Wednesday, November 28, 2007

Employee Motivation Verse

Recession-Proofing Employee Motivation

As we hear more predictions of an economy showing signs of weakening, managers around the country are asking a couple of key questions: Are we prepared for a recession reminiscent of the early 1990s? Did we learn enough from experiences nearly a decade ago to improve how we perform in 2001? The answer: probably.

While the financial experts monitor and project the extent of an economic slowdown, little doubt remains that the early years of this decade will likely feature layoffs and restructuring across every industry. These staff reductions, or even the anticipation of them, can have a dramatic influence on employee motivation and productivity. Recognizing the warning signs of declining motivation and overall morale can allow managers to respond quickly with intervention strategies aimed at propping up declining productivity.

According to Brian Dailey, a business consultant to the staffing industry in Oklahoma City, there are many warning signs of declining employee motivation that can be expected during recessionary economic times. Some of these include: increased sick days as employees interview for other jobs, increased employee use of Internet time to surf job boards and send out resumes, fewer requests for long vacations, and greater interest among employees regarding company sales or financial strength.

Dailey suggests that while employee motivation may lag for a time, some incidental benefits to employers may include less tardiness and improved work habits as employees position themselves to survive potential staff reductions. Few employees will want to be perceived as marginal performers if the possibility of recession and restructuring looms in the near future.

The real challenge for managers is to develop strategies aimed at protecting employee motivation, despite the fear and concern normally attributed to tough economic times. Dr. Larry Craft, developer of the Craft Personality Questionnaire -- a tool that measures personality and motivation for pre-employment selection systems, understands the impact of uncertainty on employee productivity. According to Dr. Craft, companies looking to reduce expenses by slashing personnel need to take a hard look at the impact on current and future employees before choosing a course of action. "Future employees will tend to look for companies that offer consistency and will likely shy away from jobs in the long run where the potential for turnover is the highest." A company that receives media attention for staff reductions may find that candidates are few and far between when economic times allow for hiring increases.

Dr. Craft agrees however that most companies find it difficult to consider the impact on hiring it will undertake after a recession when the numbers suggest the need for staff reduction in the near term. His best advice is to understand the unique personalities of current employees and open the lines of communication early to avoid many of the problems associated with rumors and false claims.

Thousands of companies have used Dr. Craft's various testing services to do just that in the last two decades, and many find that the resulting productivity requires fewer staff reductions during tougher economic times. Rick Daughtrey, a consultant with CraftSystems(800.228.5866) of Bradenton, Florida, suggests that "it's really a matter of investing the time and resources on the right people and then cultivating them along the way, therefore reducing the need for cutbacks because the right people can typically pay for themselves over the long run."

Managers must learn to assess how they respond to good and bad economic times. Too many companies over-hire in good times and quickly look to downsizing as a temporary fix to slowing demand for their services. It has long been acknowledged that employees are a company's most valuable assets, but many are slow to recognize the full impact of these tough decisions on the motivation of surviving employees. A carefully thought out plan can go a long way in preventing the potential nightmare associated with cutting expenses while attempting to maintain productivity.

Finally, the biggest threat to employee motivation may be a shift in focus to self- preservation rather than team performance. What once was a finely tuned machine may break down as the individual parts become more concerned with whether they can meet their own goals, while failing to recognize that the team's performance may be their greatest hope for individual survival. The lessons learned from the early 1990s are simple: seek expert advice in selecting the right employees for jobs, teach managers to incorporate an understanding of personality and motivation into their communication, develop a game plan that utilizes cross-training to add flexibility to existing staff, and if you must downsize, do it wisely and do it rarely.

For additional information on measuring personality and motivation, go to or Dr. Douglas Waldo.

Courtesy ARA Content,

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Investing Course Ode

A Remedial Course in Investing

Was it really just a year ago that we were all running around trying to prevent computers from coming to a grinding halt on the first of January, and speculating about civil unrest and traffic jams around the globe?

Time flies, even if the ensuing year hasn't been much fun for investors. In hindsight, I'd say the real Year 2000 Bug was the gut-wrenching flu that struck the stock market, bringing a big dose of reality back into the picture.

For those of us who have participated in the investment arena for more than just the past couple of years, 2000 will likely go down as "not unprecedented and long overdue." For the investors who have come to the party more recently, it was a brutal, eye-opening, and sobering experience. Buying every dip didn't work. Dot-com IPOs didn't work. This year was truly a coming-of-age experience for millions of "adolescent" investors.

Those willing to stay the course benefited from a number of important lessons. In the style of that famous late-night talk-show host, here are the "Top 10 Things We Learned about Investing during the Year 2000."

Lesson Number 10: Yes, Virginia, There is a Wealth Effect.

I get frustrated when strategists point out that there's little correlation between what the stock market does and how optimistic consumers feel. Virtually everyone is involved in the market -- at least tangentially. And it's only natural to think twice about every purchase you make when the value of your investment portfolio is declining by double-digit amounts. Just ask the folks whose loans are tied to severely under-water stock options: Negative debt positions have a funny way of curbing spending.

