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Often executives are forced to make decisions that may be in direct conflict with other constituents they represent. For example, a “business decision” made to improve the financial situation of the organization may be in direct conflict with the employees, customers or partners of that business.
Two recent examples come to mind. Lloyds Bank in London recently announced that it was going to move a 1,000-person call center from Newcastle-upon-Tyne to India where they could reduce the cost of the service. Thanks to a growing global economy and cheap and virtually unlimited fiber-optic capacity, a company like Lloyds can de-localize their workforce, farming out low-to-medium skilled, labor-intensive jobs to areas with cheaper pools of labor. The business rationale is impeccable.
But what is the human toll on trust to the organization and the communities they serve? And are the dollars saved worth the aftermath of the decision?
While Lloyds has assured its Newcastle employees that job losses would be handled with the utmost care and sensitivity and that customer service won’t suffer, you don’t have to be a cynic to feel like this sounds like the bank publicist’s talking. In addition to a public outcry, shortly after the announcement MPs in Parliament talked of corporations “generating profits without a conscience.” It’s too early to tell what the long-term consequences of this move will be, but just think of all the people who have lost a little faith in what is one of the world’s most venerable banking houses.
In another case, Singapore Airlines, suffering from the economic slowdown and the SARS outbreak, reduced employees' pay by 5 to 16.5 percent and reassigned 600 employees and downsized another 145. Now they too are trying to overcome poor morale. And while employee bad attitudes are bad enough in this highly competitive service industry, the real problem is that high-level employees are walking too. This small national carrier, known worldwide for the best service in the air, has seen 27 pilots resign or take jobs elsewhere. A large number of aircraft engineers, cabin crew and company executives have also fled to better paying jobs elsewhere. It has gotten so bad at Singapore Airlines that, according to the Straits Times, there will be no vote for the executive committee this year since there are only 17 candidates for 19 seats.
The source of the poor morale seems to be that employees took pay cuts during the tough times when the airline was losing money. But in the last quarter the business made a S$302 million profit. Naturally, employees wanted their wages reinstated. Airline officials announced that they would make a one-time, lump sum payment to compensate for lost wages, but they did not guarantee restoring wages to pre-SARS levels.
In both of these examples business leaders made decisions that appear on the surface to be reasonable and prudent for the health of their respective organizations. However, they failed to look at the impact their decisions would have beyond the bottom line.
Now both organizations are paying a high price for their actions. Lloyds has been forced to put counter-measures in place to stem the tide of negative feedback they have received from both employees and customers. The ultimate cost is projected to be in the millions. Meanwhile, Singapore Airlines has lost a major talent war while all the while risking losing their reputation for providing the best service in the sky.
What could the leaders of these businesses have done differently to balance both business objectives and maintain trust?
Looking at the Six Partnering Attributes, namely Self Disclosure and Feedback, it’s clear that the leaders of both organizations needed to communicate more with employees and customers before planning a big change. Both Lloyds and Singapore Airlines could have held employee and community input meetings to discuss the issues and to solicit feedback. By “going public” with an issue, leadership would have built credibility with people rather than appearing to act behind their backs.
More importantly, these meetings would have generated a torrent of information, which might have contained a gem of a solution that would have led to a win-win outcome. You skeptics out there might say that it’s overly idealistic to hope for such an outcome, but the point is for business leaders to at least try. Even if the organization still ends up making a hard decision, by involving people and being honest with them you will at least keep their trust.
Self-Disclosure and Feedback are not optional. If you don’t employ these key Partnering Attributes you will have mistrust. Leaders who continue to believe that they live in a closed world and that people don’t see or understand the consequences of their decisions are kidding themselves. In fact, if anything the world is becoming more and more transparent. Thanks to the Internet and 24-hour cable news, leaders who think they are engaging in cloak-and-dagger escapades now appear silly at best.
When confronted with a tough decision, here are some steps that you can take to make your employees and customers feel like partners instead of victims:
The most powerful way to build trust is by talking about trust. Executives cannot evade their responsibility to talk about this important element of business life. Damaging trust is costly. Sometimes the impact of damaged trust can take decades to overcome and cost millions of dollars.
Do You Have A Trust Infrastructure At Your Workplace?
If you answered “No” to two or more of the above questions, you probably do not have a Trust Infrastructure in place within your organization. To learn more on how to build a Trust Infrastructure at your workplace, contact us.
Many more articles in Partnering & Alliances in The CEO Refresher Archives