Organizati

onal
Behavior
During
Recession
Umamaheswaran B
S 2009PGP063

RAJIV GANDHI
INDIAN INSTITUTE
OF MANAGEMENT,
SHILLONG
Contents
Introduction...........................................................................................................................................3
Effect on Employees..............................................................................................................................3
Effect on employee motivation.............................................................................................................4
Concomitant mood swings....................................................................................................................4
Effect on Mid-level Managers................................................................................................................5
Changes in Group behaviour.................................................................................................................6
Role of organisational culture................................................................................................................7
HR Management strategy during recession...........................................................................................7
Surviving a recession.............................................................................................................................8
Conclusion.............................................................................................................................................8
References.............................................................................................................................................8
 ORGANIZATIONAL BEHAVIOR DURING RECESSION
Introduction
With the corporate world still caught in the
grips of the worst recession after the great
depression of the 1930s, it is extremely
relevant to discuss about the various facets
of organisational behaviour during times
such as this.
Today job is seen as a social status symbol
more than ever. Recession forces
organisations to take up a slew of
measures to ensure the profitability of the
organisation and sometimes ensure the
very survival of the organisation. The most
dreaded of all these measures is
downsizing which involves forcefully
terminating the contract of the employees.
For this reason, this recession has been a
rude shock to young Indians employed in
multi-national organisations as many of
them were given pink slips and many are
still under the persistent fear of getting
one. Suddenly their very life which was so
rosy sometime back seems very gloomy.
Effect on Employees
This provides us avenues to analyse this
scenario from various angles. Let us start
from the perspective of an entry level
employee and the how it affects him. What
happens when all of a sudden an employee
is given the pink slip? He keeps aside all
his higher aspirations and starts from
ground zero. It is like revisiting the base of
the Maslow’s Pyramid of needs. In this
context, the ERG theory of motivation
gives a better explanation as there is no
fixed way to proceed along the structure a
jump down the pyramid happens. Earlier
he might have been looking at the Esteem
part of the pyramid and now he might once
again start looking at needs and safety.
Most of the sacked employees experience
an affect feeling. Long periods of bad
moods might result which will in turn
affect the emotions he experiences.
Human psyche is such that we try to
project a different image of ourselves
mostly. How we experience an emotion is
not always the same as how we express it.
There are four different views of one’s
personality:
1) What one projects himself to be?
2) What one actually thinks of
himself?
3) What others say about him?
4) What others actually think about
him?
In the present scenario, all these
dissonances suddenly come into
prominence. Any workplace is bound to
have all kinds of people. Some might
openly sympathise with the employee and
they are the ones for whom 3) and 4) are
the same. Some might provide some lip
service and comforting words. They are
ones having a different 3) and 4). The
worst variant comes between 1) and 2).
Times of recession are a real test of
character for any employee irrespective of
whether he is sacked or not. Everyday
there is a lurking fear at the back of
everyone’s mind about the uncertainty
lying ahead. But since the employee wants
to show himself as a strong and not a weak
link in the organisation, he tends to wear a
very fake cheerful facade. The felt
emotions are completely different from the
displayed emotions and over a period of
time he will start practising surface acting
out of compulsion. This results in brewing
stress within him which ultimately gets the
better of him and does enormous damage
to his mental and physical health. There
are two kinds of situations in a
performance-stress relation. When a
person is subjected to minimum stress,
then he will be suffering from rust out
wherein he will stop knowing how to
deliver and he would become extremely
unproductive. This is normally the case
when a person is subjected to
unchallenging work in an organisation.
One fine day, he will realise that without
his knowledge he is without knowledge to
remain competitive in the job market and
if this realisation coincides with the
recessionary times when all the employees
carry a proper introspection, then he is
subjected to both internal and external
stress of great magnitude. This leads to an
opposite effect known as burn out. Here he
is not able to perform because of excessive
stress.
Effect on employee motivation
Even a highly motivated workforce tends
to become highly disinterested and
managers increasingly adhere to theory X
of motivation which says that employees
inherently dislike work and must therefore
be directed or even coerced into
performing it. Here, even if this coercion
does work, the real intent to work shown
by the employee is not there anymore
because he no longer works to excel, he
works to survive and there are myriad
thoughts running in his mind that make it
difficult for him to give his hundred
percent. McClelland’s theory of needs
states that when jobs have a high degree of
personal responsibility and feedback and
an intermediate degree of risk, high
achievers are strongly motivated. But
since here the risk factor is more, even the
highest achievers can’t give their best.
Concomitant mood swings
Due to the elongated spell of bad mood
and the umpteen bad emotions that a
person who lost the job might be suffering
from, he starts to adopt a reclusive
approach. His social activities decrease as
he fears facing the society without a job
which is viewed as an indispensable part
of everyone today. He starts to even
behave irrationally with frequent bouts of
anger shown on his near and dears. In such
a scenario, the people around him should
take up the responsibility to make sure the
negative affect doesn’t consume him
completely. The stress of an impending
pink slip weighs even more heavily on the
people who are emotional labours. In the
current airlines problem, the amount of
stress undergone by the air hostesses will
be enormous as day in and day out they
have to wear a false happy facade
irrespective of the lurking fear at the back
of their minds. People at the front end of
the companies with large client and
customer interaction will have ensure there
is no fallout of emotional dissonance
caused due to such a scenario as it will
only lead to lesser repeat business which
further increases the risk of getting sacked.