Lesson Number 9: Rapidly Rising Markets Make Questionable Stocks Look Like Good Investments.

This is similar to the fact that floodwaters make a lot of things float that aren't actually boats. In a heady environment, the quest for the quick buck rapidly overtakes common sense, and companies with questionable business plans get funding (from venture capitalists) and attention (from analysts hoping for investment-banking business). Just because someone is willing to fund it or follow it doesn't make it a legitimate business plan or a viable long-term investment.

Lesson Number 8: Dot-Coms as an Asset Class Crashed; Dot-Coms as Businesses Didn't.

By some estimates, 95 percent of the pure Internet companies that went public in the past couple of years eventually will fail. Many already have done so -- with a lot less fanfare than when they were offered. Nonetheless, their very existence scared the daylights out of many "old-line" businesses, which quickly responded with their wherewithal, existing infrastructure, and newly energized management. These "new Old Economy" players are now wiser, stronger, and more nimble thanks to the brief threat from on-line competitors. I'm sure it's sweet justice for them to have the employees who jumped shop for greener pastures come running back -- even as the stocks of dot-com competitors fade faster than Fourth of July fireworks.

Lesson Number 7: Investing isn't for Wimps.

Gambling (read "day trading, IPO flipping, buying on hot tips, et cetera") is best done in casinos. Even though the economy, technology, and the world political scene all change, certain basic rules don't. To be a lasting entity, a company has to make a profit at some point. Another way to look at it is that in an economy growing at 3 percent or even 7 percent, most companies can't grow at 30 percent or more for an extended period of time. Investing requires thought, not hot tips. It requires thorough research, not direct-from-the-management PR.

Lesson Number 6: Leverage and Volatility are a lot More Fun on the Upside.

For five years prior to 2000, both the stock and bond markets basically went up, as the best of investment environments -- improving productivity, declining interest rates, stable political environment -- kept getting better. "Volatility" was great, because it really only went up. While a lot of folks suspected things were going too far in one direction, it was too exhilarating a ride to disembark. The flip side of volatility became painfully obvious as 2000 dragged on, however, and many high fliers plummeted from triple digits to double digits. . . and then on into single digits.

Lesson Number 5: "Asset Allocation" isn't such a Nasty Phrase After All.

Our reacquaintance with the dark side of volatility and leverage introduced many all-equity cowboys and cowgirls to the concept that owning a few bonds, some real estate, or (shock of all shocks) a higher cash position might not be such a bad idea after all. A little stability in one's portfolio might, in fact, allow a day or two of rest for the Tums bottle.

Lesson Number 4: Even if Your Statement Shows a Gain, the Money isn't Yours to Keep.

This was perhaps one of the toughest lessons to learn, as we all became mesmerized by our steadily rising brokerage account balances. Yet the reality of investing is that until you convert some of the asset to cash, the gain is not truly yours to keep. (And even the process of conversion means giving up some of your gain to the IRS and inflation.) The bottom line is that whether you convert assets or let them ride, the stock market doesn't "owe" you the 20 percent or 30 percent annual gains to which many of us became accustomed. The long-term average is still closer to 8 percent or 10 percent.

Lesson Number 3: Time and Rest are the Best Cures for the Flu.

As painful as it was, we hope last year will prove to have been a beneficial rest period in an overall upwardly biased market. It has been useful for wringing out some of the speculative excesses spawned by hedge funds, venture capitalists, day traders, newcomers, and leveraged participants. Last year forced all players to re-examine their strategies and focus on thorough analysis.

In the meantime, the economy has been healthy. Corporate America has become even stronger and more competitive. And valuations have retreated to more comfortable levels -- all of which leaves stocks well-positioned for the coming years.

Lesson Number 2: When the Going Gets Tough, the Tough Stay Put.

Despite the frustrating nature of 2000, it still wasn't worthwhile to jump in and out of the market. Many studies (and even more war stories from market vets) will attest to the fact that no one can successfully pick tops and bottoms. If you want to fully participate when the market starts to move, you have to be in place already. If your analysis has been patient and thorough, you will be positioned in the companies that are likely to lift off first.

Lesson Number 1: Fear and Greed Still Rule the Roost.

Since the earliest days of American trading under the old buttonwood tree, these two emotions have ruled investors' actions. That's true despite the attempts of business-school professors to prove that some scientific system guide investors' choices. It's been a long time since we've seen widespread fear, but it's somewhat reassuring to know that the more things change, the more the basics of investing stay the same.

Carol Clark is a principal with Lowry Hill, a comprehensive, private-wealth management firm with $6.9 billion in assets and offices in Minneapolis, Naples, Fla. and Scottsdale, Ariz. She can be reached at

Courtesy ARA Content,

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