Illustration by Chris van Es
President Barack Obama isn’t the only person losing sleep over the economy—plenty of employees, managers, and owners of Westchester companies are tossing and turning, too. Increased workloads, salary freezes, and slashed benefits haunt their daydreams, while dwindling 401(k) accounts, underwater mortgages, and potential layoffs give them nightmares. Add a constant stream of bad economic news, and it’s no wonder that morale in many workplaces is sinking faster than Ben Bernanke’s approval rating.
On the other hand, does employee morale really matter? That’s an ugly way to put it, but a case can be made that businesses don’t exist primarily to make employees happy—profits come first. A day at work isn’t supposed to be an eight-hour birthday party. When profits are squeezed as they are in today’s economy, management’s attention is necessarily focused on making sure a company stays afloat. Which, after all, is good for the employees, too. No profits, no jobs—the ultimate morale killer.
But while employee morale may not be an end in itself, it certainly does impact productivity. More time spent kvetching around the water cooler means less time servicing customers, making widgets, or spiffing up the product displays. And when a negative outlook prevails, profits plummet. What’s a manager to do? It’s tempting to tighten the belt another notch or two, but that’s probably just going to make matters worse, especially if employees feel that belt is around their neck.
“The problem now is that organizations are worrying about head count and the bottom line and ignoring the simple fact that people need resources to succeed,” says Steven Kramer, author with Teresa Amabile of The Progress Principle, a Harvard Business School-funded report on satisfaction in the workplace. The pair studied almost 12,000 diaries about workdays compiled by 238 adults at seven companies.
A 2010 Gallup poll showed roughly one in four Americans is worried about being laid off in the near future. That’s nearly double the rate reported in August 2008, just prior to the Wall Street financial crisis that sent consumer confidence and the job market tumbling.
Employees often expect management to do something—anything—to make them feel more secure or at least more appreciated. Unfortunately, managers and company owners are feeling insecure, too. For many of them, more than their jobs are on the line. It could be the company’s ability to meet its payroll, service its debt—or even to survive. Plus, there aren’t a lot of arrows in management’s quiver of sure-fire morale boosters. The usual feel-better-quick remedy is money—raises, bonuses, more benefits, and other costly items. When the company’s problem is lack of cash, though, the money cure just isn’t going to happen.
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Employers are caught between the proverbial rock and hard place. Revenue growth (if there is any) is, at best, tepid, while costs—especially health benefits—are skyrocketing. “I can’t think of a single employer who, in the last five years, hasn’t asked the employee to contribute more to the cost or taken away benefits,” says York International Agency CEO Robert Kestenbaum. “Health-insurance costs go up ten to twenty-five percent every year. The employer can’t handle that entire increase.” The Harrison-based agency provides all types of insurance for companies and individuals in the tri-state region.
Cutting benefits causes more than just nasty chit-chat around the water cooler. “Changes in benefits not only impact the employee, but their families, too,” Martin says. “Many companies are trying different things that don’t impact benefits as much, but they’re starting to run out of options.”
Some of the savings companies are looking at are not quite so obvious as increasing the employee contribution to benefit plans. “There are services that aren’t used much,” Martin says. “You can pull those out and half the employees probably wouldn’t even notice.” Many companies are considering cuts in lesser-used benefits like dental plans, disability benefits, and life insurance. The problem is, those aren’t particularly expensive for companies to provide (so cost savings are minimal), while employees often value them even if they don’t use them. A MetLife survey released this year found that 59 percent of employees consider such benefits important.’
As Kramer points out, “The reality is, we talk about shared sacrifice, but cutting benefits for top management doesn’t hurt them much. The people it really hurts are the people who depend on those benefits.”
Harrison-based Castle Oil Corporation, a heating fuel and natural gas supplier with 200 employees, takes a different approach to the benefits problem, reports Theresa Delgado, Castle’s VP of Human Resources. The company has maintained the level of healthcare coverage provided by collaborating with brokers on plan design and increasing co-pays. Employee contributions, however, have not increased. “Our brokers can’t believe we don’t ask for more,” she says. The company uses a sliding scale based on salary levels to determine the amount of employee contributions to their health coverage, so higher-paid employees contribute more. Until this past year, “that scale had not changed in the last ten years,” Delgado adds.
But when the company simply can’t absorb the increased costs, Kestenbaum says, “We communicate as early as possible and work with the staff on it. We’re very open about it. We show our employees the cost of our health insurance. They’re on the committee that picks the plan.”
That old standby, communication, helps employee morale in just about every circumstance. Often, employees who know the company’s predicament will actually work harder to improve it, if for no other reason than self-preservation. Companies who share their financials (as publicly traded companies are required to do), can lighten the cloud cover around the water cooler. But managers should also keep in mind that actions speak louder than words—maybe even louder in tough times.
It’s almost impossible to get the staff to believe the company can’t afford raises when the CEO redecorates his office or buys a new car. The boss who strolls in at ten and saunters out at four doesn’t get much productivity from the staff who has to work late covering for the people the company laid off. If bad things are going to happen, management should talk about them, too. The scariest part of any horror movie isn’t the plunge of the knife, it’s not knowing if the killer is waiting in the dark around the next corner. Management’s instinct is to delay releasing bad news as long as possible, usually in a misguided attempt to minimize the impact on morale. But employees aren’t stupid. They notice declining shipments, less store traffic, fewer customer inquiries, not to mention the deer-in-the-headlights look on management’s face. They know something bad is around the corner, they just don’t know what. Says Kramer, “If people’s jobs are in jeopardy, trying to hide it from them makes it worse.”
