In this episode of www.smallbusinessadvice.tv presenter Sean Walsh turns his attention to what is commonly regarded as a company’s No.1 asset – its people. With an economic backdrop of rising unemployment and headline-grabbing company layoffs, it’s a crucial time for businesses to retain, inspire and motive their key staff.

Making a rare studio appearance, Martha Lane Fox, most famous for co founding lastminute.com, will be sharing her tips and advice on best practice management skills and motivation techniques. Alongside Martha, will be Siân Harrington, editor of Human Resources (HR) magazine since the end of 2006 and a regular commentator on HR for radio, TV and the national press.

As well as discussing how small businesses can inspire and motivate their staff Martha and Siân will also be looking at important changes in HR and Employment legislation.

Plus, we’ll have our weekly round up of the latest business news from the British Chambers of Commerce.

H: Sean Walsh, host
M: Martha Lane Fox, Entrepreneur
S: Sian Harrington, editor Human Resources Magazine

H: Hello and welcome to Smallbusinessadvice.TV brought to you by the British Chambers of Commerce and Dell, in collaboration with Intel.  Well I’m Sean Walsh and in today’s edition we’re looking at one of the most important assets of your business – your people. We’ll be looking at how to best manage, motivate, retain and get the very best out of your staff in these troubled times.  We’ll also be looking at the area of change management, particularly the challenging but topical issue of managing potential redundancies.  All of this to come plus our usual news round-up.  But first I’m delighted to be joined in the studio today by Martha Lane Fox, the business leader and entrepreneur with multiple directorships including non-executive director at M&S, Channel 4 and MyDeco, as well as trustee of human rights organisation, Reprieve.  Martha, welcome, thanks very much for joining us today.  Also joining us today is Siân Harrington, the editor of Human Resources (HR) magazine and a regular commentator on HR issues for radio, TV and the national press. Welcome to you Sian as well.  Now first of all, before we go anywhere – we’re in a difficult situation at the moment in terms of recession.  Very briefly, I’d like to ask both of you what do you see, what do you identify from your experiences as the key HR or people management challenges that British industry is facing today?  Sian if I could ask you to start please

S: Certainly.  Well I think clearly one of the big issues is how to deal with potential redundancies, deal with the fact that you’re probably not going to give a pay rise this year, and how you communicate that type of message, and also how do you keep people very motivated and engaged in the workforce, particularly if you are making redundancies.  So I’d say communication is probably one of the key things that HR needs to be thinking about at the moment

H: Communication, a very interesting subject, and we’ll drill down into that in a while.  Martha, from your experiences, what do you think are some of the key challenges that are being faced at the moment?

M: I think it’s very different if you’re in a public company to a private company at the minute, you know watching a collapsing share price, the pressures of the city, as Sian said how you approach the whole bonus and remuneration question with analysts wondering what profit streams are going to be like this year.  That’s one big thing in public companies.  I think in private companies it’s about keeping motivation up, not letting people get too spooked by what’s going on around them and focusing actually on what’s happening in your business rather than perhaps what you’re seeing happening around you

H: I mean there’s a big question of confidence isn’t there?

M: Yes exactly

H: That people as you quite rightly point out, can get spooked and I mean that’s another challenge for industry and regulators and the government, how do you keep that confidence going?  Have you got any tips for Gordon Brown?

M: Funnily enough I’m seeing Gordon this weekend so I’m saving them for face-to-face – I personally believe very strongly that at the moment we’re all behaving as though we’re in the 10% of people that are going to have a dramatic change in their lives, and actually 90% of businesses, people, houses, are going to remain unchanged, unfixed, and I think that’s the challenge is to make people realise that most people will still be – yes, you know see things happening around them, yes maybe see their house prices having collapsed.  It’s the 10% of people that we should be worrying about and that’s a big difference between those two groups and I think at the moment we’re all behaving as though we’re in that 10%

H: So challenges and opportunities.  Well let’s get into that in a moment because I’d like to pause things just for a short while and I’d like to cross over now to the news room, and join Sara Beirne for the latest business news headlines

