how do you tell your empoyee of budgets cuts
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Communicating Budget Cuts
In addition to deciding how much to cut and what approach to take, the organization’s leaders need to determine how to communicate their actions to the rest of the organization. Once people start to hear about budget cuts, they start to worry about their own jobs, programs and clients and about their friends in the organization. Morale may decrease and distractions increase.
For these reasons leadership may want to keep its budget-cutting activity quiet. This may be a good idea, especially if their actions can be discrete and have minimal impact on members of the organization, such as negotiating better rates when contracts come up for renewal or changing expenditure patterns out of central funds.
In most cases, however, leadership cannot insulate members of the organization from budget and cost cutting. Therefore, they must say something about the reasons for taking action and about what will happen. Each organization will need to make its own judgment about the amount of information shared and the tone of it. It may not be appropriate or useful for leadership to share everything it knows about its cost trends, although some information about its specific expectations can be useful.
The organization also needs to decide whether to describe its situation in terms of a crisis or to soft-peddle it. Some writers on organizational change have argued that an organization will change only if the people in it share a sense of crisis and can mobilize themselves to respond to it, as a nation does in time of war. However, in some situations the sense of crisis can get exaggerated beyond the true scope of the situation, and distract people unduly from the organization’s normal business.
One way of looking at the decision about tone of the communications is to ask whether this a situation in which the organization needs everyone to drop what they are doing, roll up their shirt sleeves, and help dig out of this mess, or is this a case in which people should know that the organization is facing some difficulties, but leadership is working on it and is confident that they can respond with minimal disruption, so people should just keep doing what they are doing and be prepared to help out when they are asked.
In communicating about budget cuts, leadership needs to keep in mind a few points:
• Assume that everyone is looking for the answer to one question—will I lose my job? This means that everything said by or on behalf of the organization and leadership will be scrutinized very closely, hunting for implicit clues that suggest the extent of layoffs or that jobs will be guaranteed or protected. This means that if a dollar savings target is announced, some people will divide that by what they believe is the average salary to come up with the number of positions they think will be eliminated, even if there is no intention to cut positions. On the other hand, an announcement that the organization expects to achieve cost reductions through attrition may be interpreted as a guarantee of no layoffs.
• Keep the messages clear. People can exercise selective hearing during this process. If leadership tries to make an overly nuanced pronouncement on the budget cutting process, the nuance may be missed and people may hear a more discouraging or encouraging message than was intended. If leadership has decided to try to place everyone who wants one in a new job, but wants to retain the right to offer a lower salary for the new position, they need to be careful not to say something that is interpreted as a guarantee that no one will lose their job and everything that goes with it-responsibilities, pay, etc. On the other hand, in this case one would want to be careful not to suggest that the organization is going to cut pay rates if that is not the case.
• Be careful what you promise. People will remember the statements leaders make. The organization should be sure it won’t have to lay off people before anyone makes a statement that rules out layoffs or some other painful move. Once the statement has been made, it either limits the actions the organization can take or forces leaders to forget about the earlier statement (usually people in the organization don’t allow these statements to be forgotten) or to recant it, exacerbating the negative effects on morale and trust.
• Don’t expect to make everyone happy. You cannot control everyone’s interpretation of events. Periods of budget cutting are difficult times, and after making a good effort to communicate effectively, management has to accept that some people in the organization will be angry and will not accept the organization’s “party line.” Leaders will move forward in spite of these sorts of difficulties, although they will do what they can to reduce them. Communicating during a period of organizational stress is not easy.
• Many organizations find it useful to adopt a formal communications plan early on in such a painful process. This plan would specify the audiences for communications, the information they should receive, and the timing and vehicles for communicating to them. Certain messages need to come directly from the organization’s leader; others can come from more immediate supervisors. Often an organization needs both face-to-face communication of information and formal documents that record and disseminate key elements of the analysis, process and response.
The organization should also assess the need for messages to outside groups, including in some cases the local media. An organization which has a significant profile within its community may find that the media start to pick up news of its internal actions, and may need to take action to educate the media about what it is doing.
From Strategic Budget Cutting by David Maddox (1999)
