancy incentive schemes are over. What motivates employees in a downturn is honest engagement from their managers about their future, writes Frank Dillon

WITH A torrent of bad news on the jobs front every week now, maintaining employee morale and motivation seems like a thankless task for managers at the moment.

The toxic mix of fear over job losses and anger over potential pay cuts makes for a disgruntled workforce. Those that aren’t disgruntled are distracted.

Either way, productivity can suffer at a time when it should be all hands on deck. Keeping spirits up is vital for organisations that want to survive the recession.

Much of the recent criticism of the Government approach to the crisis centres on Taoiseach Brian Cowen’s inability to articulate a vision for a better future – moving beyond a mere appeal to cut costs – something organisations might well heed.

Above all, in this new environment, engagement with staff is vital and managers need to open up frank and honest discussions with their people.

“One of the best things managers can do is to listen to their employees and let them express the worries that they have,” says Michael McDonnell of the Chartered Institute of Personnel and Development.

“A huge sense of nervousness has crept into many organisations, regardless of how they are performing and managers need to develop a great sense of empathy now.”

With bleak prospects for many firms at the moment, that engagement may not involve a huge degree of reassurance but experts are agreed you should do it anyway. "You need to be honest and realistic with people," says Brian McIvor, author of Career Detection, Finding and Managing your Career. "Organisations are changing . . . all bets are off." While discussions need to be framed against that background, which may initially add to a sense of worry, it does not necessarily have to be all doom and gloom. "A lot can be accomplished if employees can change their mindsets . . . develop a new sense of how their performance can impact positively," he adds.

Employees are often acutely aware of the insecure nature of their own jobs. “The skills that got employees their job in the boom may not be the ones that will get them through a recession. It may be a case of saying to people that while there is no guarantee they will continue to have a job, they need to re-skill for their own sake as well as the organisation’s. If things go well, their jobs may well be secured but at the very least they are more marketable if their jobs do go,” McIvor says.

McDonnell says that helping employees up-skill is the most motivating thing an organisation can do for their people now.

A co-ordinated approach by employers, State agencies such as Fás and educational institutions, is one practical response that we are likely to see more of over the coming year. “It could be that employees go on a three-day week and spend the remaining two days in training . . . that is highly relevant to their area of work,” he says.

Maeve Houlihan of UCD Smurfit School agrees that two-way communication is vital and says that this should be done in the context of the daily interactions between managers and staff, rather than through “town hall” style meetings.

“It’s easier to demotivate than to motivate and it’s the action . . . seen on the ground that will resonate with employees,” she says.

Adversity can often be the mother of innovation. One architectural practice Houlihan knows, for example, needed to cut its overheads so it abandoned its office and now operates as a virtual network with all of its staff working from home. Rather than acting as a demotivator, the enhanced flexibility of home working has boosted productivity and staff feel more secure knowing that the practice has taken some decisive action to lower its operating costs and enhance its competitiveness.

Getting people out of defensive mode to take a more positive view of the contribution they can make is vital, says Dr Shirley Janner of Manchester Metropolitan Business School. “Staff may want to look elsewhere for work but feel trapped in their positions because of a lack of opportunities in a declining job market. Organisations that really value their staff will offer . . . initiatives including retraining and redeployment opportunities that will hopefully create refreshed enthusiasm and optimism.”

While managers’ focus will inevitably be biased towards the short term and dealing with the urgency of the problems it is facing in a downturn, an eye must be kept on the future as well, she advises.

“How successfully an organisation manages their business through this downturn will have a lasting effect on its brand reputation too. What people remember about how others were treated during this period will impact on their ability to recruit new talent in the future.”

Traditionally, organisations have a range of incentive schemes designed to improve morale. These are often designed in good economic conditions and are seen as part of the armoury in the war for talent. Experts are divided on the impact of schemes and the commentators we spoke to last week suggested that many of these were not relevant in the current environment, given the scale of the problem facing the economy.

However, another school of thought suggests this may be the very time to put in place schemes to push employees the extra mile. Writing in the Financial Times recently Michael Gibbs from the Chicago Booth School of Business suggested that with companies increasingly focused on cash management, incentives for better management of receivables, cost cutting or reductions in areas of discretionary spending, might be a good idea.

With salary cuts on the agenda for many private firms, scope for traditional incentives may be limited but UCD’s Houlihan says research shows that the effectiveness of such schemes are often marginal. “Gimmicks don’t work . . . especially not in the current environment”

Ian Duncan from Dublin-based management consultants Vision Consulting says incentive schemes at best remove dissatisfaction but don’t drive motivation levels. “Empowering people to do more rewarding work is what motivates people. The same principles apply whether it’s senior management grades or call centre staff.”

Duncan says a practical example of this is where customer contact staff in call centres are empowered to take ownership of solving clients’ needs with the reassurance that promises they make will be honoured by the organisation. The double-whammy of this is that it reduces costs, boosting productivity levels while at the same time making the call centre staff feel more fulfilled. The effect of such initiatives can have significant effects on the organisation’s bottom line, he says.