Surviving a downturn

Many arts organisations, and venues in particular, tell me that they are feeling the pinch: customers are buying fewer tickets; top-price tickets are more challenging to sell; customers are spending less in the bar and restaurant; and merchandising is slower. At the same time, overheads are increasing at between 5% and 10% – with fuel costs frequently well above that. The cumulative effect of falling income and rising costs is that many arts organisations are focusing on cutting costs as a way to survive this economic downturn. Staff costs are usually the single largest overhead, so reducing staff size is often the first port of call. This month, I am going to consider whether this approach always makes sense, and which HR strategies make sense when the going gets tough.

A new journal from the Chartered Institute of Personnel and Development (Futures, June 2008) includes more than a dozen articles from leading HR theorists and practitioners, all of whom conclude that it is the quality of leadership that determines an organisation’s success through a downturn. My favourite was Jeffrey Pfeffer from Stanford University who put his finger on it when he observed, “the fact of the matter is that when times are good, even idiots can be successful. It is when times are tough that the best get separated from the rest”. There was a general consensus among the contributors that in our more service-and knowledge-based economy, and this surely includes the arts and cultural sector, it is a mistake to focus exclusively on cutting costs as a strategy to survive a downturn. So what should effective leaders be doing? Two clear priorities emerged.

Heighten employee engagement
People are usually prepared to go the extra mile if they believe in what they’re doing, feel that they are fairly treated, and have the opportunity for personal growth. Conversely, staff are less likely to make the effort during periods of uncertainty, so you get lower levels of productivity and higher levels of absence and turnover. So minimise the uncertainty by maintaining regular dialogue with staff and other stakeholders, and think about cost-effective ways to improve performance. Cross-departmental working groups are a great way to exchange skills, improve motivation and improve efficiency (which will also reduce operational costs in the longer term).

HR professionals get very exercised by ‘talent management’, which basically means having a plan to recruit, develop and keep gifted people who can lift your organisation from ‘good’ to ‘outstanding’. Jeffrey Pfeffer makes the case that offering great working conditions and permanent contracts gets you good people, who can build deeper customer relationships and deliver innovation – perfect for arts organisations seeking artistic excellence and public engagement. He describes how, on 12 September 2001, all but one airline laid off large numbers of people, and how by the end of 2001 that one exception (Southwest Airlines) “had a market capitalisation greater than the entire rest of the US airline industry combined”. So while it is always important to focus on making good staff better, the argument is that this moves from important to absolutely vital when it comes to surviving a downturn.

Managing redundancies
But what do you do, if despite everything, you have to make staff redundant? www.businesslink.co.uk has a useful interactive tool to help you manage the process, and www.acas.org.uk has a wealth of information. Here are some pointers to bear in mind:

• Have a communications plan, and use it. Everyone appreciates accurate and current information, whether the content is positive or negative, so keep staff up-to-date, and keep listening (it is no accident that we have two ears and one mouth!). Remember that you are required to have a meeting with all employees affected by redundancies to explain your decision and explore other options. Build this into your communications plan.
• Make sure that you have taken appropriate legal advice to avoid subsequent claims of unfair dismissal or discrimination. For example, if your selection criterion is ‘last in, first out’, it could be unfair to younger staff who have not been with you long because of their age, and this would be discriminatory.
• • Don’t neglect those people staying in your organisation. They may experience ‘survivor syndrome’, a term coined to describe the negative psychological impact of redundancies on those retained. Demonstrate the necessity for change, and act with openness and integrity. Reinforce the importance of the remaining staff to the future of your organisation, and remain positive