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How to retain employees?

Several US organisations offer examples of how companies in the region can avoid these problems and what happens to companies that don't. For example, consider the US-based Home Depot chain of hard-

ware and home-repair stores. During its first few decades of operation, the chain benefited from extremely loyal employees who genuinely wanted to offer the best possible customer service and didn't demand high wages for doing so. But when a new CEO took over and imposed a rigorous cost-cutting plan, those same employees balked. According to the company's financial reports, operating expenses (per dollar of sales and per square foot of retail space) actually increased in the years following. Why? The approach didn’t factor in the emotional commitment of employees, who grudgingly followed the plan but lost their passion for the company. And in early 2007, the board decided to replace the CEO – a victim of his own downsizing plan. There is a better way. Instead of simply mandating cost cuts, managers should try engaging employees in the cost-cutting process and motivate them to succeed at it. Essentially, it's the difference between yelling at workers and listening to them. The best executives trust that most employees truly want to work hard and want to succeed as an organisation. That urge to succeed can be harnessed around specific goals, such as developing a new product or improving customer service. And during a recession, it can also be applied to the challenge of cutting costs. A few companies are able to do this systematically because they have built a culture that is ‘proud to be thrifty’. They communicate a noble purpose or positive theme that focuses their people on cost and value, and they let employees figure out the specific means of achieving that goal. Online retailer Amazon.com gives out a monthly ‘door desk’ award to employees who figure out creative ways to save the company money. The prize symbolises the makeshift desk that founder and CEO Jeff Bezos fashioned out of a door during

Amazon.com’s earliest and most cashstrapped days. These initiatives succeed because employees often see possible cuts in day-to-day operations that management does not.

Tap into the pride

Other companies apply this philosophy to more urgent, one-time measures. A few years ago Reliant Energy, a USbased electricity utility, needed to cut costs quickly. The company's stock had fallen from $30 to less than $1 in its first 17 months of public trading. Reliant was loaded with debt from major acquisitions and facing bankruptcy. But an employee survey in 2002 showed that the two most important sources of pride among workers were the company’s reputation and the quality of its people. Managers tapped into that pride and asked workers for help in cutting the company’s cost base by 35%. They held informal lunches with employees to spur candid discussions about what had to be done and generate ideas. Individual groups had wide latitude for how to reach that goal in their own departments. It worked – within two years, Reliant had cut $340 million in operating costs out of a base of approximately $1.3 billion. At the same time, Reliant saw a 20% increase in employee satisfaction and pride. None of this is meant to sugarcoat the process. No one should pretend these initiatives, particularly layoffs, are not difficult. But most workers understand the necessity of cost-cutting measures and ask only that they be fair, transparent, and allow some say for workers in how the process gets implemented. In the end, employees want to solve problems. When the problem is excessively high costs that threaten a company's survival, their input can be crucial n

By Bahjat El-Darwiche Booz & Company is a leading global management consulting firm, helping the world’s top businesses, government ministries and organisations.

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