Business News

“Thank you Sean, here are the latest headlines.  The latest unemployment figures released this week show another big jump in the jobless totals, with nearly 2 million now out of work, the BCC’s director general, David Frost, is warning that UK firms are being increasingly forced against their will to let good staff go.  He warned that unless banks start lending again, cashflow will continue to be a major issue, forcing firms to lay off staff.  And talking of the banking sector, the BCC has welcomed the government’s second bank bailout package.  Chief economist David Cairns said that last October’s bank bailout had failed to unblock the paralysis in the credit markets, but he warned that if this second bailout doesn’t work, then the government would have to start lending directly, and that could put a huge strain on the public finances.  And finally, the Government’s green light for Heathrow’s third runway has been welcomed as a boost for the nation’s businesses.  The BCC said it sends a strong message to the world that the UK is a nation open for business.  That’s all for now, back to you Sean

H: Thanks very much indeed Sara.  Now Martha I’d just like to pick up on the point you’re making there, just before the news headlines, about the 10% and the 90%.  Now we had Michael Dell of Dell computers on one of the programs a couple of weeks ago, and he was talking about now is a great time for small businesses and medium sized businesses to take advantage of the economy out there and really grow their ideas, and really step up to the mark.  Do you think – do you agree with that?  Do you think there are opportunities now?

M: Yes but I say that cautiously because clearly re-inventing an organisation and having to go through any scale of redundancies is a strain on it, and I certainly think if you look back over the business headlines in the last year, lots of companies are using this downturn as an opportunity to do things they probably should have done many years before.  So I absolutely think you can, but I think you have to manage it very carefully and I think you have to be very careful not to destroy the morale of the organisation in the process

H: Sian, opportunities as well as challenges?

S: Yes I totally agree with Martha that a lot of people are using the excuse of the recession to get rid of some people that they’d been carrying during good times and perhaps weren’t performing right – in fact whose job may not be right for the future anyway, and they just haven’t tackled it before.  In terms of opportunities, it’s interesting to see in the different sectors, for example just to take one, Food – at the moment if you were to sort of have some weighing scales, amount of jobs lost and amount of jobs that have been announced to be created, you’ll find that it’s just on the positive. There are more jobs being created by the Tesco’s, and Waitrose’s etc than are being lost at the moment.  So it is definitely not all a negative story.  We have to blame people I suppose a bit like myself in the media, who are really doing a lot of coverage of the negatives, and there’s only the few lines here and there to say what positive things are happening.

M: Yes and I certainly, you know I agree with Sian, there are certainly opportunities if I look at the online world, perhaps the bit that I know best, you know we’re looking at maybe growth that’s 10% not 30%, but it’s still phenomenal growth, and on MyDeco which I’m one of the board directors, you know the business is growing absolutely, not – maybe slightly below plan but still absolutely much faster than a traditional offline business, so there is still growth in the market

H: Yes I mean it’s quite interesting, it’s quite patchy – from your experience you know with M&S for example they’ve run into problems, you’ve got your online businesses are doing not as well as you would expect but are still growing, so it’s quite patchy

M: Yes

H: I suppose areas like retailing like manufacturing there are challenges.  Banking as well clearly.

M: Yes I’m certainly not a banking expert, thank God, but you know retail, you know Stuart Rose says this all the time, second oldest industry in the world is not going anywhere, it’s just shifting, and I personally believe that the multi-channel mix within retail, so how you address online and offline, how you maybe have some hybrid models, how you create a different experience for the customer in the future, are going to be the things that put retailers in a strong position to come out of this well

H: Indeed.  I mean it’s interesting that we’ve had the big “R” word, recession, and that was very popular, or very flavour of the month a short while ago, now the other big “R” word – redundancy is hitting the headlines.  Sian, what should we be looking at if we’re in a downsizing situation?  I mean, basically getting rid of people?  What should we be looking at?

S: Well I think the most important thing is to not make any quick-fire decisions. Often you see people go, ok last one in, first one out, or somebody whose maybe more expensive and there’s a slightly more junior person cheaper who could step into that role.  That could be a fatal mistake.  I think the first thing any company must do if they’re thinking of making redundancies, is actually look to the future.  Not think about what’s happening today but look at what you want to – what shape you want to be in for the future when the upturn comes, because you could be making a very big mistake by getting rid of people now, that for political expediency effectively in terms of cost cutting, and really ending up in the position where when we do start getting the upturn realise that you’ve got to hire in all these different people again at a time when everyone is really annoyed with the way you’ve treated people, and they don’t want to work for you.  So remember one very important thing when you’re handling redundancy is that the people who remain, if they see that it hasn’t been done well, they will stick in their job at the moment because there isn’t anywhere else to go, but the minute there’s an upturn, they will be looking to move to a company that they think would treat people better.

