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Economy & Business

In tough times, managers must be smarter - and more humane

This article first appeared in the St. Louis Beacon, Feb. 27, 2009 - You wouldn't know it by the news headlines, but not all business owners and managers are laying off workers during the recession.

Some, like Bob Brinkmann, head of Brinkmann Constructors  in Chesterfield, are managing through these stressful times by becoming more skillful leaders of their companies.

They are doing their best to preserve their workforce for the day when the economy begins to rebound and they can begin working to capacity again.

They want to keep morale high. They do not want workers living in fear that as their co-workers get laid off or fired, their jobs may be next.

That atmosphere, they say, would lead to lower productivity, perhaps costly errors, the loss of customers or clients and an overall sense of pessimism and defeat -- all prescriptions for problems that could plague them for years.

And they are wary of cutting into their staffs in ways that leave them crippled when the recession starts to end -- possibly later this year or early in 2010, if the experts are right.

These ideas have been percolating in the back of Brinkmann's mind since he saw the recession taking shape in the construction business.

"People are just elated to have a job here," said Brinkmann, who recalled being laid off four times in his first 10 years in construction. "We can't afford to be caught flat-footed when the recession ends. We can't be here with half a staff when new jobs start up."

Brinkmann expressed a paternalistic sense of caring for his 89 employees and their families. He said he has cut his own pay "almost to nothing" and feels responsible for all those who depend on his company for their own livelihood.

Likewise for Peter "Pedro" McMillan, CEO of Pedro's Planet, an office supply company in Maryland Heights that picks up recyclable trash as a service for its customers.

"Our plan is to not let anyone go," said McMillan, speaking of the 17 employees. "That's my job: to create a place where we do not have to let anyone go."

Why?

"The chief reason is I feel attached to these people. I don't want to lose anyone," McMillan said. "There's no fat in our organization. There's no room to let anyone go."

If worse comes to worst, McMillan said he and his long-time partner, Charles "Chuck" Pass, "would cut our pay 10 percent or whatever."

Both companies are debt-free and their executives said they strive to manage close to the bone.

Many companies trying to hang onto employees are service-oriented operations for which personal relationships -- between sales personnel and their customers, for instance -- make up the heart of the business model.

They are looking for ways to avoid cutting their staffs, turning instead to unpaid furloughs, reduced bonuses or none at all, salary freezes and other means to cut payroll costs.

Large national banks may be in trouble, but community banks like Midwest Bank Centre are doing all right - and hiring when the right person comes along.

John B. "Jack" Biggs, vice chairman of Midwest BankCentre Inc., added that a service company needs its people.

"We've worked terribly hard to build a team. We cannot let anything destroy that."

Keep employees informed

How business owners handle the challenges raised by the recession may strongly affect the attitude of their employees. One solution could be to ask workers to come up with their own ideas for cutting costs, instead of taking the easy way out and improving the bottom line quickly by shrinking the staff.

"A lot of companies wait until it's too late to make changes," says Matt Grawitch, professor of organizational studies at Saint Louis University.

He noted that Caterpillar has cut its manufacturing workforce drastically, which may be have been somewhat unavoidable, given the sharp decline in global demand for Caterpillar equipment.

Still, Grawitch says, companies that cut their workforce in harsh ways risk causing morale to sink, as well as prompting "survivor's guilt and continued levels of uncertainty," which will negatively affect the productivity of those still on the payroll.

Company owners and managers should make strong efforts to let all employees know as much about their employer's financial situation as possible.

Telling employees what is happening and where the company stands in the economy is crucial in times like these, said Carrie Muehlemann, head of the St. Louis office of Robert Half International, a global staffing firm.

To boost morale and hold the team together, she recommended using staff meetings, newsletters and staff e-mails to praise employees who work hard. "Managers need to be extra attentive to employees," Muehlemann said. "They can't afford to lose them. They may be hard to replace. You have to have open lines of communication."

Grawitch noted that skilled managers are compelled to be far-sighted - and honest with employees.

"Lots of companies don't tell how long they will be in a bad situation or what areas need to improve," he said. "This creates much uncertainty, with all sorts of unintended consequences."

The best way to deal with the economic hardships of today would have been to have laid the groundwork for excellent communications between managers and workers some time ago, Grawitch says.

"People are going to respond more positively to communications when they have respect for the CEOs," he adds. "They have to have earned the employees' trust and be consistent in what they have said."

The situation may be somewhat different for manufacturing companies, but the management challenges remain.

Max Tsai of Baily International Inc., a noodle, egg roll and fortune-cookie manufacturer in National City whose sales have not dropped during the recession, sees the poor economy as the handwriting on the wall. It's a warning to look for ways to save money on operations, since no one knows when the recession will end.

"We are brainstorming right now," said Tsai, whose company employs 220 men and women. "If we have to cut costs, we will be looking at more efficient equipment and how can we do our work better. We have to work better with our customers.

"This is a healthy exercise," added Tsai, whose company supplies Asian markets throughout the Midwest. "This is uncharted territory. We don't know what we are doing."

For Kurt Schmidt, the fifth generation of his family to head A.E. Schmidt, a St. Louis company that employs 20 craftsmen and women who carve and assemble pool tables, the challenge is keep his crew - with very low turnover -- intact for the day when customers again will spend several thousand dollars for a pool or billiard table.

"Where is the hidden money?" he asked, referring to costs. "You want to cut all unnecessary costs before you cut people. We now have two trash collections a week instead of four. We have cut the insurance on our four trucks to liability only, which will save $2,000 to $3,000 a year.

Repps Hudson is a freelance writer.

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