The self-efficacy that the employee had scenario. Cultures characterized by low
before takes a severe beating as his self trust, role ambiguity, unclear performance
confidence is at an all time low. evaluation systems, zero sum reward
allocation practices, democratic decision
making, high pressures for performance
Effect on Mid-level Managers
and self serving senior managers will
Let us now look at the difficulties
create breeding grounds for politicking.
experienced by mid level managers in
This kind of an environment will lead to
these times. In the following analysis, we
politicking within the group as it is
are not going to delve too much into the
threatened by lack of resources and it is the
fact that even a manager runs into the risk
survival of the fittest.
of suffering a job loss just like any other
employee. We will be concentrating on his
The manager also experiences a lot of
role as a manager of a high performance
cognitive dissonance when he is receiving
team.
strict orders from the higher authorities to
act in a manner that is in contradiction
Contrary to the notion that Recession is a
with his value sets. It might be extremely
purgative process that only claims the
difficult for a manager to address a person
below par performers of an organisation,
who is to be given the marching orders.
anyone can get the march out order as in
Nowadays, companies like yahoo are
today’s globalised scenario, teams as a
adopting a policy in which on the D-day
whole are getting dissolved. So managers
the employee is sent a mail to directly
have to ensure there is proper spirit
contact the HR department to complete the
maintained in the team and managers can
termination formalities. This kind of an
succeed in doing that by using humour and
approach might relieve the manager from
give their employee small tokens of
the unpleasant experience of interacting
appreciation for job well done.
with the person but it will make the
employee feel belittled as he is being
Normally, when leaders are in good mood,
commoditized and seen as a mere resource
group members are more positive as they
which is getting removed from the system
start having a feeling that all is not so bad
when it is no longer needed. Manager must
after all and positive members can have a
be extremely humane in such times and
contagion effect and spread across the
make sure the relieving process is smooth
several teams. Nowadays, even a high
with a good severance package that will
performing sports team is better off having
help him in the horrid period before he
a humorous and affable leader. Tata was
finds another job.
able to wade through recession mainly
because the middle level managers
Management decisions, policies and
absorbed the pressure coming from higher
practices will determine the direction in
management and did not allow it to
which the organisation goes in
percolate through to the lower strata which
recessionary times. One thing that is of
is most populated. They should not play
paramount importance is very open
any kinds of politics as that is the last thing
communication with all the subordinates.
that the team would want in such a
He has to make it very clear to the
employees regarding the present status to
all the employees and the immediate future
steps to face the recession. This will
ultimately give the employees time to
prepare themselves for any eventuality and
can even make them feel good if the
situation is not as bad as they had
previously thought. The managements
have to take extreme care of the freshers as
they are the most vulnerable lot in terms of
the kind of stress that they can suffer early
in their careers. The other problem that
freshers face is the paucity of job
opportunities for them in the job market.
Their only alternative is to go for higher
studies which might not be feasible for
many considering their family situation.
Looking at it from another direction,
Freshers are the ones from whom
innovative ideas can crop as the rust of
conventional corporate thinking has not
got settled on them yet and they do not
adhere to group thinking as yet. A smart
organisation should be able to tap this
potential and there is a definite possibility
of getting an idea that can bail the
company out of the woods.
Changes in Group behaviour
Group cohesiveness is tested in
recessionary times as people suddenly
become highly self serving forced by
situations. People who were like family
members till yesterday start searching for
jobs without telling others and might even
try bad forms of impression management
by transferring the blame onto others and
trying to get into the books of the
superiors. This can lead to a lot of bad
political games whose complexity become
increasingly difficult to even comprehend.
This also makes the life of all the people
around difficult as there is a sense of
insecurity in the air as a shock can emerge
anytime from anywhere. There is an
increasing climate of mistrust as becomes
wary of each other which further dents the
team. Here we clearly witness that the
synergy is drained out completely and the
team’s output is not even equal to the sum
of the outputs of the individual parts. Here
we see that a work team ceases to be a
work team and it is just a work group
whose output steadily decreases over time.
A self managed team which can share the
woes equally and also come up with
innovative ideas time and again is the need
of the hour.
Organisation teams should see these
gloomy times as half time breaks to help
them rejuvenate. Many companies like GE
were actually formed during recessions
and there are umpteen examples of
companies like IBM and Samsung which
were almost wiped off during various
recessions but rose like phoenix to be the
market leaders they are today. These
recessionary times also prove to be
detrimental to the organisation in more
ways than one. There will be growing
instances of people behaving in an
unethical manner by preparing fake
resumes. Proper background check must
be carried before inducting anyone. Higher
echelons in some organisations stop
paying attention to the needs of the
employees as they know that the
employees are at their mercy and don’t
have the kind of persuasive power that
they used to possess before.
