Something big happened–errors were made, predictions did not manifest, and the company’s fortunes are plummeting. Employees are whispering in the halls and you fear they might even jump ship. How do you resurrect morale?
When times get tough, downsizing might be inevitable. The Oregon-based Nautilus exercise company saw soaring growth in the ’90s and early 2000s until it all came crashing down in 2007 with the Great Recession. To stem the bleeding, Nautilus sold off several of its products and slashed jobs from a height of 1,700 employees to a low of just 330 in 2011. That’s when Nautilus brought Bruce Cazenave on to the executive board (and eventually named him CEO), a veteran executive with a proven track record of bringing businesses back from the brink.
Cazenave came onboard at the bottom of the company’s fortunes as Nautilus posted a $10 million income deficit in 2010, down from $660 million in revenue in 2005. Cazenave swiftly applied several plans and lessons he learned from resurrecting other globally recognized brands.
Cazenave’s first step was to bring the smaller workforce together. The previous CEO had worked across the country and was not well-known within the Oregon-based office, says Cazenave. So he went around the departments to shake hands and introduce himself, and estimates that he met more people in two days than his predecessor did in three years.
That was reflective of a bigger divide within Nautilus, a very hierarchical system that kept departments divided. This was literally embodied in Nautilus’s old office by the pair of large, ostentatious mahogany doors separating the general offices from the executive offices. Cazenave had those doors torn down to eliminate the barriers between employees and executives and encourage anyone in the company to visit the executive area. Cazenave also moved the company into a smaller building that was more appropriate to the new size of the company. This literally pulled the workforce closer together.
Improving communication and interaction between departments has been a focus for Cazenave: It makes teams work better and improves the company culture. He instituted town hall meetings and a four- to five-minute video dispatch from a company executive sent out to employees on the first day of every month recapping the last month’s progress. And Final Fridays, where teams present skills and lessons from their department to the company, gives employees the chance to give back to the company.
Cazenave gives great credit to the 330 employees left after the cutbacks. He says they were surprisingly resilient and loyal, due in large part to the pride they took in what they were creating: workout devices that visibly improved lives. “It’s taking a lot of pride in these success stories that thousands of people share with us. I think it’s put a lot of adrenaline into our positive culture,” says Cazenave.
Cazenave had seen this before. In the early 2000s, he was brought in to help Dorel Industries turn its profits around. Dorel was much larger than Nautilus, and was the largest manufacturer of infant car seats, but its products were poor quality and faced lots of recalls, says Cazenave. People were demoralized over the quality of the infant car seats that were going out. It took time, but Cazenave focused on improving the product quality. To improve morale and confidence in the product they were building, Cazenave started collecting all the feedback and thanks they were getting–and put it right on the wall of the factory.
“Cards and pictures from kids saying, ‘You saved my life, thank you.’ That feedback of making a difference in people’s lives had a tremendous impact on product quality,” says Cazenave.
Making everyone responsible for the company’s survival can empower the workforce with pride in the company’s success. This isn’t just the case for large corporations–it can save small businesses as well.
Ryan Hulland was a manager for a small sales firm under parent company Monitoring Management that sold specialty HVAC products and electrical equipment. Because of their small staff of 14 employees, Hulland’s team focused on selling a few core products–big ticket items for niche customers, including one specific product line from a local manufacturer that represented 80% of Hulland’s team’s revenue and income. In 2008, that local manufacturer decided to stop using Hulland’s company as a vendor, completely sinking a deal Hulland’s team was making to supply that product for a multiyear deal that Hulland ballparks at $30 million.
To say it threw Hulland’s employees for a loop is an understatement. Within a few days, employees stopped joking, office chatter died, and Hulland heard through the rumor mill that some of his employees were considering leaving.
“I sat down with our employees and had the most difficult conversation of my life,” says Hulland. “A small business often has no safety net. They often operate on thin margins, only one late payment away from not making payroll.”
Hulland and his team had to decide whether to throw in the towel or pull a sales miracle and secure new contracts to make up for the multimillion-dollar contract they could no longer fulfill. They chose the latter, and after brainstorming, decided to radically pivot their business model. They rebranded their sales team as Netfloor USA, with Hulland as CEO, and abandoned the HVACs in favor of raised-floor installation.
Morale had taken a serious hit, but Hulland refused to pressure his workforce or threaten pay cuts. He was transparent about the stakes and the risks. He treated his employees like adults and didn’t invent pie-in-the-sky dreams to keep them motivated.
“The reality of the big loss set in, took its toll for a few weeks, and, to be honest, it sucked. I know I wasn’t the only one who wasn’t excited to come in to work like before,” says Hulland. “But then we had the big Netfloor USA opportunity. It was a motivator. It gave everyone something to care about again. It gave us a goal; it gave us hope. We had some meetings and the ideas were just flying around the room: ‘What about this?’ ‘Can we do this?’ ‘Have you thought about going into this market? This one?’”
Hulland and his team survived what he later termed their “flatline period.” Netfloor USA has since grown to 22 employees, with distributors of Netfloor USA products in other states bringing that number closer to 50, and Hulland ballparks their income at 25% higher than their pre-Netfloor USA days.
Cazenave made sure to push his Nautilus workforce, too. He instilled a greater sense of urgency. His ultimate goal was to get Nautilus failing fast and not fixated on an ultimate, permanent solution–to avoid paralysis by analysis.
“If it works, we’ll hit the gas; if it doesn’t work, we’ll try something else,” says Cazenave. “Particularly in research and development, we instilled a sense of urgency. We can’t become enamored of our success because income is up. That’s great, but guess what: We’re still a small company, and could very easily revert back to where we were five years ago.”