Balancing The Budget And Employee Morale

Balancing The Budget And Employee Morale

When times get tough, most executives move to cut costs, reduce resources and shore up company savings. And while focusing on financial issues in the short term is important, this is often done at the expense of the long-term health of the organization.

In a weak economy, it’s of critical importance that leaders practice “giving back” to the company culture, even as things are being taken away.

In our experience, it’s deflating and demoralizing to a workforce when things are only being taken away and nothing is being put back in. Leaders often underestimate the level of upset brewing among staff and even misread the fact that people are not complaining to mean that they are not bothered by the current state of the company.

Worse still, some leaders take the position that since the job market is tight, people cannot leave so there is no need to take care of them.

These conclusions ultimately lead to a situation where, when the market does come back and opportunities open up, employees — who are resentful of how things were handled during the difficult times — leave.

Even in the face of reducing expenses, you need to infuse conversations with energy, confidence, hope and a sense of the future.

One important thing you can do to maintain employee morale and balance things out as the budget gets rightsized is to rally everyone around the new strategy. Start by telling employees the truth about how things are — even if the news is bad, they can handle it. Involve them in the process of fixing and improving things, developing new products and finding new customers. By having the courage to be sincere and transparent, you cut rumors and speculation off at the pass and engage employees’ commitment to both deal with today’s reality and plan for tomorrow’s recovery.

What are you doing to strike a balance between budget constraints and employee morale? We would love to hear your comments.


Founder and President of Quantum Performance Inc., a management consulting firm specializing in generating total alignment and engagement in organizations.

His work has encompassed a broad range of industries including banking, telecommunications, manufacturing, entertainment, real estate, retail, startups and non-profits.

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