How Do You Handle Sticky Situations With Your Employees?

I met up with Nancy, a COO friend of mine for coffee in early July and she was visibly perturbed. 

“Wow, you look upset, what did I do, I’m not late am I?” I asked.

“It’s not you Jeff, I just had a rough meeting with our CEO. I typically get paid a significant percentage of my total compensation with a mid and end of year bonus. Well, I just found out that I am getting no bonus for the first half of 2010. Actually, I was so upset I almost cancelled, but figured it would be good to vent with you," she replied.

“That’s terrible that you didn’t know this earlier, although the news should not have surprised you,” I replied.

“What do you mean?” As she now set her anger on me. “I was counting on that bonus for my family vacation in late August."

“How has your firm done so far this year?" I asked.

“Well, as you know we laid off about 15 percent over the course of several quarters, and I just found out that the owner dipped significantly into retained earnings from previous years to fund the business," she replied.

“And you were expecting your full bonus Nancy?” I asked.

“Due to the layoffs and revenue shortfall, I was not expecting to get the full amount, but I wasn’t expecting zero. Now I can’t stop thinking about it. I am so upset that I am thinking about starting the job hunt," she said. "And you know me, once I begin process, there is no turning back.”

Regrettably, I speculate this talented executive would not be thinking about leaving, even with no bonus, if her CEO had thought about how the situation occurred to her and acted upon it. 

Here is a similar situation with a much different outcome:

Late last year, I met with Steve, a CEO of a different firm, similar industry, that was going through a similar situation. Steve discussed with me the upfront conversation he had with his executives and staff dating back to 2008, when they first started to see the slowdown in business.

“Starting with the budget process that began in late 2008, our management team looked at the choices together and decided on a combination of pay cuts for everybody, even steeper for executives, combined with a reduction in staff in order to meet our cash flow requirements for 2009. That was good from a fiscal responsibility," he said. "I also knew we had a responsibility to our employees and making sure they knew what was going down and why. So, combined with the layoffs I had a company meeting to specifically address the compensation changes before we implemented them.

“How was that meeting Steve?” I asked.

“Actually, it was quite positive although I don’t want to give you the wrong impression, it was a relatively somber meeting. Our CFO and myself shared all the cost and revenue numbers with our team, so they understood why we made the hard choices we did," he said. "I could see that the team could understand the problem for themselves and appreciated the open conversation.”

“And the feedback afterward?” I asked.

“Jeff, during the course of the next few days, I had conversations with most of our employees. Many of them were upset, especially the ones who knew me well, for not having this conversation sooner," he said. "Some wanted to know more, the majority came by to thank me, and others actually encouraged me to stand tall. Basically, they were letting me know they had my back. This would have been a real disaster for the company and we could have permanently damaged relationships with some great people, instead I think it brought us all together.” 

To create a valuable and exciting firm requires a staff that is fully committed to the journey with you. Understanding how situations occur to them is a requirement for their full commitment.