8 Tips for Managing Staff Through Hard Times

When the economy sours, many entrepreneurs turn to board members and industry veterans for help. Which is fine. But Scott Cook, the founder of Intuit, the tax software company, says it also makes sense to spend time among the most junior members of your staff. "Expect your contributions to be led by your youngest employees," he says. "Seek them out. Make them your mentors. Get them into a room and ask them to lead in creating ways for your company and customers to benefit. Then, help them act on some of the ideas that emerge. Consider setting up your own in-house “science fairs” so employees can showcase their thinking."

"It’s very painful to do, but when you lay people off, it’s important to make the cuts deep enough so that you won’t have to do it again soon," says John Mackey, founder of the Austin-based Whole Foods, the natural and organic supermarket chain that reached $7.9 billion in revenue in 2008. "Your employees will forgive you one round of layoffs," he says. "But if you do it a second time, you will lose their trust as people start thinking, My God, when am I going to lose my job?"

Many business owners push their salespeople harder during a downturn. Not Barbara Corcoran. The founder and former owner of The Corcoran Group, a leading New York City residential real-estate agency, takes a counterintuitive approach. Her advice? "Hold a sales meeting and ask salespeople to take out their calendars and pick a few weeks to take for vacations," she says. "A recession is a good time for this, because sales are low anyway, and it’s an opportunity to reverse the mood of the company. No one wants to buy from a desperate salesperson with sweaty palms."

"When you are going through tough times, it’s easy to have depressing meetings," says Chip Conley, founder of Joie de Vivre Hospitality, a boutique hotel chain based in San Francisco. "So in 2002, the last time business was hurting like it is now, we started ending our weekly executive meetings a bit differently. During the last 10 minutes, any one of the 16 executives could raise his or her hand and recognize someone in the company for outstanding work. Just something small like that has had big, positive effects on our business."

"If you have engineers in your company, make them get up early and try some selling, too," says Bob Metcalfe, the inventor of the Ethernet and the founder of 3Com, the pioneering networking company. Nothing helps an engineer gain a better appreciation for the technology than seeing how and why people choose not to buy it. "They will be inspired by seeing their handiwork in the wild and motivated by customer appreciation," Metcalfe says, "and maybe they will get feedback to make future products better matched to customer needs."

One of the easiest line items to cut is employee training. But that's a mistake, according to Bernie Marcus, the billionaire founder of The Home Depot, the Atlanta-based home improvement retailer. "Training sometimes seems like a small thing, but it is actually the first step in empowering people to do their jobs well," Marcus says. "No matter what an employee’s position was within the company, he or she could make a contribution by being creative or working hard. Training combined with providing employees a sense of belonging and rewarding them for results were the keys to our success."

Jack Stack, the founder of SRC Holdings in Springfield, Missouri, and the father of open-book management, says that now is the time to embrace financial literacy and transparency. Make sure every worker, no matter how junior, knows what your P&L is, understands how his or her job relates to it, and has an idea of how to improve the business's overall financial performance. "My daughter has a small clothing shop in Missouri," he says. "It could be struggling. Upscale clothes are not a necessity, especially in a recession. Her answer was to make her seven employees financially literate. She now has seven people who think like her. Now it’s the associates who are selling. In October 2007, the business did $55,000 in sales. In 2008, in this climate, it did $81,000. Those numbers say it all."

It's hard in a downturn to remember to take care of your people, observes Ari Weinzweig, co-founder of the Zingerman’s Community of Businesses in Ann Arbor Michigan. But it's also the time when they need your attention and reinforcement the most. Fortunately, you can do this without a lot of expense. "Going out of your way to do nice things for staff members can go a long way," he says. "Bring them a book they are interested in. Compliment them in front of their families so they feel good. Buy a small gift. The better you make them feel, the more likely they will pass on the cheer to customers."