CSR practitioners in business are doing some navel gazing right now. With the current economic uncertainty, investments in general and CSR budgets in particular are being scrutinized more deeply.
CSR is an easy budget to cut but when CSR is broken down into an organisation’s responsibility towards its people, the planet and making a profit for its shareholders, it all makes more sense to real businesses. I believe you need to continue investing in CSR through a downturn because this is when the social, or people aspects of CSR become even more valuable.
The dreaded “R” word. Right now, smart businesses I know are taking the opportunity to streamline their business models so they can survive and hopefully thrive through a recession and this inevitably involves making decisions about costs. AI Digital has been one of those businesses and our decision making has been influenced by our claim to be a “champion of responsible business”, as winner of the BITC Small Business of the Year award in 2007 and as holder of Communitymark.
I, like many others, have recently had to make decisions about overhead cost reduction and budget cuts as we “trim our sails” in anticipation of turbulence in our customers’ markets. It’s made more difficult when young businesses like AI Digital have never known “challenging times” and many of our employees have never worked in an environment of reduced business confidence and rising unemployment. So in many ways, this is uncharted territory from both an employee and management perspective.
Fortunately, I feel I am in familiar territory having personally been through two recessions. I got my first job as a management trainee at George Wimpey plc in 1991 when the building industry was fighting for survival and I survived and then later in 2002 at BuildOnline.com when the dotcom bubble burst and I was made redundant. So I am acutely aware of the responsibility Companies have towards their people, shareholders and other stakeholders.
Ensuring decision making is legal is a “given” but whilst there is plenty of advice available regarding the legal compliance aspects of employment law and decision making (we use the excellent RBS Mentor service), there is a distinct lack of guidance on how to make ethical decisions in difficult times. How does a business “explore all opportunities to avoid the potential for redundancy” in order to genuinely come up with some options that could save jobs, yet still achieve the necessary cost reduction?
Back in July when we were supposed to be having a summer, the Board at AI Digital downgraded its revenue forecasts for the year (to growth of 40% instead of 100%) which necessitated a reduction in our breakeven level by around 30%. We had to do that whilst continuing to invest in account management and our quality improvement programme because we wanted to get even closer to our customers. We knew this would be difficult but we were also well aware that it had to be done.
It is commonly accepted good advice in this situation to “Cut hard, deep and early” yet it is very easy for the heart to be swayed by the emotional arguments for saving someone’s job despite the head presenting a strong counter argument to make sacrifices so that the rest of the business can survive to invoice another day. And this is where a culture of openness and trust, often brought about through CSR, can help companies to make the right decisions in difficult times.
In our case we had a series of team meetings where the financial forecasts were discussed and the requirement to reduce costs was quantified and explained with the result that a combination of changes were implemented including:
• A hiring freeze so no new recruits were employed
• Some Directors took a short term paycut
• Some staff volunteered to work fewer days
• Some suppliers reduced prices and eased terms
• Some staff re-trained to fulfil other new roles in client services and SEO production
• Closer monitoring of overhead budgets and efficiencies
The net result of this has been a reduction in the number of redundancies required to achieve the cost savings, a stronger understanding of the business by all staff and a better shared sense of being part of a team which is pulling together to be successful.
It would be untrue to say that morale was not a serious issue throughout this process however I believe that by sharing and being realistic about the situation, people are better able to understand how they can contribute and this reduces stress and improves satisfaction which improves morale from the inside out.
Trust is critical; it takes a long time to develop and can be lost in a flash. I’ve spent several years building a culture of transparency and openness with staff, customers, partners, suppliers and more recently, with shareholders and I believe that we’ve benefitted from that past investment throughout this process. The goodwill and mutual respect between employees has crystallised in everyone, including those under threat of redundancy, pulling together to continue working, to resolve problems, to win new business and deliver their best for current customers in difficult circumstances.
I recently read an interesting article by Professor Khalid Aziz, Chairman of the renowned Aziz Corporation who said, “In having to deal with and communicate bad news, a downturn exposes leaders who are muddling through without a plan. In the absence of full information, markets will assume the worst. Companies which refuse to come clean risk a steady and persistent drip of bad news. Businesses in difficulty should disclose their position early and in full. That way they can often allay the worst fears of the market, while demonstrating that they are on top of the problem and have a plan to deal with it.”
I believe you could replace “markets” in the quote with “employees”. And whilst I can absolutely sympathise with those who delay the process in the hope that things will get better or who fear sharing bad news with their team, I have learned in practice that open, two way communication reinforces business ethics, improves trust and can enable better decision making in difficult times.
I know that AI Digital is now stronger in terms of both people and profit performance and although we still have a long way to go, in terms of achieving our business ambitions, we now have a much better chance of being around to do something about the planet.
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