The Human Toll of Belt-Tightening

Karen Alston, president of Washington, D.C.-based Alston Marketing Group, has felt the pinch of a tightening economy. “Last year, I did projects that paid $75,000, $100,000 and $150,000,” the 37-year-old entrepreneur says. “Now it’s $5,000, $10,000 and $16,000.” Belt tightening among clients has even forced Alston to lay off her five employees but, recognizing that her business needs their expertise and loyalty, she continues to outsource work to them until she can re-hire them when the economy improves. “Once the projects are coming in on a larger scale, they’ll be the people who will be rewarded,” she says, “whether it’s through profit-sharing or bonuses.”

Like Alston, small business owners are finding themselves faced with the task of cutting costs while maintaining employee loyalty. “You have to

have already created a healthy organizational culture and one that inspires loyalty to begin with,” says Nicole Cutts, CEO of Cutts Consulting (www.cuttsconsulting.com), a professional training and development firm in Washington, D.C. “People are not going to feel loyalty and stick with you through tough times if you haven’t been genuinely involved in their lives before this.”

While every employee won’t ride out the storm, there are strategies business owners can use to keep valued employees on board as the business weathers economic turmoil.

Be honest. “People feel stressed and fearful when they believe that they don’t know what’s going on in the organization,” Cutts says. Not only should business owners let employees know that the bus

iness faces challenges, but they should ask employees for input in how to cut costs, says Loretta Love Huff, president of Phoenix, Arizona-based Emerald Harvest Consulting (www.emeraldharvest.com). Bringing valued employees into the planning process gives them a sense of buy-in, Love Huff says, and “they’ll probably come up with some ideas that you’ve never even thought of.”

Create new currencies. If you’re asking employees to accept a temporary pay cut or a reduction in perks or benefits, look for alternative ways to compensate them, Cutts says. Some employees may respond well to praise and recognition. Others may be won over by the opportunity to work on a challenging project that can advance their careers. And some may be motivated by the opportunity to work from home, a move that can also cut costs for the business even more. “It’s important to know the people you’re dealing with so you’ll know the kinds of things that will motivate them,” Cutts says.

Explain business basics. If you want employees to avoid excess spending, explain how their actions affect the bottom line. “Show them what they do to spend money and what they can do to slow down those expenditures,” Love Huff says. “You want to get the employees to realize it’s everybody’s problem.” Also, let them know what cuts you’re making. “You have to lead by example,” she adds.

Think future rewards. Though the present economic environment may be tough, let employees know how you’ll reward their loyalty once the turmoil has ceased. Not only will employees know that you’re confident that the business will weather the

storm, but they know that you appreciate their efforts and their willingness to work with you. Of course, when the time comes, stay true to your word or else employees won’t trust you and will be out the door. “You never want to make promises that you can’t keep,” Cutts says.

Mark your progress. Find a way to measure whether the company is achieving its new financial goals and let employees in on the progress. When employees do their part, acknowledge it and, when the tough times are over, celebrate the company’s success, Love Huff says. “When you do take the time to acknowledge success, employees will be that much more willing to do something for you in the future.”