10 March 2008
Executives fear poor decisions from recession inexperience
"Knee-jerk" reactions and “panic firing” look likely.
The UK and US economies are heading for recession but the majority of senior executives have no experience of management in hard times. Furthermore, employees have no faith in their management's abilities, so suggests recent research by The Pentacle Virtual Business School.
Plenty of "boom" but no experience of "bust"?
The research, based on a survey of more than 200 business people in the UK, finds that a large percentage of senior management (70%) admit that UK bosses have little or no experience of how to deal with impending economic situation.
UK bosses have little or no experience of how to deal with impending economic situation.
In addition, 62% believe business leaders lack experience of being more tactical and exercising caution in a difficult economic climate. Further findings from the report include:
- A majority of executives (62%) estimate that under a quarter of the senior staff at their own firm held key senior positions at the time of the last UK recession in the early 1990s.
- 64% believe that the UK economy has been booming for so long that many senior bosses have little or no experience of how to deal with a downturn.
- 62% think that business leaders have been valued for their vision, positive culture and risk-taking, leaving them with little experience of being more tactical and exercising caution in a difficult economic climate.
Boom time has finished
According to Pentacle's director, Professor Eddie Obeng, some harsh lessons are about to be learnt.
“After a long economic cycle with nearly 15 years of growth, most of those at the top of business today are used to vigorous expansion, ambitious projects and taking major risks, all with unwavering confidence. A strong economy has often protected them from the impact of bad decisions," says Obeng.
"The question is whether these same bold leaders have the expertise to adapt to much more challenging conditions. With most British workers questioning the ability of bosses to be 'more tactical' and 'exercise caution' on this side of the pond, you have to wonder about the effectiveness of management to deal with a downturn. A steep learning curve is coming.”
A lack of faith in executive decisions
The research data also suggests that what executives believe should happen – improved communication and renewed focus on core revenue-driving activities – most certainly will not happen, furthering a widespread lack of faith in capabilities.
- 83% of executives argue that senior management should invest in strong internal communications in a downturn, yet only 1 in 5 believe that they will actually do so.
- Similarly, 56% believe that businesses should actively remunerate key staff, but only 26% think this will happen.
74% of junior staff confess that insecurity, distraction and 'fear of the chop' may damage struggling businesses.
Instead, the widespread view is that cost-cutting will be the top priority, with 95% believing that reviewing headcount will be the prime focus. Subsequently, 74% of junior staff confess that insecurity, distraction and “fear of the chop” may damage struggling businesses further, as workers vie to impress those at the top.
Employee fears appear to be justified, however, with 71% of senior management also believeing that as soon as the downturn hits the bottom line there will be a knee jerk reaction of “panic firing” from the top.
Employee awareness
Professor Obeng says employees are keenly aware of the inevitable reactions of inexperienced management.
“On the whole, staff appear to be quite clued-up on the agenda of senior management and the watchful eye that will be kept on financials when things get tough. Yet interestingly, two-thirds still argue that curbing business plans and investment should be a low priority for management.
The very nature of a downturn – from staff insecurity to effective financial control – means that priorities must change with business plans being reviewed, for the security of the business and its employees," says Obeng.
Have your say
Tougher times may be on their way, according to several business sources. What will this mean for internal communication? How well geared up is your internal communication strategy and delivery plan if the economic waters start to get choppy?
A downturn could provide internal communicators with a major opportunity to work with senior leaders, particularly given Pentacle’s survey results that suggest top level leaders are inexperienced in such economic situations.
What discussions have you held with your leadership about helping them communicate through a possible future downturn? What's your experience of handling economic crisis? Do you agree with the survey's findings? How can companies help their managers prepare?
Discuss these issues with other comms practitioners by joining the Internal Comms Hub members' group on the Communicators' Network.
Related articles and resources:4 key crisis comms questions
11 ways to empower staff during change
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