My CEO Life

Businesses around the world are going through tough times as the world’s economy continues to struggle.  In these tough times, business have to make tough decisions – often letting go of key people.  In making these decisions, it is important that the people in the business understand why the decision is being made, in particular what events have led to that decision.  However, this openness and transparency is often very difficult for management.  Therefore, the result is that businesses become plagued by fear and rumour, thus leading to a slowdown in efficiency and effectiveness and therefore more layoff.  How can management break this spiral?

One of the hardest things for management to do is be open and honest about the position of a business.  In the early days of realestate.com.au, when the business was on the brink of running out of money,  we took the clear step of being very transparent on how the business was running.  We would hold weekly / fortnightly team meetings (all employees) and we would let them know how we are going with collections, cash, expenses and so on. 

We purposely engaged them in the business.  We knew that they had to understand where the business was going and the challenges we were facing every day.  We did not shy away from the tough discussions – infact we embracd them openly. The reason for this was simple – it was only as a collective team that we would be able to win.  The employees understood why it was important to do somethings and not other things.  They took ownership of the business and helped steer us in the right direction.

In todays environment, this approach is more important then ever.  Businesses around the world are going through tough times and for many senior management, it is easier to revert to the “cone of silence” and discuss, amongst a small group, where the business should be heading.  These discussons often involve cutting expenses (read people). 

The problem with this approach is that everyone in the business has a good idea what is happening.  By driving it underground, the rumours fly and productivity (and repect for management) decreases.  This then leads to more cost reduction being required and the vicious circle continues.

Management should be open and honest on the situation of the business.  No one will be surprised – we all know that the economy is in a tough place!  Through engagement and openness, management will find that they have an easier time during what is a very tough period.

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