BANGALORE: Trends in employee survey data over the past nine years reflect a startling, but understandable impact from macro economic conditions. Employee trust in leadership and faith in the future of their organizations has steadily fallen to an all time low. The result: employees are less committed, loyal, satisfied and motivated. However, many leaders have thrived through this time, maintaining high levels of engagement.

Economic Downturn: Impact on Employee Engagement

Corresponding with the move from the economic boom times of the 1990's to the recent economic downturn, there has been a parallel drop in trust and faith by employees. In response to economic pressures, many companies have made dramatic changes in strategy and structure, sometimes leaving employees feeling bewildered, not understanding the new direction or how they fit in. The economic instability combined with layoffs, decreased bonuses and profit sharing, increased insurance costs, salary freezes and highly publicized corporate scandals, has negatively affected employees' faith in the long-term success of their companies and their trust in leadership to successfully navigate the treacherous waters. Employees are becoming less engaged at work, resulting in decreased commitment and effort.

A review of Kenexa's employee survey database from 1995 through 2003 reveals several trends. Across all business sectors, trust in leadership and faith in the future of the company have dropped to an all time low.
In 1997, the global economy was at an all time high. Employee responses to survey questions such as "I believe this company has an outstanding future" were soaring at a 76% favorable rating. However, as the economy declined, so did employees' faith, with the favorability rating falling to an all time low of 62% in 2002. (Note: The rating on this item is beginning to show improvements in 2003 and 2004). The ultimate impact is a reduction in employee engagement. However, there are companies who managed to maintain morale.

Weathering the Storm: A Matter of Leadership

The 2002 employee survey data in Kenexa's database can be dichotomized based on engagement scores: those that maintained high levels of engagement from the late 1990s and those that experienced a significant decline. The former had 69% average engagement favorability ratings, while the latter had average favorability ratings of only 42%. Follow-up with many of the leaders of these companies revealed a clear trend.

While many of these companies experienced declines in revenue and profit (including profit sharing), a number of leaders acted proactively against the poor business climate—communicating, setting a vision for the future and rallying the troops. These companies were able to maintain high (and even increase) levels of employee engagement regardless of the poor economy. These leaders made it clear that, even though they were not meeting financial and business goals, there was faith in the future. In contrast, other leaders emphasized missed targets and cost cutting measures.

Leadership of the most highly engaged workforces have taken initiatives to build confidence in the future of their company. These leaders have worked to build trust and strengthen bonds with employees. In 2002, employees of these companies reported significantly better communication (42% favorable versus 33% for low engagement companies). In these organizations, workers said they understood the organization's vision for the future and believed in it (68% favorable versus 28% for low engagement companies). Comparing the high and low engaged organizations, we see clear differences in how employees viewed actions of their leaders. The result: these organizations enjoyed significantly greater trust in leadership (70% favorable versus 34%).

Conclusion
When poor economic times come, there is a direct impact on more than just the bottom line. Employees can easily lose trust in leadership and faith in the future of the company. Leaders that view these times as an opportunity to set a vision and rally the troops will reap the benefits; these companies will have greater commitment and effort from employees, in both the good and the bad times.

The author is a Kenexa executive consultant.