|
Jenny chairs a small listed company. It has been through very tough times this year, major contracts were lost due to the GFC, workers had to be made redundant as roster changes were not sufficient to reduce costs, dividends were cut to zero. Some loan capital agreements expired and, as new debt was simply unavailable at the time, a rights issue was canvassed with major shareholders. They were unable to support this so a placement was made. This diluted shareholders who are now complaining even though they made it clear at the time that they would not support a rights issue.
Morale has suffered but prospects are now good. The company is operating profitably with a pipeline of prospective work and a strong balance sheet. The CEO wants to host a ‘slap up’ Christmas party to raise morale and signal to everyone that things are now going well. Jenny is not sure that this would be popular given that many staff have friends who were laid off and are still struggling. The new shareholders from the placement have praised the company for its austerity and focus on client service. She fears they would not be pleased to see money spent on parties. But, like the CEO, she knows that morale is important and that some tangible way of convincing staff that the worst is now over would be help to raise morale.
What should Jenny do?
Morale is something that, although can be quickly destroyed, takes a long time to build. Token events, like parties and bonuses, have little effect and can be received with some cynicism by staff who still remember recent events.
A more effective way of showing that business is improving is by investing in the business. During the downturn it is likely that investments such as upgrading equipment and staff training were curtailed. These 'investment deficits' act as a continuing reminder of the bad times and continue to suck morale from the workforce. Investing in the business displays that management are positive on the outlook for the business. Staff feel valued because the company is investing in them. If the investments are directed to improving productivity, both the old and new shareholders will benefit as well.
Jenny should work with the CEO to develop an investment program that addresses the investment deficit. Priorities should focus investments that benefit staff and prepares the company to prosper from the impending upturn. Even if the money is not available immediately, having the plan sends the signal to both staff and shareholders that the future looks positive.
See how other practitioners addressed the problem... |
Case Studies