Preventing Worker Paranoia

In times of economic uncertainty like today when people feel they have less control over their jobs, their income and their lives, it is common for people to engage in a psychological phenomenon called pattern perception (see our June 10 post). Uncertainty about the future generates feelings of unease that can cause considerable stress, leading the mind to search for patterns in events where no patterns exist. It’s a phenomenon that has people seeing conspiracies in government actions and finding hidden, unintended meanings in business announcements. It’s the phenomenon that causes people to think the worst when managers meet behind closed doors or co-workers start whispering. Illusory pattern perception feeds company gossip mills to negative effect, sowing seeds of dissatisfaction. The result can cause paranoia that negatively impacts worker efficiency, decreasing product quality and slowing production.

How do companies keep paranoia from spreading through their workforce? Human resources experts say open, honest and frequent communication is the key to reassuring nervous employees. Companies must be proactive in addressing not only internal gossip but external rumors. A brief news article or minor drop in a company’s stock can generate fear far out-of-proportion to the actual event. If faulty information is not corrected immediately, it has the potential to mushroom into panic that can cripple your workforce — and even worry investors and stockholders. Addressing issues as they occur via email, memoranda and company newsletter is important; but don’t ignore the value of the personal touch.

Nothing alleviates fear like the ability to address it head on. Open meetings allow managers to directly address worker fears, project calm and provide accurate information. Q&A sessions can provide workers with the opportunity to voice their concerns and ask for the specific information they need to feel confident about their position in the company. Allowing give-and-take sessions between management and workers provides managers with valuable information about worker concerns and the current psychological state of their workforce. For workers, such sessions meet two psychologically critical needs:

  • They allow workers a direct avenue to management, making them feel empowered and more in control of their destinies.
  • They serve to invest workers in company processes, increasing feelings of control by promoting a “we’re all in this together” sense of community.

Communication with its workforce should always be high on a company’s agenda; but in these uncertain economic times, effective communication with your employees can have a significant impact on both worker and production efficiency and quality.

Finding the Silver Lining in a Stormy Economy

Despite the doom and gloom of news reports, there is a silver lining glinting through our stormy economy. The trick, says Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, International (FMA), is knowing where to look. In the FMA economic newsletter Fabrinomics, Kuehl reported finding three precious gems amidst the ashes that provide unique opportunities for savvy businessmen. Manufacturers and businessmen who make use of these three unexpected opportunities will position themselves to take maximum advantage of future opportunities as the economy recovers.

  1. Commodities. Costs are dropping on some of manufacturing’s most used commodities. After posting historic highs, the price of oil has dropped more than $70 in the past three months. While diesel prices unfortunately haven’t dropped at the same pace, the price of gasoline has plummeted to less than half what it was last summer. Steel and copper prices are also sagging. “In fact, most commodities have slipped,” Kuehl notes, “which is good for businesses where these costs are the biggest considerations. Of course, lower input costs don’t help much if demand for the finished product is off, but it doesn’t hurt to get some cost relief when the recovery begins to surface.”
  2. Labor. Unemployment has created a highly skilled, diverse and available labor pool. “The unemployment rise puts some talented people on the market,” Kuehl notes, “and that allows smaller companies to have access to people only larger companies were able to recruit in the past.” The strong labor pool provides an excellent opportunity for companies to improve their employee base and strengthen weak areas. Kuehl also notes that in a downturn people are more grateful for their jobs which can result in higher productivity.
  3. Banking. The mortgage meltdown and resultant credit crunch has taken a heavy toll on America’s banks. The Feds have been forced to shutter a number of small local and regional banks and even the big boys are hurting. Those that survive will be looking for smart ways to re-engage with businesses and consumers. This is the time to strengthen your relationship with your banker. The economy will recover in time and an effective banking partner will allow you to update and expand to take advantage of future opportunities.

New Trends Will Affect Speed, Strength of Economic Recovery

The heart monitor on the economy has started beeping again, apparently shocked into recovery by the dual application of bailout money and stimulus funds. Of course, there’s still concern that the cure may prolong the patient’s recovery but the big guy does seem to be on the mend. Many economic analysts are now predicting that true recovery from the recession may begin as early as next quarter, that’s six months to a year ahead of previous predictions. Naturally, there’s disagreement about the strength and speed of the economy’s recovery. “The question is whether we are transitioning to a solid growth period or to something flatter,” explained Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA), in the FMA economic newsletter Fabrinomics.  

