Episode with guest: Dave Scholten
International Business Coach with The Great Game of Business
(This episode was recorded in November of 2022.)
Key Episode Take-Aways:
1. We're so uncertain and don't know what to do, that we stopped thinking. Even more important than that, we stopped talking. (click to jump to this topic below) So this is nature, it's freeze, fight, flight. It's fear, and you never want to let your people see a sweat. So whether it's your customers, whether it's your children, whether it's your employees, if you can't remain confident and have a good plan, or communicate that you're building one. And the 9% of companies during recessions thrive. You can choose to be one of those. But being a victim is also a choice, so turn up the communication and talk more with your people. Last thing you want to do is surprise your people, your customers, your vendors, your employees.
2. There's a distinct difference between an underperformer and too many people. (click to jump to this topic below) If somebody's really worried about the economy, and they're concerned that they may not be able to keep all their people, there's two ways really that I would consider going about it. Number one, if you're nervous, or uncertain about the revenue that's trying to come and you're worried about being overstaffed. There's a distinct difference between an underperformer and too many people. So, if you would view laying off the four underperformers and disguise it as a layoff, it makes it easier for you as a manager or at least a leader. But the impact to the rest of your crew is way different than if you eliminated those four underperformers. You would get more credit for addressing the underperformers with the rest of the team, than if you did a layoff. So I would encourage you to take the high road and continue to be honest with your people, particularly the ones that you have some people that are underperformers, you know, start with looking in the mirror and see if they know it. Honest communication is always the best policy. There's two impacts, number one is, if we actually remove underperformers, the good achieving people will be say "What took you so long? You know, we saw it, we knew they weren't working that much." So that can actually be a morale boost. The other impact is if you lay them off under that guise, you can damage everything, because everybody's like, "Am I next?"
3. What you do speaks so loudly, I can't hear what you're saying. (click to jump to this topic below) Everybody I work with, they have three rules: think on paper, talk on a wall, use numbers to make decisions. So before you open your mouth, because you're frustrated, write down your thoughts. Think on paper. Talk on a wall, if you're in a conference room, go to the whiteboard and start writing everything down. People's eyes will be up there. And they'll be in the conversation versus pretending to take notes when they're really doing emails on their own computers. Number three use numbers to make decisions. There was a study done in Europe in 2010, after the recession of 2008 and 2009, organizations that performed layoffs, had a 41% decline in job satisfaction, 36% decline in organizational commitment, and a 20% decline in job performance. So just consider you have 100 employees, you layoff six, to save $36,000 a month. But your capacity, and productivity just went down 20%.
Continue scrolling to read the full episode transcription.
Welcome to the change the game podcast, where we share stories of open book management and highlight capitalism at its best. Here's your hosts, Rich Armstrong and Steve Baker.
Steve Baker 00:12
Hi, everybody. It's Steve Baker with The Great Game of Business, and I have a special treat for you today. I'm here with Coach Dave Scholten. This guy is all over the globe, working with companies in every sector you can imagine. And we've been talking a lot, Dave and I, about the reality of there's a spectrum out there isn't there, Dave a spectrum of people and their fear. We here at SRC, we're worried because we can't get enough people, I think we have close to 100 openings at SRC, we can't keep up. You're running into a lot of people who are on the other end of the spectrum who are saying, I might have to consider a layoff. So if people are listening right now, they're nervous about the economy, what's gonna happen, and that's the spectrum. I need people, I don't have enough work for my people. Could you talk about what you're seeing out there in the field?
Dave Scholten 01:04
Sure. Hi Steve, and hello everyone else. Great to see you all. And I have my green shirt on because that means money and people. So, um, a lot of crazy things going on right now. In the economies you know, there are countries that are forecasting 18 to 20% inflation next year. There are companies that have taken a 15, 20% exchange rate hit on the US dollar in the last three weeks. And so this uncertainty in business, can cause, probably will cause anxiety. Sometimes anxiety leads to depression, but either anxiety or depression probably develops into intellectual paralysis. We're so uncertain, we don't know what to do, that we stopped thinking. And even more important than that we stopped talking.
Steve Baker 02:05
So this is nature. It's freeze, fight, flight.
