Company calamities like the ones playing out at firms such as BP, Goldman Sachs and Toyota do more than just impact a firm’s reputation and bottom line. They also do a number on employees.
It’s been nearly a decade, but Shirley Green still remembers vividly the pain and anguish she felt when her former employer Qwest Communications faced disaster.
The company announced sweeping layoffs in 2000, the stock plummeted in 2001, and CEO Joseph Nacchio soon resigned amid allegations of fraud. He was convicted of insider trading in 2007.
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“It was really upsetting,” said Green, who was a process analyst for the telecommunications company at the time. “At baby showers, networking groups, even when I went to the doctor’s office and filled out forms, I didn’t want to say where I worked.”
Green, who lives in Denver and spent more than two decades with Qwest until she was laid off, describes herself as a “peon” who had no direct connection with the goings on at the top at the beleaguered company. “The people at the bottom of the food chain are the ones who get hit the worst.”
Company crisis leaves many workers facing insecurity, a loss of control and disillusionment in a corporation that they were once proud of, management experts said. And that is a recipe for even more disaster because employee morale suffers.
Unfortunately, many employers facing adversity forget about its impact on the rank-and-file.
“In a crisis situation, many companies focus externally only” on things such as public relations and a firm’s stock price, said Christine Probett, a management and human resource professor at San Diego State University.
“If there is no internal communication, employees expect the worst and productivity drops significantly while employees speculate on what might happen,” she said.
Addressing employee concerns
Toyota spokeswoman Celeste Migliore said that when the automaker began recalling vehicles late last year and earlier this year, there were a lot of questions from employees. “It was not so much a morale problem but concern for the company,” she said.
As a result, the company held town hall meetings; allowed employees to ask questions of the executive staff through online forums; and instituted an internal website in February offering up-to-date information on what was happening to workers and dealers.
Workers are “feeling much better” knowing what’s going on with the company, Migliore said.
Boosting employee enthusiasm can be difficult after “hypercrises,” said Patrick Maggitti, an assistant professor of management at Villanova School of Business and director of the university’s Innovation, Creativity, and Entrepreneurship Center.
A study co-authored by Maggitti called “Leadership in Hypercrisis: Leading in the Face of a Shaken Culture” offered examples of past hypercrises that severely impacted workers:
- In the wake of the 1989 Exxon Valdez oil spill, Exxon employees were stigmatized and experienced a degree of shame for working for a huge company that others saw as uncaring about the environment after 11 million gallons of oil spilled into Alaska's Prince William Sound. It was one of the largest environmental disasters U.S. history.
- In the late 1970s, Ford Motor Company used a cost-benefit analysis to make decisions regarding safety designs on the Pinto model following reports that such vehicles were susceptible to fire in a collision. The company calculated that the cost of modifying Ford vehicles was $87.47 million dollars more than the estimated cost of the 180 deaths, 180 burn injuries, and 2,100 burned cars they estimated would result if the modifications were not made.
“The shaken organizational culture and effects on organizational members require a masterful leader in order to effectively deliver the organization and its members from the depths of these types of crises,” Maggitti said.
Need for strong leadership
Employees are looking for signals from leaders that give them information about what has happened, what management is going to do, and where the company is headed, said Richard Coughlan, associate professor of management at the University of Richmond's Robins School of Business.
Going on the defensive immediately following a crisis, as did leaders at Toyota and Massey Energy — the owner of the mine in West Virginia where 29 workers were killed — is exactly how not to handle the situation, Coughlan said.
“Workers wonder what the company stands for” when leaders don’t take responsibility right away, he said.
But it shouldn’t be just about assessing blame, said Ben Dattner, an adjunct professor at New York University where he teaches organizational development and co-author of forthcoming book “Credit and Blame at Work.”
“Often when there’s a large-scale disaster, there’s been a cascade of errors. It’s better to avoid oversimplifying and having there be a villain,” Dattner said.
Sometimes employees will rally around a company during upheaval because they feel they’ve made a commitment to an employer and are likely to defend it, added Dattner.
In the case of Goldman Sachs, for example, partners at the firm reportedly gave CEO Lloyd Blankfein a standing ovation during an April earnings meeting, according to a Bloomberg article, despite the dark shadow of government civil charges.
So what should workers do when a crisis hits their company?
Jon Gordon, author of "Soup: A Recipe to Nourish Your Team and Culture," suggested asking yourself, “Did my company violate the principles that made me proud to work for this company and did they violate the standards that I believe in and live up to? If so, then identify what they are doing to address the crisis and ask yourself: Do I still want to work for this company?”
“People have to be loyal to a company and skeptical at same time,” said Peter Firestein, a senior management consultant specializing in corporate reputation and author of “Crisis of Character: Building Corporate Reputation in the Age of Skepticism.”
“As a productive employee, loyalty is important. How can you be creative and innovative without that?” he asked. “But you and you alone are responsible for your own destiny.” He said you have to figure out whether the leaders at your firm are seriously ready to emerge from the disaster as a team or are just looking out for No. 1.
“Some of the most respected CEOs of our time have not only failed themselves and shareholders, but they’ve failed employees who are depending on them,” Firestein added. “You want to be able to assess the reality and be honest with yourself on what you think of your leaders. One sickness of this era is we seem to confer authority on other people.”
A paycheck might be keeping many workers at a certain company because they can’t find other work, said Firestein, who doesn’t expect everyone to cut and run if they realize they’re working for unethical people. “But tell yourself the truth, and that truth will eventually lead to action,” he said.
Truth and lies
Alas, sometimes it’s hard to distinguish between truth and lies.
In 2005, Ed Cohen left his job at Booz Allen Hamilton. His wife, Priscilla, left her consulting practice to take jobs in India with Satyam Computer Services, a top global IT outsourcing company.
Satyam’s Chairman and founder, Ramalinga Raju, “was the most generous person we had ever encountered,” said Cohen. “He would speak of ethics and integrity at every leadership training meeting.”
It turned out, Raju was actually cooking the company’s books. He was arrested in 2009.
“At the time the allegations came up, I thought it was a joke,” Cohen said.
Cohen, who was the chief learning officer responsible for talent management of Satyam’s 53,000 global workers at the time, said many of the employees, including himself, seemed to go through the stages of grief that people coping with death often face — betrayal, anger, depression, and eventually, acceptance.
The experience prompted Cohen and his wife to write a book about their experience titled, “Riding the Tiger: Leading Through Learning in Turbulent Times.”
“It was like we were in a war,” he said. “When you’re in war, your adrenaline is pumping, you’ve got to keep things going, but when it’s over the post-traumatic stress kicks in.”