Kuehl pegs the strength of the economy’s recovery to three emerging trends that manufacturers and businessmen will need to factor into their plans as they position themselves to compete in the post-recession market:

  • Cautious consumers. High unemployment and the continuing threat of job loss has made consumers wary of spending and further depleting any financial reserves they have left. Most economists expect consumer spending to lag other signs of recovery, further slowing the recovery process. Until unemployment rates return to post-crisis norms and consumers regain confidence in the economy, demand for goods and services is expected to remain low.
  • Consolidation. Financial chaos has forced mergers and acquisitions in the U.S. and around the world, and not just in the automotive industry, Kuehl points out. Manufacturing bases have gone global, shifting from the U.S. and Europe to Asia, particularly China, and Latin America. Digging a toehold into these markets will be essential — and extremely challenging — if manufacturers, especially smaller players, are to survive. The complexities of global business may encourage even more consolidation as small manufacturers partner with larger ones or form cooperatives to gain global access.
  • Unsettled financial markets. While banks and financial entities took the brunt of the first blow, they haven’t carried the burden of the economic crisis. Even so, they are still recovering which will continue to make them wary of lending money. The yet-to-be-known impact of new government oversight and regulation will also be a factor. Kuehl sees a return of the “old-school banker” with tougher credit standards, demands for greater cash flow, and less money available for growth and expansion.

Is There Light at the End of the Tunnel?

The Dow is plunging, financial institutions are failing, credit is drying up and long-time Wall Street icons are plummeting into bankruptcy. The U.S. economy seems to be falling like a poorly stacked house of cards. The news is full of doom and gloom and more gloom. Is there light at the end of the tunnel?

In a word, yes. But it may be a long tunnel, say manufacturing experts. There are things you can do to calm worried employees and weather the storm, says Joe Cogliano in Manufacturing & Technology eJournal.

  • Keep your staff in the communications loop, says Jay Kuhn, president of Definity Partners, a business improvement company. When the economy tightens up, employees worry about job security, providing for their family, even putting gas in their car to get to work. All that worrying takes a toll on worker productivity. Being honest about what’s happening in your company will bolster employee morale. “Workers are going home and they are hearing bad news everyday,” says Kuhn. “It’s important they know what’s going on because everything the company does is really going to be taken as a negative sign, whether it’s meant to be taken that way or not.” Employers should be prepared to answer questions and explain even minor changes like switching an insurance carrier to reign in employee nervousness. Keeping employees in the loop can alleviate their fears and keep office gossip in hand.
  • Keep things positive. Worry and stress take a physical toll on workers which can result in increased absence rates. Keeping things positive helps make workers want to come to work.
  • Embrace patriotism. Historically, Americans respond positively to hardship and sacrifice when they know they are helping their country. “Small and medium-sized businesses need to realize they’re the backbone of our economic growth and job creation,” says David Velie, managing partner of Amend Consulting/Techsolve, a manufacturing improvement consulting firm. “Remind teams that they’re the strength of the economy, not the Fortune 500s and the housing sector.”
  • Maintain your cash flow. Take a close look at factors that affect your cash flow. You may need to reign in credit terms and be more aggressive about collections to improve your cash flow. Watch for potential cash-draining trouble spots. Kuhn says business owners should base every decision on a “cash is king” model.

Things may be rough for all of us for a year or two, but as Kuhn points out, “The economy does come back; it always comes back.”

Recession Over but We’re Not Out of Woods Yet

Today’s headline blared: “Recession officially ends, with trepidation.” Ain’t that the truth! In officially declaring the recession over, the U.S. Commerce Department cited a 3.5% growth in the economy. Encouraging, certainly. Something to cheer about? Apparently Wall Street thought so as the Dow Jones Industrial average shot up nearly 200 points. But the guy or gal on the street? Maybe not so much. The effect seems more psychological than actual. Economists caution that much of the 3.5% increase in gross domestic product was fueled by the government’s Cash for Clunkers program and first-time homebuyers tax credit. Whether those programs have created an unnatural spike in economic growth that can’t be maintained or the economy really is finally throwing off the chill of recession, only time will tell. But until unemployment decreases, most analysts agree we’re not out of the woods yet.

Getting people back to work is the real challenge now. People aren’t going to start buying again — the necessary trigger for real economic improvement — until they have jobs and can stop worrying about keeping food on the table and a roof over their heads. And the jobs won’t be there until American businesses feel comfortable financially. A bit of a vicious circle: consumer purchasing fuels businesses which fuel jobs. Traditionally, small businesses provide the greatest potential for U.S. job growth; so it was interesting to read the results of the American Express OPEN Small Business Monitor bi-annual survey in Manufacturing & Technology eJournal.

Here are some of the survey highlights:

  • 51% of manufacturers have a positive outlook, about the same as last year (52%)
  • 61% are experiencing serious cash flow difficulties, compared to 47% a year ago
  • only 22% plan to hire additional employees, down from 30% six months ago 
  • only 36% are planning capital investments, down from 59% in 2008
  • 68% think U.S. economic woes are far from over

DJ Products would like to know what you think and how your business is coping with the recession.