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Leadership

How To Accomplish The Impossible Task Of Cutting Costs And Maintaining Morale

Is it actually possible to keep spirits high while slashing a budget? What leaders can learn from The Washington Post.

[Photo: BRENDAN SMIALOWSKI/AFP/Getty Images]

It’s tough to be a business on a budget—even tougher when cuts have to come.

When faced with a series of important budget decisions, figuring out how to keep those inside an organization happy is integral. And the sad truth of the matter is that when a business is faced with budget cuts, morale can be significantly hurt.

But there are ways to potentially combat this. A recent New York Magazine story tangentially highlights this. Gabriel Sherman wrote an extensive piece about the Washington Post’s reboot and what now-owner Jeff Bezos has done with the paper since he bought it for $250 million. A lot of the piece highlights the risks the media company is taking to stay relevant, including the $50 million Bezos is said to have invested in the company last year alone. But there was one section at the end that caused some people to pause: The potential for significant cuts.

Sherman writes:

According to sources, the Post’s digital revenue is around $60 million, far below what the newsroom needs to function. The last time total operating revenue for the paper was published, in 2012, it was $580 million; one former executive estimates today it’s probably closer to $350 million. Another Post veteran told me that Bezos said in a meeting that the company’s annual budget, currently around $500 million, will have to be cut by 50% over the next three years. The newspaper denies this, and so does [CTO] Prakash, who does, however, confirm that Bezos told him, "We can’t be an organization that loses gobs and gobs of money."

While we won’t know the truth of this statement until three years from now (if ever) such a possibility isn't far-fetched. All the same, there’s a general sense of hope at the company—at least according to those interviewed.

How does a leader walk that tightrope of slashing funding (and potentially jobs) while keeping spirits at least somewhat high? Very delicately.

According to Brian Kropp, an HR practice leader at the consultancy CEB—which describes itself as a "best practice insight and technology company"—financial shakeups often lead to waning internal morale. "It happens all too frequently," he says. There are, however, a few things that can be done. The way to attack this potential problem is by looking at how employees will respond. And understanding how to prepare the workforce for big changes.

Battling Uncertainty

The first big thing to happen when organizations go through huge reshuffles, says Kropp, is employees’ role definitions fall apart. That is, people aren’t quite sure what their job is and what they’re supposed to do when things seems to be in a state of chaos. When funding sours and organizations are in the midst of tumult, jobs inevitably change. So employees could feel like they don’t know what their exact roles have become. Instead of redefining the job description, Kropp says leaders should just focus on individual objectives. "You have to shift," he explains, to "‘what does success look like?'"

This leads to the second big thing that hurts morale during budget crises: Recognition. Often people who are trying to navigate internal changes become disillusioned by superiors not noticing their travails. "Employees who are working hard want to recognized for this contribution they’re making over this period of change and disruption," says Kropp. The answer to this is obvious: Take notice of those performing well and build a system that highlights these people.

Taking Risks

One big misconception during big internal changes is the idea that risks can’t be taken. People become more risk averse when budgets are cut. While this reaction makes sense, it actually doesn’t help companies get out of the woods. In fact, changing things up helps companies get on the road to recovery faster.

Kropp's research shows that promoting people to take risks improves the internal atmosphere. More, it fosters people to make good decisions. Even if the results aren’t perfect, Kropp says it's best to reinforce employees to make independent decisions, rather than simply doing business as usual.

Ultimately, this all comes down to proper communication. Leaders have to explicitly tell members of an organization what is working and what isn’t. More, they need to foster a culture where people feel comfortable. Though budget cuts can make things feel uncertain, if leadership explains things clearly what is going on and what the clear objectives are, a lot can be demystified. Often, says Kropp, employees begin acting out because they are trying to save their jobs, and this can be fixed with more communication. More, top brass need to be role models rather than acting like chickens with their heads cut off.

The big take-home is that companies should be prepared to foster their work base even when faced with a money crunch. What perhaps has worked for the Post—and what could still help out—is Bezos’s attempt to take risks as a media company. It isn't just newspaper anymore, the company is actively trying to prove itself a worthy digital media company.

Lastly, Kropp says leaders should never make promises they can’t deliver on. For instance, if a company begins rebounding after a period of instability, it is not good to announce that everything will be perfect again. "More often than not," says Kropp, "there’s more change that’s going to occur."

In short, it’s up to the leaders to be communicative and truthful. Though times may be tough economically, there are ways to at least try to keep spirits high.

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