NEWSROOM

John P. Kreiss, MorganSullivan, Inc.

The news lately in construction and real estate has not been pretty. Credit is scarce and competition among contractors for new projects is becoming fierce because more companies are bidding on a significantly smaller pool of available projects. Managing people in this type of economy becomes even more challenging because they’re the most important and often the most expensive part of any business. Here are some tips on managing people in a down economy:

Communication and open-book management. Talk to your people and share the financial information with them. This lets everyone know where the company stands and what needs to be done to be successful. Failure to communicate this type of information leads to speculation and rumors and the rumor mill is always worse than the truth. Employees also appreciate open communication and respect. Keep them informed of all news good and bad.

Rankings. The Jack Welch system of ranking employees is a good idea in any type of market. If cuts have to be made to remain profitable, eliminating the lowest ranking employees makes the most sense.

Start at the top. Too many companies let the junior employees go first when there are often some unproductive employees at the upper levels who’ve been burning payroll for years. Let too many staff level employees go and risk being left with too many management level employees and not enough people to do the work.

Sacrifice at all levels. Employees tend to be more willing to accept expense reductions when they see owners sharing the pain. Company principals have the potential to get the most rewards in good times and should accept sacrifices when times are not so good. Avoid major purchases like company vehicles when cuts are being made. These types of moves often lead to resentment among the rank and file. This should be common sense, but it happens.

Avoid across the board wage freezes. These types of moves often lead to resentment among the top performers in the organization. Many of these individuals might see this type of action as a form of socialism where money is taken from good performers and distributed among poor performers. Get rid of the lower performing employees before considering this type of action.

Treat people being laid off with dignity. If you have to lay people off, think about how your existing employees will react because they will observe how you treat the people being let go. Treat the people being let go with respect. Avoid firing people in groups and do the terminations in-person. Firing people over the phone or via email is unacceptable.

These types of actions are not fun, but often necessary for survival. Hopefully, the recent legislation in Congress will help in getting the US economy back on track. In the meantime, watch the cash flow and communicate frequently. Companies that do this are likely to do very well when the economy recovers.