H: I suppose Martha in some respects, it’s not the person that’s being made redundant, it’s the post, but it’s very difficult for people not to take it personally.

M: Yes and in some cases it probably should be taken personally.  I mean I hope I’m not a ruthless person but I’m quite brutal and clear about things, and I think that, you know, we mentioned earlier that companies sometimes lag behind maybe creating the structures that they should have put in place earlier on, and this is a lot of, I think, of what’s happening right now.  But you know I agree with Sean you should be building for the future but at the same time I’m a big fan of having a few plans, so plan a, plan b and plan c is certainly what I try and encourage in the things I’m in.  So plan a, ok we’re going according to where we should be, maybe slightly below budget.  We maybe need to lose one or two people, who should those people be? And then prepare for plan b, so actually a scenario which is worse than you’re imagining, sooner than you would imagine it.  So you’ve got it up your sleeve and I agree completely that that’s when you could be looking a bit more strategically about the kinds of people you should be making redundant.  And then plan c could be a disaster scenario where you probably don’t have many choices.  So I think the more you can pre-plan these things the better it will be and the easier it will run

H: And –

S: Planning is key, absolutely key I would say

H: And then clearly being able to adapt to circumstances as they arise.  If you’ve got a plan you can develop from that

M: And also, sorry to interrupt you but I think one of the worst things is if you have quite a far-reaching plan, you execute on it but that actually doesn’t prove to be enough, and then you’ve got to do it again.  And so then the people that are left are beginning to think ok I thought I was left because I’m in a safe position, maybe I’m not, and that’s when I’ve seen motivation and morale drip down like sort of slow deaths.  So I think trying to be as realistic as you can as early on as you can is pretty important.

S: I think also to be open to the fact that a lot of employees are a lot more flexible than people think, and because that post has been a 9 to 5, 5 day a weaker, once you start the consultation process which obviously you need to go through, through law, you know I think so often people have already made their minds up really that they are getting rid of this person or making this post redundant, and in actual fact you’d be surprised at the way a lot of employees will think, if they think their job is on the line, they are quite adept often at thinking of ways that they could maybe stay within the organisation, and give more value back.  So they might suggest that they maybe work two days a week instead of five, and then you’re not losing a skilled person, and in that two days they’re probably going to do five days work because they’ll be so desperate to show, or they may say look I know I do this job, but did you know I also can do this job, perhaps I could double up.  You know we’ve got a bit of a gap in the sales side, perhaps I could offer something there?  I know somebody who went through that process recently, and came up with loads of plans, they’d really thought as an employee about what they could deliver back to the business, and they went into that period of consultation and tried to persuade the employer that they could use their skills in a different way.  So I think that’s maybe something to maybe think about, you have got people who are prepared to adapt in this environment.

H: And HR is not, although it seems to be current at the moment, HR is not just about job cutting is it?

S: No

H: It’s about retaining and motivating your staff, and there’s a big challenge there isn’t there?

S: There is a big – particularly if you are going through job losses, and again I really can’t reiterate enough this communication – once you’ve decided that, you know, you need to make drastic measures like this, what you need to do is ensure everybody in the company knows what’s going on, you need to make sure even people who are not being made redundant are kept fully informed of how the process is working, and what timescales we’re talking about here, and then also what the result means for those people who are left.  If you just leave people gossip goes around like mad –

M: It’s unbelievable

S: Particularly in smaller businesses where everyone does stand outside with cigarettes –

M: I think big or small, it’s quite extraordinary to me how people who you’d have thought even would be confident in their jobs, as soon as redundancy is announced, everyone thinks it will be them

S: Yes

M: It seems to be a completely universal truth.  I’ve spent a lot of time in businesses recently talking to people who are absolutely no threat and would never be under threat, it surprises me but they’re always destabilised, it’s really important I think as quickly as you can obviously within the law and all the consultation guidelines, but to make people feel as secure as you can

H: Indeed, I mean we’ve just had a question in here from Ian Johnson in Berkhamstead, he says “I’d be interested to hear about how you get people working well.  Any ideas on how to keep your staff upbeat and motivated and therefore working at their best?” Martha I suppose it’s take them to a karaoke club is it?!

