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Crisis: CEOs play crucial role

As a leader, the CEO should reach out with a symbolic gesture by shaving off his own cost to his firm.

business Updated: Jul 18, 2012 22:18 IST
HT Correspondent

Deep Kalra, CEO, makemytrip.com, is fond of narrating tales from the stressful days of the dotcom boom and bust in India at the turn of the century and how the travel portal nearly folded up, courtesy investors who wanted to jump ship, forcing Kalra and his other two co-founders, Keyur Joshi, chief commercial officer and Rajesh Magow, CFO, to pump in their personal savings to keep their baby alive.

"Times were tough and we worked on a boot-strap model for 2 years. Several folks left due to the difficult situation and those left behind had to double up and multi-task. But at the end of the day, I’m glad I shared the gravity of the situation with all concerned and let them make their own personal decisions," recalls Kalra. http://www.hindustantimes.com/Images/Popup/2012/7/19-07-biz-05.jpg

The current economic crisis may not be as dire as the one over a decade back, but employee morale at many companies is not exactly rocking, especially when the cubicle next to you suddenly goes silent one fine morning and increments are one-fifth the rate of inflation. Sharing the true picture with staff, therefore, becomes paramount, feels Kalra.

“While communication itself is of utmost essence in difficult times, honesty and transparency while communicating are even more important. Leaders must share information clearly and honestly and at the right time. You will be amazed by how well employees respond to truthfulness and credibility,” he says.

But Kalra does concede that there could be such a thing as information overload — that is, sharing too much information about the company’s financial belt-tightening with employees, and advises against being an open democracy.

“Most CEOs have able management teams to support and guide them through difficult times — information-dissemination among a larger group can have legal, financial, HR-related and external ramifications, hence it is best to consult those groups and arrive at a conclusion,” he says.

To prevent or to counter employee demoralisation during tough economic times, especially when pay cuts and wage hike freeze take centrestage, head honchos say the personal example set by the CEO plays a paramount role in motivating staff from letting their performance sag.

“The reputation, integrity and behaviour of the CEO and the sense of fairness that he displays will be of utmost importance at all times and specially so during difficult times. It is very important to engage with the staff, share with them what the need of the hour is and further to empower them to do their best and trust them to do so,” says Keki Mistry, vice-chairman and chief executive officer, HDFC.

While he’s not in favour of layoffs, preferring instead to cut pay for a certain period to tide over difficult times, Mistry stresses on the importance of the humane touch even when retrenching people.

“The employee must be made to realise how difficult the decision was and in case the employee has been reasonably good, do offer him to be in touch for a possibility to rejoin when things get better. All possible assistance should be offered in expediting the severance package and in terms of providing reference for an alternate job,” he notes.

Much of the employee angst during a fiscal tightening pertains to wage increments not keeping pace with the rate of inflation, coupled with the perception, correctly or incorrectly, of the corner office incumbent raking in the bucks, year after year.

A Mahendran, managing director, Godrej Consumer Products agrees that perception can often be a spoiler in CEO-staff relations and it’s imperative for a leader to walk the talk. “As a leader, the CEO should reach out with a symbolic gesture and shave off his own cost by double,” he avers.

An additional spur for employee morale could be through innovative remuneration. Castrol India, which saw its profits dipping 15% in the last quarter and also increased its headcount and thereby its wage bill, resorted to offering all its employees stock options of its parent company, BP, says COO Ravi Kripalani. The caveat, of course, is that an employee needs to stick with the company for three years — and not many would complain at that condition given that job offers across sectors and industries are in short supply.

“Our increments are marginally higher this time because we realise in times of difficulty, you have to put your arms around your people. Otherwise, when good times return you won’t have your people,” he says.