Show of strength

Companies in the leisure industry may be left with no choice but to make redundancies, but the real sign of leadership will be how they manage and empower their staff past the downturn.

The world is in recession, and people are nervous about their jobs. For those working in leisure and hospitality, the relative security they enjoyed has long gone. As hotels and leisure facilities make their staff redundant, the question of how to make the most out of remaining employees, whose confidence levels are low, is becoming critical.

The fear of losing their own jobs impacts on employees’ overall performance and motivation, and, ultimately, on a company’s ability both to compete, and to recover when the economy improves.

Though redundancies are at times necessary to ensure a company’s survival during downturn, there are many strategies companies can employ to minimise long-term damage, says Ernst & Young’s head of human capital in the Middle East Mohammed Salem. In their haste to cut costs and survive downturn, he admits, many companies not only cut back on more staff than necessary, but do so almost arbitrarily. “Shedding people is a measure that many organisations have to make, but the way they should do it is to link redundancies to the performance of those individuals.”

A company’s key performance indicators (KPI), he continues, should be directly linked to the job description of every employee within the company. When this is done, he says, “each one of them will know where they are heading, making it easier for them to contribute to the success of the organisation.” Companies will then be armed with the right quantitative data to allow them to cut costs while minimising the long-term damage of doing so.

During times of downturn, when management is nervous about cash flow and return on investment, it is easy for companies to concentrate power in the hands of a few, effectively stripping the authority of many middle managers. “Accountability and authority are being taken back,” says director of financial consultancy Berkeley Burke & Co, James Berkeley. “If I’d had the authority on a middle management level to make decisions, now the consequences of my decision are quite big for the organisation. The people at the top fear the consequences of those, so they’re going to take that decision out of my hands.”

When decision-making powers are taken away, he continues, job insecurity increases, thus affecting employees’ ability to make every day decisions about their work. “If the consequences of me making a decision could ultimately cost me my job, and if I don’t think there are opportunities elsewhere to find that role, then I’m going to be very nervous about making those tough calls, and I’m almost going to duck to avoid making them.”

Though centralising decision-making may make sense in the short-term, Berkeley warns companies to beware of the long-term consequences. “No company has ever grown through reduction,” he says. “No company has ever grown through reducing accountability and authority over the long term.”

The key to maintaining sound management strategy through a downturn, says Salem, is by implementing a policy of decentralisation, backed up by clear corporate governance. “The concept of decentralisation is very important to give more power to the various departments within the organisation, and corporate governance provides the right controls.”

Within this strategy, he continues, it is crucial that companies provide an ‘authority matrix’ for their every individual and department. “This governs the exact kind of power that each individual within the organisation should have, whether that is derived from financial or administrative power.”

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