Although advance planning for resource allocation is the ideal scenario, many organizations found themselves caught short by the severe constraints imposed by the economic downturn. What are the alternatives when organizations are operating in crisis mode and there is no “Plan A?”

Given the need to make decisions about how to curtail their operations immediately, leaders have two options that can help them in the short-run: (1) increase inputs or (2) decrease outputs. Within each of these options, there are several alternatives, some of which will be more viable than others depending on the given situation. Let’s look at each set of options in turn, and examine their feasibility.

Increase Inputs

Here are four ways to increase inputs:

1. Delegate
2. Outsource
3. Work more hours
4. Increase efficiency

Alternatives #1-3 presume the availability of resources such as people (i.e., those to whom you can delegate things) and money (e.g., paying others to do the work, paying overtime). Organizations that are short of those resources are unlikely to be in a position to select those choices. Although some employers may argue that they could avoid paying overtime simply by having salaried staff work more hours, such a view is short-sighted: people will burn out quickly, and they will be very likely to leave the organization at the first opportunity. Thus for most organizations in crisis mode, increasing efficiency seems to be the most sustainable way to increase inputs in the face of scarce resources.

Decrease Outputs

Here are four ways to decrease outputs:

1. Delay the promised goods or services
2. Provide partial delivery of products or services
3. Reduce service or performance standards
4. Decrease the number of products or services

Although none of these alternatives may seem very palatable, in a crisis situation they may be preferable to not being able to achieve the organization’s mission at all. For example, some customers may be open to a delay or partial delivery due to their own financial situations. Others may be unhappy with a delay but will accept it as an alternative to non-delivery.

Reducing service or performance standards may be a viable option for some organizations. For example, one organization I worked with recently is justifiably proud of its tradition of providing “excellent” service across the board. Given severe budget constraints, however, its leaders now are considering the possibility that customers will find “very good” or “good” service levels acceptable, at least in the short-term. This will allow the organization to re-allocate some resources or to continue to operate in the absence of others. However, for an organization whose mission focuses on providing exceptional service, this option is not feasible – unless it revises its mission statement.

Decreasing the number of products or services actually may serve the organization well in the long-term as well as in the short-term. Most likely some customers will be disappointed to find fewer choices. Considering the alternative is the inability to achieve the organization’s mission at all, however, the decrease may seem like a reasonable “price” to pay. And over time, if those products and services in fact are very important to the organization’s mission, they may be reinstated.

Recommendations for Successful Implementation

Here are four recommendations to help ensure that decisions about how to operate most effectively within existing constraints have the greatest positive impact:

1. Ensure the above decisions are be the result of conscious, strategic choices based on the mission.
2. Once set, communicate the decisions clearly and in a variety of ways to employees, customers, and other stakeholders.
3. In most cases, radical changes will require the adjustment of stakeholders’ mindsets. For example, people who have worked for years under the notion that providing anything other than excellent service are likely to find it difficult to provide anything less. Leaders must address this issue in order to ensure successful change.
4. Recognize that the organization’s mission may have to change to reflect existing circumstances. This change may be short-term or long-term.

© 2010 Pat Lynch. All rights reserved.

Scarce resources are a fact of business life. In the wake of devastating budget cuts, furloughs, and/or layoffs, however, “normal” levels of scarcity have been exacerbated. The question for many organizations has become, “How do we move forward from here most effectively?”

When asked to help clients answer that question, I recommend that they begin by identifying some crucial information that will guide their subsequent actions and decisions.

1. Clearly define the organization’s primary mission.

   Given current circumstances, the existing mission may have to change. For example, during times of greater resource availability, some organizations expanded or stretched their initial mission by offering products or services that are “nice to have,” or they increased the level of service offered from basic to premium. Now is the time to evaluate the organization’s primary mission, articulating specifically what it is and what level of service will be provided, for at least the short-term.

2. Identify the functions that are critical to the organization’s ability to achieve its mission.

   Critical functions are those without which the organization would be unable to achieve its mission, or those whose loss would quickly and substantially impede a major work flow. Here’s a question that helps separate functions that are critical from those that are non-critical: “Will the organization be able to achieve its primary mission if this function is not staffed?”

   Note: a function that may be critical to one organization may be merely important to another – i.e., it adds value but doesn’t prevent achievement of the mission. For example, customer service might be a critical function for an airline that promises passengers an “exceptional travel experience,” but it probably is not a critical function for an airline that promises to get passengers from point A to point B safely and at low cost.

