Taking the Fear Out of the Workplace
Jack Stack, SRC Holdings Corp.
March 18, 2020
Fear. Uncertainty. A growing sense of panic every time the president delivers a national address filled with increasingly bad news. Even with interest rates at essentially zero percent, the stock market (and 401(k) balances) continues to tumble. Chatter around the workplace is filled with questions like: Should I get married? Can I afford to pay my rent? Will I get sick? Will I have a job tomorrow?
As scary as things may seem today as we confront the impact of the Coronavirus, we’ve lived through this eerily similar economic horror movie before—four times, in fact. We actually bought our business, Springfield Remanufacturing Corp. (SRC), in the wake of the 1983 recession. Since that time, we have navigated each period of challenge through a system of open-book management we developed to empower employees with financial literacy—The Great Game of Business.
The power of the principles of that system was reinforced after the 2008 recession hit. It was the result of a so-called “black swan”—an economic wreaking ball that no one saw coming, not unlike the coronavirus. In that case, it was the collapse of the U.S. real estate market.
Now, more than ten years later, I can tell you that it’s never fun to go through a downturn—but we are a stronger company because of each one we’ve been through. Now here we are, facing yet another crisis—one with so many unknown variables yet to play out. But we’ll use the same Great Game playbook we’ve relied on in the past to alleviate the fear that is rising up again.
Here are four steps we’re taking today, which may benefit your Evergreen® company as well:
1. Embrace Transparency
Understand that your people are afraid. You can help alleviate that fear by openly sharing the current finances and the conditions the business is facing. This founding principle of open-book management will empower your employees and bond your team as you tackle the challenge of this time together. If you can share the current reality and say, “here is the worst-case scenario—now that you know what that is, let’s move backward and put plans together to get through this,” your team will be inspired to help.
As you think how to navigate, recognize that you don’t have all the answers, and be open to the ideas and creativity of your team. Not tapping into the wisdom of your people means potentially missing great ideas and the opportunity to develop solutions together.
What has always been amazing in my experience, is to see that when you have the courage to share the ugly truth, people don’t run; they are more than happy to help, and they want to contribute. I have never seen our people come together more than during a recession. Don’t let this crisis go to waste. There’s a lot to be gained by building bonds through transparency.
2. Talk about Your Cash
Today’s motto should not be “watch your cash.” It should be: “Talk openly about your cash position, about how much debt you have, and how long it can last.” If you can teach people how much is left in the bucket of cash, they are the ones who can best extend it to sustain the health of the business.
Similarly, I recognize that some of you may find yourselves in an overleveraged position. But that is an opportunity to engage your workforce and tell them the truth about the situation. If you do find yourself in trouble, ask your associates for ideas about how they can contribute to cutting costs—and increasing cash flow to the point where you can actually cover your debt obligations. Your people are the ones buying the office supplies, converting inventories to cash, selling online, and coming up with other innovative practices that will make a difference. The creativity and ideas that I see when people open their books is incredible. People actually develop new businesses within existing businesses with and without money; they find solutions where you’d never expect. You’ll be amazed what can happen when you teach your people the rules of the game—and start keeping score.
Right now, banks around the country are deciding what industries are going to survive—which businesses they will lend to and which won’t make the cut. That’s really scary. We saw this happen in 2009. With that experience in mind and despite how liquid we are today, and with a strong balance sheet, we went ahead and drew down a $10 million line-of-credit last week as an additional safety measure. As you consider the steps you will take to help ensure the cash health of your company, you might think about drawing on existing lines of credit now while there is still money available.
3. Protect Jobs
If you’re like us, you’ve been fighting tooth and nail over the past few years to attract—and retain—people in the middle of the “War for Talent.” We don’t have a future without people.
I’ll never forget the night in June 1980, when I turned on the TV to watch the evening news. It haunts me to this day. We were smack in the middle of a nasty recession, and the news was usually grim, especially in the Rust Belt where I lived and worked. Factories were closing left and right; thousands of people were losing their jobs on a daily basis. Unemployment was soaring, along with interest rates that topped 18 percent. Executives became idols as downsizing jobs became the new mantra, laying off people at a time they needed those jobs the most. Something similar could happen today.
I attended a conference last summer in Silicon Valley with a number of business leaders, and my biggest takeaway was that the minute they run into trouble, they will go back to their old ways, and downsize, instead of figuring out how to protect jobs. I caution you to think differently.
There is no future without people. We are doing scenario planning on how far we can go without any revenues, e.g. the government shuts down our factories. We look at how much longer we can go if top people take less pay. We look at how far we can go if everyone takes a pay cut—measuring days, weeks, and months. It’s my belief that whoever has the most talented workforce will dominate their markets as soon as 2021. We will avoid layoffs at all costs so that we will have the people when this thing turns.
4. Get Ready for the Upturn
You have to recognize that there will be an upturn and do what you can now to prepare. As bad and as uncertain as things look today, I have a secret to share with you: it’s actually harder to get a company ready to take advantage of an upturn than it is to prepare for a downturn!
Downturns can actually be opportunities to fix things inside your business that you can’t afford to invest the time and resources in when the economy is booming. While it might seem counterintuitive, the current down market comes as a kind of short-term relief. It’s giving us a chance to catch up—to make investments in our people and facilities—and to prepare ourselves to capitalize on the economic uptick that we expect to hit in late-2020, early-2021. By then, our workforce should be more stable and productive—and ready to take full advantage of the available opportunities.
Today, as we face the reality of quarantines or shorter work weeks, we’re thinking creatively about how to invest in our people. If they have to be at home, they can be learning about financial literacy or gaining other new skills. When they come back, they will have even more to contribute to the team. We are consistently thinking about how to maximize people’s time and learning in this challenging time.
I know how painful things are today—I feel it, too. The health and safety of our associates is our highest priority. But there’s no reason you can’t also dare to be successful. Embracing transparency, practicing financial discipline, trusting and respecting your people, and remaining forward focused are all steps you can take to alleviate fear and stress in your workplace today and prepare for the future.
Jack Stack is President and CEO of SRC Holdings, Corp.