The economic downturn has brought millions of lay-offs, leaving most companies populated by employees who could be best characterised as “survivors”. As the recession continues, some companies will use this period to establish a platform on which to shape growth and success when the economy turns round. For others, declining performance will lead to wave after wave of redundancies in a seemingly inexorable downward spiral.

What differentiates the companies that will weather this downturn from the ones that will fail? The ones that succeed will be those that recognise that their lifeblood is the motivation and commitment of their remaining employees. While the traditional rewards that managers use to motivate employees, such as promotions, pay increases and bonuses are in scarce supply in difficult times, there are other steps managers can take, for free or at little cost, to strengthen morale.

The single most important thing managers can do is to plan and implement decisions in a manner that is fair – especially those related to downsizing. What do we mean by fair? Decisions are perceived as fair when they are implemented consistently and without bias, are based on thoughtful analysis rather than politics or whim, and when they are explained. Employees sense fairness when they are given advance notice of changes and an opportunity to provide input, wherever appropriate, and are treated with dignity and respect.

Fair procedures reduce the likelihood that employees who are made redundant will file a wrongful termination lawsuit. Furthermore, in years of research studying thousands of lay-off survivors across organisations and industries, my colleagues and I have found that when lay-off procedures are fair, remaining employees are more committed, more motivated, more creative, report a more positive and co-operative work group climate, and are more confident and less likely to leave the company.

For example, in one large non-profit organisation, managers role-played breaking the bad news to lay-off victims in order to prepare themselves to be sensitive, rather than formal and abrupt. An employee survey showed that morale did not decline after the lay-offs because of how the redundancies were handled. In a large bank that was previously riven by political factions and infighting, using consistent and transparent procedures to allocate jobs and cut staff after a merger actually enhanced esprit de corps and helped to facilitate co-ordination across units.

What do fair procedures require? One common misconception is that, in order to be fair, managers should ensure organisational survival while avoiding tough decisions or cost cuts. However, being fair is not about straying from hard choices. Fairness is not defined by the what that must be done, but rather how it is done.

Fair procedures reassure employees that they will get their share of desired outcomes in the long run and can help to convey a company’s positive character and identity. Unfair procedures, by contrast, tell employees that the organisation’s values are undesirable and that employees are not valued. My research has found that employees who are treated unfairly are more likely to prioritise their own self-interest, focus on the short term, micro-manage subordinates and projects, and protect themselves through methods such as deflecting responsibility and avoiding risk.

For example, in a supermarket chain, employee theft increased significantly after a poorly managed cost-cutting initiative. In stark contrast, employees who are treated fairly are more likely to act in the organisation’s interests, take a long-term view, empower and help other employees and invest themselves in their jobs and companies, such as through innovative ideas and actions.

Focus on remaining staff

While the global downturn poses a host of threats, it also provides an opportunity for savvy managers. Employees are attempting to make sense of their circumstances and to establish a new set of expectations. They are, therefore, especially open to words and signals from management that define the company’s identity and purpose. Although employees may exude negativity and cynicism in difficult times, most are looking for something to believe in. Managers must therefore refocus employee attention on goals, missions and purpose. When employees perceive that purpose as valuable, they are more likely to accept the organisation’s identity and work hard to align their goals with those of the company. When their assessment is negative, they are more likely to withdraw.

For example, in a large European public hospital, staff interpreted cost-cutting as evidence that management was willing to sacrifice patient care. This occurred because managers failed to draw a link between the cuts and the aim to remain a local hospital that could best serve the immediate community. This failure to connect managerial decisions with organisational identity led to increases in employee turnover and absenteeism.

How to make fairness clear

Clarifying what the organisation stands for requires well thought out ideas and consistent communication, but relatively few resources. It is essential that managers articulate why decisions are made and why the organisation has set particular goals.

This helps employees to see the link between their own roles and the larger whole. An added benefit is that such discussions prompt reflection, which can expose erroneous assumptions and allow them to be corrected.

Employee attention should be directed outward to combat the tendency for resource scarcity to provoke unproductive internal competition. For example, employees and departments can evaluate themselves in relation to the value they deliver to customers, rather than the return they deliver to shareholders. Serving the customer is personally rewarding and builds employees’ sense of competence. Customer feedback directs employee effort without managerial intervention. To take advantage of this, managers must help staff to understand who their customers are, and the factors that shape their satisfaction.

Building organisational identity and implementing change in a fair manner requires managerial commitment, but it can be accomplished without additional expenditure. For managers forced to downsize during the downturn, this could prove to be beneficial for business growth and sustainability in the long term.

Batia Mishan Wiesenfeld is professor of management at NYU Stern School of Business, Robert and Dale Atkins Rosen Faculty Fellow and Daniel P. Paduano Faculty Fellow
bwiesenf@stern.nyu.edu