Dave Scholten 02:13
It's fear. And, you know, I mean, you never want to let your people see a sweat. So whether it's your customers, whether it's your children, whether it's your employees, if you can't remain confident and have a good plan, or communicate that you're building one. And the 9% of companies during recessions thrive. You can choose to be one of those. But being a victim is also a choice, and so, you know, turn up the communication, and talk more with your people. Last thing you want to do is surprise your people, your customers, your vendors, your employees. Now, this conversation is intended for companies that practice great game. The good news is you're going to understand this conversation. The bad news is, if you do a layoff, you're going to be punished more than an non-great game company. Because a non-great game company, the employees will already think it's going to come, they wouldn't be surprised if it happens. But a great game company, where I have one client I worked with, and we made four points progress on their profitability in 18 months to the tune of $600,000.
Steve Baker 03:33
Dave Scholten 03:34
And I asked the team and said, How do we make that progress? Trust, transparency, communication, teamwork, integrity. I said okay, and you're gonna lay off some people? Yeah we're thinking about it. I said do the people know this is coming? Um, well no, they'll probably be surprised. Do the people know they're in trouble? Well they haven't had an employee evaluation for nine months. And I said, What will the rest of the organization think if you lay off these six people? And the leadership team said, well, there'll be surprised as well. And so then my question to the team was, everything that you just told me brought us the $600,000 of progress, is going to go away in five minutes? So I think we have to be real careful that when we're uncertain, we have to prevent and avoid fear and panic not only on ourselves, but also with our people and with your vendors.
Steve Baker 04:43
So let's talk about that. Another way, what are a couple of different ways that you can view layoffs, and I'm using that term loosely. So walk us through a couple of ways that if somebody's really worried about the economy, and they're concerned that they they may not be able to keep all their people, walk us through a couple of different ways to view that.
Dave Scholten 05:07
There's two ways really that I would consider, number one, if you're nervous, or uncertain about the revenue that's trying to come and you're worried about being overstaffed. There's a distinct difference between an underperformer and too many people. So, if you would view laying off the four underperformers and disguise it as a layoff, it makes it easier for you as a manager or at least a leader. But the impact to your, the rest of your crew is way different than if you eliminated four underperformers, you would get more credit for addressing the underperformers with the rest of the team, than if you did a layoff. So I would encourage you to take the high road and continue to be honest with your people, particularly the ones that you have some people that are underperformers, you know, start with looking in the mirror and see if they know it. Okay, honest communication is always the best policy.
Steve Baker 06:09
So what I'm hearing you say here, if you have an underperformer and you're just kind of like, well, you know, everybody's hearing about layoffs, I'll just go ahead and lay off those people. We missed the opportunity. But well, there's two impacts that I'm hearing you say number one is, if we actually remove underperformers, the the good achieving people will be like What took you so long? You know, we saw it, we knew they weren't working that much. So that can actually be a morale boost. But if you lay them off under that guise, what you're saying is you can damage everything, because it's like everybody's like, Am I next? Is that what you're saying?
Dave Scholten 06:47
Yeah, exactly. You know, one of the management truths is that the underperformers always bring down on the talent.
Steve Baker 06:57
That's a jewel.
Dave Scholten 06:58
So secondly, if you're worried about revenue, first thing you need to do is a cash forecast. See how bad it is versus reacting on a gut feeling? Second, consider options to save money. Okay, if you wanted to. First I think if we're going to get along in this conversation, you're gonna have to agree that your people are an asset.
Steve Baker 07:29
I love it, so we can all agree on, people are an asset.
Dave Scholten 07:33
They are why you are successful, and you couldn't get your results without them. So if your people, assuming appropriately trained and supported, if your people aren't assets, and you're looking for ways to save money, and you're worried about the next six months, would you consider selling a truck? Or a bandsaw? Or rent out half of your building?
Steve Baker 08:06
I know there's somebody out there going no, it took me two years to get this truck. So to walk me through that, I love it. I love it. You're challenging the thinking.
Dave Scholten 08:18
Well, yeah, I mean, if, if you're if you can agree that your people are an asset, okay, then assets are assets are assets, they're all on the balance sheet. Okay. And so if you want to save money, consider all your options before you start with the easy way. That's why I'm saying, Yeah, okay. And if you have to do layoffs, you better make sure that no one in the organization is surprised. But we're going to talk in a minute about the message you're going to send to, the damage you're going to cause to your brand, when you do a layoff.
