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How to manage employees during an economic downturn

As companies cut costs and fire staff, anxious employees will need support. Here's what managers can do.

By Miriam Partington in Berlin

Vanessa Stock, Pitch

Over the past few months, tech companies at every stage of growth have seen the red-hot financing landscape give way to a new uncertainty, says Vanessa Stock, cofounder and chief people officer at Pitch. Amid the cost-cutting, market pullbacks and mass layoffs, employees might be feeling anxious about what the future holds for them — and as a leader, it’s your responsibility to try to ease some of that angst. Here, Vanessa gives her tips on how to support employees through this potentially rather difficult time. 

Communicate, communicate, communicate.

Consistent internal comms should be your number one priority at a time like this. When your team is unsure about what (or whom) to believe, it can quickly lead to insecurities. Clearly explain to employees how the current market environment specifically affects your business, and how it could affect it in future. Then follow up with regular updates. 

At Pitch we shared our new financing strategy with every employee as soon as we’d aligned on the approach within the leadership team. We explained our plan to extend our runway without letting anyone go, but without expanding the team as fast as previously planned. 

Be sure to reinforce that the situation will be in flux. Chances are many of your teammates haven’t been working long enough to remember the last tech downturn, so remind them that this isn’t permanent; this is a phase, things can change again at any time, and you will always let them know as soon as the business’ strategy changes.

Be transparent about layoffs.

It’s the news that everyone dreads, and no founder wants to deliver it. It doesn’t just impact teammates who have to leave; it affects those who stay on, too (particularly those who may have to temporarily take on extra work.) It’s important to dedicate as much time explaining your decision about layoffs to those who stay as to those who go. Explain what has fuelled the decision to let go of employees and be honest about how this will affect the company in the short term. Avoid sending an impersonal company-wide email or recorded message about the layoffs, but try to hold a meeting in person. And reiterate that your door is always open for one-to-one conversations for employees to vent their concerns. Finally, be enthusiastic in your praise for the employees who remain. They are the company’s most valuable asset and deserve to be recognised for their contributions. 

Make sure “work harder” isn’t the takeaway message.

If, as a company, you are slim on resources (and possibly people power) during an economic downturn, it’s important to adjust your expectations. You can’t expect staff to continue working as hard as before on fewer resources — and you should be proactive about quelling fears that you are expecting employees to do so. Yes, it’s important to tell employees that they may have to accomplish more with less if budgets are tight — but remind them that this is an opportunity to refocus. At Pitch many managers were relieved about our decision to pause hiring. Scaling the team so rapidly over the last year has taken time away from getting their core work done and supporting the existing team, and now they have an opportunity to get their heads down.  

Prioritise important perks.

You may have to re-evaluate the benefits you offer employees too, in order to save cash. Prioritise the perks that are important to your team (physical and mental health are definitely up there) and communicate to employees about cutting perks that are more a “nice to have.” For Pitch our top priority as a fully remote team was to protect our annual off-site as we know that in-person time is crucial to the team’s feeling of belonging and efficiency in collaboration. During times of economic uncertainty, it can be helpful to employees to communicate the policies and traditions that will stay as they are — whether that’s a learning stipend, your upcoming summer offsite, or just a beloved Bagel Friday.

Motivate your team to stay.

After years of competition for top talent in tech, it’s become standard for startups to offer very compelling equity packages. As a manager you may therefore worry that down rounds (or even the prospect of reduced exit multiples) will make it tempting for team members to jump ship. Assuage these fears by focusing your team’s attention on what’s real, right now: building great products, being a great partner to your customers, and growing as individuals and as a group. Now is a great time to reiterate both the company’s goals and individual team member’s goals, and how those are related. This will help the team focus and help them clarify their true motivations for staying. 

Miriam Partington is Sifted’s DACH correspondent. She also covers future of work, coauthors Sifted’s Startup Life newsletter and tweets from @mparts_

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