Psychological recession

There are going to be great temptations to cut back on many things, but remember that your staff are the ones that will help pull your business back on track. NAOMI SIMSON

Naomi Simson

By Naomi Simson

I don’t know about you, but I’m pretty confused… some days all the news reports are great (“Australia is robust and will weather the storm”) – other days it is all gloom and doom.

The reality is that no one really knows – how deep, how far and for how long. The only thing we know is that our financial systems are about to change – forever.

The way financial institutions have been incentivising people with massive bonuses for structuring and closing deals has almost been part of the problem. Simply put, pre-February 2008 was a time of amazing risk taking.

However, the pendulum has now swung to the most extreme – we now see absolute risk aversion. People putting off decisions, not even considering what are sound opportunities “just in case” because no one has any idea what is coming down the line.

Australia has four of the world’s 20 AA-rated banks, we still have reasonably high interest rates, good employment, even retail trade if you dig deeper than top line is still good. NSW is a whole different issue… the state has been floundering for two decades… this current crisis just exacerbates this.

All this waiting and watching is not productive. In fact bad times will come for sure if business stops doing things. It is up to us as business leaders to ensure that what we have invested in over a long period of time we continue with.

So far we have a wide spread “psychological recession”. (Remember drama sells newspapers.) According to Judith Bardwick out of the US: “This is an emotional state in which people feel extremely vulnerable and afraid for their futures. Chronically fearful people are too exhausted to be creative and innovative. They expect the worst to happen, so they see no reason to give their all.”

In other words, all this gloom and doom is wearing people down. They wonder what is the point of working hard with talk of job cuts and a downturn.

Towers Perrins, in a global workforce study recently completed, reported that four out of five workers are not performing at their optimal level, with two out of five “checked out”.

The impact on company performance is massive. Companies with high employee engagement show a 19.2% increase in operating income, while low engagement companies show a drop of 32.7% With a potential 50% differential in operating income on the line, engaging employees is critical for company success.

If a company is struggling, I really hope that you have invested in employee engagement; because that is what will get you through the tough times. Now is not the time to give up on employees. Now is the time to look after them. They are gold! and the key to your financial future.

Of course if job cuts are inevitable – and restructuring of businesses will have to take place – then still do not give up on employee engagement. According to Globoforce: “Those who make it through layoffs are often the most talented high performers – and companies want to keep them. However once the market recovers – and it will – those employees will remember how the company treated them and their less fortunate colleagues and may be the first to consider leaving for a more appreciative work culture.”

Strategic recognition is critical to engagement. In fact, contrary to common beliefs, Bill Catlette, author of Contented Cows Give Better Milk, says “It seems likely that an ailing economy will cause many organisations to ‘lean down’ their spending in the traditional compensation and benefits areas for a while. We will be more reticent than usual to add to the fixed cost structure. With growing acceptance that a focused, fired-up workforce really does lead to improved outcomes, we will however, likely see enhanced focus on performance-based recognition and reward programs.”

There are some things that we as business owners must keep spending on for our long-term success. And a great place to start is people. You will find other ways to cut back – but the employee experience is critical to your ongoing success.


Naomi is a finalist in the 2008 Australian HR Awards and the 2008 Telstra Women’s Business Awards, winners to be announced end 2008. Naomi was also a finalist for the BRW Most Admired Business Owner Award in 2008 and Marketing Employer of Choice by B&T in 2007. One of Australia’s outstanding female entrepreneurs, Naomi regularly entertains as a professional speaker inspiring middle to high-level leaders on employer branding, engagement and reward and recognition. Naomi writes a blogand has written a book sharing the lessons from her first five years.

To read more Naomi Simson blogs, click here .



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