In rocky times, it’s up to the leaders to keep employees calm, research finds

This year Australian businesses have endured the greatest number of insolvencies since 1999, but a key challenge for leaders in tough times is minimising employee worries, new research finds.

Researchers from Monash University, University of Queensland and the Palladium Group found chief executives who took a communicative approach through challenging times such as downsizing, mergers or administrations, reduced the anxiety felt by employees.

The research into 40 CEOs from ASX200 companies found that leaders who communicated a shared vision for the business and encouraged teamwork helped minimise staff uncertainty in times of strategic change.

Monash University Department of Management associate professor Giles Hirst says most employees feel uncertain of their status, power and role in times of a company restructure.

He says many employees focus on personal security rather than cooperating with a common goal for the business.

He told SmartCompany that the survey showed it was important for employees to “have a sense of meaning” regarding the business, with a “narrative” about the company proving to be helpful in times of stress.

“People don’t just work for a pay check, they work for meaning,” he says.

He cites Australian muesli business Carman’s as a good example of a company with a story, which helps employees feel connected to the business and fosters a shared sense of where the company is heading.

Hirst says the survey revealed that in times of change, new roles and responsibilities should not be forced on employees, but rather should evolve more gradually. Conversations and planning are key to this.

Researchers found that a good approach was to give employees the opportunity to meet with managers to discuss their role, and to work through how they can adjust their roles and responsibilities to align with the company’s changing strategy.

He says Australian businesses had more short-term goals and were more reactive than companies in Europe, which had longer-term plans in place. He explains that short-term vision can be more unsettling for employees.

“We know from psychological studies that a lack of a plan or control, or a feeling of disempowerment, can lead to stress and depression,” he says.

Hirst says the research, which was both qualitative and quantitative, will be expanded across a further 25 countries and 700 CEOs.

Other Australian researchers included Dr Simon Moss from the Monash University School of Psychology and Psychiatry, and University of Queensland’s Professor Charmine Hartel.

The research was part of an Australian Research Council Linkage Grant in collaboration with the Palladium Group.