Steve Baker 09:03
Well, let's let's talk about that. What are the unintended consequences of a layoff?
Dave Scholten 09:09
Well, I mean, if you're nervous about revenue for the next six months, and you're going to try and pause or save on some of your expenses, and you're going to call everybody you do business with and ask for different terms, and pause the relationship, the financial relationship, and it's tell them that maybe in six months we'll reengage, what's the message you're sending everybody?
Steve Baker 09:35
Things aren't good.
Dave Scholten 09:36
That that, that you're panicked? You're afraid. Maybe. Maybe you're sending the message that you're not financially secure?
Steve Baker 09:46
Yeah, I'm desperate.
Dave Scholten 09:48
You know, I have a lot of companies that are homebuilders, they depend on the trades. You call the trades and say we'd like longer terms, the trades here. You're in trouble, I'm going down the road.
Steve Baker 09:59
Dave Scholten 10:00
So, you know, when the employees see you start acting desperately. What will they do?
Steve Baker 10:10
I'll be looking for the next job.
Dave Scholten 10:14
Exactly. I have two children, you know, I've been very careful to never let them see me worry. Because if I'm scared, they're freaking out. And part of leadership, part of guiding a team. Look at any athletic coach, or parent, they always believe in their people. And they don't act desperate. But you can build a plan, but don't do it by yourself. Work with your teams communicate with them, because they might have ideas you haven't thought of.
Steve Baker 10:48
Yeah, I've heard. I don't know who's responsible for this quote, so I can't attribute it properly. But fear is a liar. As what I've heard before, and it's it's great how you put it into terms in the family. Of course, we don't want to panic everyone, just because we're nervous about something. But with an organization, we have a bunch of adults, and we can actually go to them and say, what is what are our solutions around this? And they're pretty darn creative. We saw that during the recession.
Dave Scholten 11:19
And the pandemic, one of my favorite leadership quotes, what'd you do speaks so loudly I can't hear what you're saying.
Steve Baker 11:28
Wow, that is awesome.
Dave Scholten 11:32
And the other one is, you just have to really be careful. Because people are gonna watch you. They're watching you. Now, we've got to demonstrate that we have a plan. And we have to communicate. Okay, two hands are always better than one, harness the wisdom of your crowd.
Steve Baker 11:54
What, could you please talk about the aftermath. Let's say that somebody goes, I just don't have a choice. I can't figure another way out. I really need to do a layoff. What's the what's the reality? What happens afterward?
Dave Scholten 12:08
You asked my favorite question Steve.
Steve Baker 12:11
That's what I'm here for man.
Dave Scholten 12:13
Everybody I work with, they have three, three rules, think on paper, talk on a wall, use numbers to make decisions. So before you open your mouth, because you're frustrated, write down your thoughts. Think on paper. Talk on a wall, I mean, if you're in a conference room, go to the whiteboard and start writing everything down. People's eyes will be up there. And they'll be in the conversation versus pretending to take notes when they're really doing emails on their own computers. Number three use numbers to make decisions, rather return on investment of the impact of a layoff. There was a study done in Europe in 2010, after the recession of 2008 and 2009, organizations that performed layoffs, had a 41% decline in job satisfaction, 36% decline in organizational commitment, and a 20% decline in job performance.
Steve Baker 13:08
Dave Scholten 13:09
So just consider you have 100 employees, you layoff six, to save $36,000 a month. But your capacity, and productivity just went down 20%. Because people are freaking out that they're next. Or they're out looking for a job. And so, you know, the aftermath? What are you going to do about replacements, recruitment, onboarding? Miss hires, a loss in employee engagement, which is highly correlated to productivity.
Steve Baker 13:47
Dave Scholten 13:48
What about damage to the employee brand? When you do need people, are they going to come to you? Because they heard what you did. Damage to the customer and vendor relationships. Okay. I mean, they all talk, you know, you pay one bill late, all your vendors know. And you're gonna have, you're gonna lose some knowledge that those people had. Remember, if they're an asset, then their intellect, their intellectual knowledge about your business is also an asset.
Steve Baker 14:20
Yeah, for sure.