Castle Oil has downsized some, but tried to do it as painlessly as possible, says Delgado. The company laid off a half-dozen people in 2008, but the real strategy has been based on attrition, she says. “When someone leaves, we really evaluate how that work gets done. Can it be done by other team members? Do we really have to hire someone at all?”
Which can raise another major morale issue. “The problem with downsizing is twofold,” Kramer says. The initial layoffs and the buildup to them are disruptive, then, he says, “you’re left with people who have to sometimes do the work of two or more people. If they don’t have the resources they need to succeed, they become frustrated and demoralized.”
Delgado maintains that Castle Oil makes an effort to deal with increasing workloads. “We have a seasonal kickoff lunch, give gifts to the employees, and make a little noise about it,” Delgado says. “We do something similar with a ‘thank you’ theme at the end of the season.” Last year, some employees requested a “Biggest Loser” contest, so the company put up some prize money and threw a special lunch for the contestants.
Marc Mazarulli, CEO of The Mazarulli Restaurant Group—owner of Opus 465, Marc Charles Steakhouse, Wild Westchester BBQ, and Three Little Pigs BBQ—has about 50 employees in Westchester. “We trimmed back,” he says. “Our people are doing a little more, just like I am. Instead of wearing ten hats, now I wear twenty.”
Mazarulli’s staff has been hit with a double whammy—more work and lighter tips. “Our employees are frustrated like everyone else,” he says. Corporate entertainment and travel cutbacks have impacted the staff’s income. In an effort to increase tips, he says, “we try to help them give the best service they can give.” The company has put an extra manager on the floor while assigning two waiters instead of three to a table. “That helps make their pockets a little fatter.”
Another way to lighten the workload—as well as the employee’s outlook—is by investing in training and education, according to Martin. In the past, personal-growth programs may have existed at many companies, but they were underutilized.
Mentoring programs, tuition reimbursement, or training and development efforts are now being promoted more actively.
Why? Kestenbaum says, “It not only improves morale, but it increases their knowledge and makes them better, smarter employees.” York encourages its employees to take insurance industry courses and pays 50 percent of the cost of a course upfront, then reimburses the remaining 50 percent upon completion. “We also give a two-thousand, five-hundred-dollar bonus and an expenses-paid trip to the national convention for employees who earn a certain industry designation, which requires three to four years of night classes and extra study,” Kestenbaum says. Several of his employees are taking classes, and two of his staffers achieved that goal in the last year.
Delgado says her company focuses on customer-service training. “Maybe our customer-service people are doing a little more, but we’re giving them more skills.”
Paul Adler, VP of Rand Commercial Services, says his company’s 725 agents (including 280 in Westchester) are encouraged to learn on the job and to use the latest tools. “Are people down? Sure,” he says. “But we’ve encouraged them to take classes, get new technology, and learn new skills. We’re not giving them an opportunity to dwell on the downturn.” Rand employees can earn up to $900 for real estate conferences, conventions, or personal-improvement courses. Technology credits can be used for items like iPads, video cameras, or software. The company sees a return, too: “For us, it’s a great reinvestment in the agent,” Kramer declares. “Training signals to people that they are valued.”
Not all education needs to be directly job-related, Martin notes. “Another thing is offering financial-services advice, lunch-and-learns, educational sessions you can attend on company time on the company’s dime.” She’s seen companies bring in insurance representatives to talk about how to handle benefits more wisely. Another did a session on identity theft. “Different things to let employees know the company is thinking about them.”
Castle Oil takes it a step further. The company has a wellness program that reimburses employee costs up to $100 for just about anything health-related, including smoking-cessation aids, gym memberships, exercise equipment, even golf lessons. They also bring yoga instruction onsite once a week.
Another morale-boosting tool is appreciation. Believe it or not, most people work not just to get a paycheck, but because they get satisfaction from accomplishing something every day, Kramer says. So management should take every opportunity (and even create a few) to let the staff know their contributions to the company’s well-being counts. “Attaboys” aren’t cheap; they’re priceless.
Adler says Rand gets a big return on its investment in employee recognition and social events designed to foster teamwork. “We do a lot of social events with the agents,” he reports. “Each residential office has a weekly meeting—around food.” The company also has frequent outings, like the one they held at Provident Bank stadium in Ramapo, New Jersey, where more than 100 agents and their families were treated to a ballgame, hot dogs, and sodas. “We also have an annual gala, sort of like the Academy Awards, as well as a company breakfast where agents from all of our twenty-five offices in the region gather to honor each other.”
He adds that the company encourages individual offices to get behind volunteer efforts, like the one in September when employees in Yonkers spent a day painting the facilities at Jawonio, an organization that provides services for the disabled. Castle Oil believes community support is good for employee morale, too, according to Delgado. The company backs employees’ charitable causes, sponsors a company-wide Coats for Kids collection, a March of Dimes team, a Junior Achievement program, as well as adding funds to some individual employee contributions to specific causes.
“Some companies, instead of doing a summer outing, will do a day with Habitat for Humanity,” Martin says. “The employees don’t mind seeing the company spend money that way, whereas they may say about a social event, ‘Why are we giving a party when people are losing their jobs?’”
Right now, many people cling to their jobs because they know how tough it is to find another one. But that won’t last forever. Economic trends are cyclical. What goes up not only comes down, but the opposite is generally true as well when it comes to financial indicators like the stock market, the price of gold, and even the unemployment rate. What happens when the uptick begins?
“There is a concern that when things do turn around, people will leave,” Martin says. “You have to worry about retention of your good folks.” MetLife’s study found that 47 percent of employees report feeling very strong loyalty to their employer, down from 59 percent just three years ago.
Kramer puts it bluntly. “The problem for organizations is who are they going to lose? When things turn around, the first people out the door will be your best people, not your worst ones. Then you’re at a competitive disadvantage because you didn’t take care of your folks.”