3. Identify the skills that are critical to the successful functioning of the organization.

   Critical skills are rare, unique, or in short supply; they have no acceptable substitutes in the short-run; and they are necessary for the achievement of the organization’s mission. Unlike critical functions, critical skills are dynamic, varying with environmental factors such as labor market conditions and changes in technology.

   Often skills become critical due to temporary imbalances between supply and demand in the labor market. However, once those forces are back in balance, the skills no longer are critical – even when the functions they support remain critical. For example, in the 1990s, many technology-related skills were in short supply, so people with those skills were able to command large salaries. However, as others began acquiring the necessary training and expertise, the skills lost their “critical” status. As a result, salaries for these jobs no longer carried a premium.

4. Direct available resources toward staffing the critical functions and obtaining the critical skills.

   Leaders must focus relentlessly on the organization’s mission, and the functions and skills necessary to achieve it, if the organization is to survive in the short-term and thrive in the long-term. This requires making tough decisions, saying “no” to people, and using the mission as the ultimate criterion – i.e., evaluating the extent to which each program, decision, function, job, policy, and system supports the primary mission. Only those that contribute directly to the mission should be retained or added.

To illustrate the above concepts a little more clearly, let’s consider a fire department whose mission is to save lives and preserve property. Most people would agree that critical functions are putting out fires and providing emergency medical care to accident victims. However, other critical functions include communication, vehicle maintenance, and payroll. Here’s why: without learning of the incidents and dispatching the appropriate people and equipment, without vehicles that operate safely when needed, and without paying those who provide the services, the fire department could not achieve its primary mission. Non-critical functions for the department may include getting cats out of trees and transporting people to hospitals who are not seriously ill and/or can use alternative means of getting there.

Some skills are critical for the fire department by virtue of the fact that specialized knowledge or expertise is necessary (e.g., dealing with hazardous materials, providing appropriate medical care). Other skills are critical because they are not readily available in the relevant labor market in the short-run (e.g., maintaining mission-critical computer systems, repairing vehicles).

Resources will remain uncommonly scarce in the near-term. What steps are you taking to ensure you allocate them in ways that allow your organization to achieve its mission?

© 2010 Pat Lynch. All rights reserved.

Now that the economy is beginning to show signs of upward movement, executives and business owners are considering when and how to manage the reversal of cuts in pay and benefits that so many organizations resorted to during 2009. Although restoring such cuts may seem to be as simple as returning them to previous levels, there are important questions to consider. For example:

– Were the previous pay and benefits programs effective?

This might be a good time to question their underlying assumptions and to assess the value they provided.

– Will restoring the cuts support the organization’s current and future business goals?

If those goals have been modified over the last year or so, it would be wise to ensure their alignment with the proposed changes.

– Are key employees likely to react to the news by “forgiving and forgetting,” or will they jump ship as soon as they have alternative job opportunities?

I don’t think it’s an exaggeration to say that by cutting pay and benefits, employers seriously damaged their employees’ trust and violated perceptions of fairness.

Here are four key tactics that together help increase management’s credibility and trustworthiness when making changes to pay and benefits programs:

1. Align the compensation and benefit program objectives with organizational goals. Take this opportunity to review your compensation and benefits programs from top to bottom, and make sure that their objectives are aligned with desired results. If your business goals have changed, make sure the systems that support them are modified to ensure their successful achievement. For example, survey data indicate that many employers intend to adopt pay practices that reward good performance. Your total rewards system sends a message to employees about organizational values and priorities, so make a conscious choice about the message you want to convey.
2. Take steps to increase the likelihood that employees will accept the designated changes to the total rewards program.Although restoring pay and benefits cuts seems to be positive news, employees are likely to be wary because they remain distrustful of management. To accelerate the re-building of trust, ensure that the changes are transparent, involve employees to the extent possible, communicate early and often, and educate first-line managers and supervisors about how the changes will affect individual employees.
3. Incorporate procedural fairness into organizational processes and decision-making. Procedural fairness refers to the rules by which decisions are made. It is a key concept in the workplace, and it is especially critical in compensation-related decisions. You can increase perceptions that changes to the compensation and benefits programs are fair by ensuring that decisions and processes are free from bias, transparent, based on objective criteria, and provide meaningful opportunities for those affected by the outcomes to have a voice.
4. Communicate, communicate, communicate.There are two aspects to communication: actions and behaviors, and words. Employees believe what they see rather than what they hear. Thus it is critical that leaders’ behaviors and actions are consistent with their words.

What are you doing to ensure your pay and benefits decisions are effective in supporting organizational goals and accepted by employees? Let us know!

© 2010 Pat Lynch. All rights reserved.