Dave Scholten 14:21
So, you know, are things tight? Yeah. You know, are things gonna get thin? Maybe, um, the world is changing so fast. And if you're not willing to be disruptive, and radical, really disrupt your industry, learn from other industries. And you know, you have a choice to thrive or suffer during, during what might be coming and we don't even know if it's coming. We don't know if it's been a hit your geography we don't know if it's gonna hit your industry. You know, I mean, all the indicators are, it's time to worry but people aren't spending that way, so I can't I can't give you the answer to the definition of what's coming. But everybody we work with Steve, you and I our answer, if someone says to us, we hear a recession is coming. Our answer is we choose not to participate.
Steve Baker 15:19
I love it. I think that one thing that everyone watching this video can do is to sit down and do the math, and really reflect on what is the true cost if I do this layoff, financially, emotionally inside the business. Also, regarding productivity, if they start to do the actual math on this, it sounds like it's going to come out a lot different than just simply I saved this much money this quarter, by having four less people. Any last thoughts to wrap it up? Dave?
Dave Scholten 15:51
In the absence of information, the employees will think the worst. So number one, whatever you consider to be a reasonable bottoming or a reasonable amount of communication, double or triple it with everybody, your people, okay. 41% of the United States of America is food insecure. Okay, that's getting in the middle class. 41% of families are worried about their next meal. Um, and I think the other thing, you know, we've learned over the years, the SRC, we've never laid anybody off during the pandemic, you know, the leadership at SRC talked to the employees and said, What should we do? And the employee said, Well, why don't we all work 80% of the workweek, so that we don't have to lay people off. And so everyone on the team was willing to take a little bit of a hit to save their friends. But there's so the psychological and emotional impact of a layoff on a team. You know, if I was a gambling man, I think nine times out of 10 Does it matter why you do a layoff? I would particularly regret it.
Steve Baker 17:11
Yeah. So that that's a huge piece, right there is the you can use it as a crucible, right? You can either burn everything up or you can come out stronger as a team because you stuck together. And you've had last time we spoke you mentioned a quote you love from, from Jack about this subject is don't think for your people go ask em'. And,
Dave Scholten 17:40
yeah, you know, here we are, everybody's uncertain. I mean, your, you know, your teams, your employees, their families at home, they're uncertain. You know, groceries have gone up, gas has gone up, people are taking a, a family forest, taking a $700 hit inflation right now a month. I don't know how many people can absorb that. Okay, so they have the same fears you do. Okay. So I just, we can't go into a conference room, shut the door, you know, put the blinds down and decide how many people to eliminate. Your employees know what you're doing? Okay, and they are
Steve Baker 18:17
Amplified in their minds, right. Rumor, gossip, misinformation.
Dave Scholten 18:23
So just go talk to em'
Steve Baker 18:24
Yeah. I love it. Well, this has been enlightening. For me, I think I love to hear you know, about what people are doing in the field. If you are watching this, and you are concerned about the economy, as we all are, what if you could make your company the one place where your people could consistently win and get good information? And together, create a culture of winning, a culture of stickiness, a culture that will get through challenges? Will you or will you not dominate in your market in the next five years? I think you'll be on top. Dave, thanks for being here. I appreciate that.
Dave Scholten 19:04
Sorry. I wanted to add one last thing. So, we've been talking to companies where the annual plan doesn't look achievable.
Steve Baker 19:13
Dave Scholten 19:13
Okay. And that means Stake in the Outcome might not be achieved. Okay, so no bonus, it's nothing. Yeah, it's nothing different than a football coach. At halftime. we're way behind in the game and the coach knows the team's not going to win. Your job as the head coach is to get your players back on the field and get their head in the game. So figure out a different way to come together. You can do a second half year challenge that's not Stake in the Outcome. You know, you could do cross train, there's still lots of ways, you know, just get their head in the game because winners win. And losers fail. Love it. That's what make the people feel like they're winners.
Steve Baker 20:02
Yeah. Because it's a choice. As you said before, being a victims a choice. And being a champion is a choice. So let's choose to win. Dave, Thank you very much. It's always a pleasure. Let's keep people thinking positively. And, you know, check back with us. We're always coming out with, with new, great ideas to help you on your journey. Thanks, Dave. Thanks, everybody. We'll see you next time.
Dave Scholten 20:26
Appreciate being included. Thanks.
The Change The Game Podcast is produced by The Great Game of Business. To learn more, visit greatgame.com