Deviant workplace behaviour takes a back
stage as employees are really aware of the
consequences that they may have to face.
Social loafing also reduces as everyone in
a group, willingly or unwillingly, tries
contributing to the teams output so that the
team may stay afloat. In such times, virtual
teams are at an obvious disadvantage as
the lack of face to face interaction and lack
of proximity of certain members with the
base office will only lead to increased
anxiety.
Role of organisational culture
In the current recession, certain companies
were reluctant to fire the employees and
they carried all the other possible ways of
cost reduction. There have been instances
of cutting cab frequency, automatic
switching off of AC after core working
hours, cutting down on annual gifts etc. It
actually depends on the culture of the
company as to which path it takes. Mostly
oriental companies have downsizing as the
last resort. This is mainly because
collectivism is imbibed in their culture and
in conformity with that, they tend be
reluctant to put only certain people in the
line of fire. While it is completely different
in the case of western companies where
individualism dominates collectivism and
hence they don’t think twice before
resorting to the downsizing option. LG and
Samsung, which are primarily South
Korean consumer electronics giants, have
not fired any employee till date in India
whereas Motorola fired nearly half of its
work force albeit with a good severance
package of 6 month salary.
HR Management strategy during
recession
From the organisational context, the term
“re-organisation” has become quite
common. In most of the cases, this is a
very polished way of saying that the
company is resorting to drastic measures
not out of desperation but to increase its
effectiveness. This is a case of deep acting
as it has to put up a brave face and not own
up easily. Critics of this strategy within the
company feel that they are trying to be
hypocritical and this will make them
suspect more grave danger than is
currently present.
Organisation should clearly distinguish
between a star performer and an average
employee. During downsizing, HR
personnel normally get into a dilemma
when deciding between an intelligent
performer who is involving in deviant
workplace behaviour and an average
performer who has sufficient motivation to
do better but is unable to do so due to lack
of ability. The latter should be retained as
there is the motivation inside him but the
former is never going to contribute to the
organisation. In my team, there was one
engineer from IIT who was extra brilliant
but was extremely frustrated with the
whole environment and did not find the
quality of work provided challenging. He
started indulging in deviant workplace
behaviour such as coming late to office
and deliberately not adhering to the
deadlines. During recession, when they
had to fire 10 people in my division of
100, they sacked him despite the fact that
he was a consistent top performer in the all
the talent examinations conducted in the
organisation.
In order to ensure proper person-job fit,
certain people, who could have otherwise
been sacked due to the dissolving of their
former team, can actually be transferred to
other departments in which he might be
interested in.
The workforce has to be kept motivated
and busy. In times such as this, when
clientele is decreasing, this might be done
by giving them pilot projects whose results
might be useful in the future. Since pilot
projects generally involve starting the
project from the scratch, it will give the
employees more job satisfaction and job
involvement as well and happy workers
are productive workers. Once a company
listens to an employee during such times
and gives him as much support as possible
considering all its constraints, the
perceived organisational support by the
employees will sky rocket and there will
they will start exhibiting organisational
citizenship behaviour. When satisfied
employees start talking positively about
the company, there is a great amount of
goodwill generated for the company in the
eyes of the stakeholders.
Surviving a recession
Mostly, the organizations that come out
unscathed from times of recession are
learning organisations. The amount of
change that an organisation is made to
undergo in recessionary times is huge and
change always brings with it the element
of fear of the unknown. Companies which
are just happy to stand their ground just
can’t make it through as any company has
to match its internal resources with that of
the environment’s expectations.
Culture should be highly adaptable to any
eventuality and should have the capacity to
bounce back immediately. Innovation is
the need of the hour. For innovation to
crop up easily there should be very low
power distance inside an organisation.
Only then we can expect fresh ideas from
across the hierarchical levels. If we
carefully analyse, many start-ups actually
survive recession due to the sheer
innovation. Idea champions play an
important part in promoting ideas and
ensure the implementation is carried out to
benefit the organisation. The company
might be forced to change its very
objectives if the change necessitates it.
This brings in double loop learning.
Though it may seem very difficult to
digest a changed objective in the past, 3M
demonstrated it through its “post-it”
product.
Conclusion
Recessionary times are definitely torrid for
any organisation. But, it is a test of
character for the organisation that tests it
to the hilt. It is also an interesting period
for an OB researcher as there are so many
changes seen in the behaviour of
individuals, groups, teams and the
organisation as a whole. For surviving
through a recession, you don’t require
extraordinary brilliance at the helm. As
Peter Drucker put it, “No institution can
possibly survive if it needs geniuses or
super-humans to manage it. It must be
organised in such a way as to be able to get
along under a leadership composed of
average human beings”. Not many
organisations sail through a severe
recession such as the present one but the
ones that do by virtue of their resilience
and capacity to change are the ones who
have the potential to play a long innings in
the future.
References
1) Organisational Behavior 13th Edition–
Stephen P Robbins, Timothy A Judge
and Seema Sanghi.