M: Singing definitely helps, you can’t underestimate the power of song, you know not to be too flippant but I do think there’s a big role for doing things together as a team in this kind of time, and you know lightening the mood a bit.  Focusing on some fun you can have, whether it’s taking everybody out for lunch every now and then or I’ve often employed the tactic of saying go home, everyone right that’s enough for today, go and have some fun

H: But not go home permanently?

M: Not go home permanently, no that’s a different strategy and I think you know I like random acts of spontaneity and fun, I think that brings the company together and makes people feel good.  But more on the serious side you know I’m absolutely certain that what you have to do is focus on your organisation, what you’re delivering, not get as much as you can try and draw the blinds down to the outside world, because you know I get spooked because I see lots of different things, and when I go into some businesses that are doing well I’m thinking are they going to collapse because of everything else I’ve heard, it really takes focus to just think ok, what are we doing? Are we doing it right, are we serving our customers, whoever they may be and really focus on your own business.

H: Sian, are there any simple tactics you can employ to help rebuild that team and get them moving in the right direction?

S: Well I agree on the sort of team motivation thing, there was a very funny piece of research actually only out last week, which said that about 18% of Londoners / employees thought that the best motivational tactic was they’ll all go down to the pub at the end of the day.  And you know and that’s sort of keeping motivating.  One thing that could be a slight concern is a lot of people obviously are worried about their jobs, and so you could say motivation is just having a job at the moment, and I think quite a few employers might think that and they might communicate quite a negative message in that, like you know be lucky you’re the one that’s remained, and that’s a real danger spot, you know.  For people I think in smaller and medium sized companies one of the advantages that they’ve got actually is you do tend to have a bit more interpersonal relationships, so this is a time to see people as people, not just as employees, and to see what makes the buzz in your organisation, as Martha says different organisations have got totally different cultures and different ways of rewarding people.  We’re not going to see big pay increases, I think something like 40% of businesses reckon that they are going to have a pay freeze this year.  We’ve had one within my own company, you know managing that expectation is really important and so getting your line management, if you’re the managing director, if you can speak personally that’s great, really good to come from the top.  If you’ve got a slightly bigger company you need to make sure those people who have the day-to-day interaction with the employees, know everything and know you know what messages need to be communicated.

M: I also think that you know despite pay freezes, it’s incredibly important at any point of time, particularly now, that everybody has a shared sense of objectives and goals, and if you can, to set a kind of realistic, not a massive over-achieved target in which everyone then benefits, so you know in my own ‘Lucky Voice’ business whatever the profit number this year might be, take maybe minus 10% and then say if we reach that number, everybody gets something, so that people do feel there’s a realistic target out there, it’s something that’s motivating that everyone can agree on, can contribute to and constantly measure that through the year.  I think that making sure everybody’s facing the same way is hugely motivating.

H: Is it a time now to maybe be thinking about challenging the traditional mode of working, your 9 to 5 in an office?  I mean with the growth of new technology it allows great flexibility, it allows part time working

M: I think that’s gone already.  Maybe again it’s the industries that I’m in, but nothing I’m personally involved in is a 9 to 5 office job.  Even though Marks and Spencer’s is sometimes called the civil service of retail, it absolutely isn’t, they work phenomenally hard in that organisation.  I think that it’s changed a lot even since, you know we started lastminute.com in 1997 and you can be anywhere and be working now, and I think people do tend to take more responsibility whether it’s through their Blackberries or home computers or whatever it might be, and I think that you can definitely encourage people at the moment to be a bit more flexible, and as you say, you I know maybe work 4 days in different places and a bit more conveniently for them and for the organisation

S: I do think that, unfortunately though that a lot of businesses do not think that way.  You know I’m surprised all the time when I’m speaking to HR directors of businesses, how this word ‘flexible working’ gets them panicked, you know and I think partly because in April we’ve got the new law on it to extend the right to request to do, parents with children under 16, and this formalises something which has been going on quite a lot in fact in SMEs in particular, but the fact it formalises it immediately puts up this sort of barrier in companies view points.  But I do think it’s about trust and there is plenty and plenty of research to show that people who are remote working, or working flexibly are more productive.  There’s huge amounts of things that show that the trust you’ve shown in them gets an engagement with the company, you know, they feel that if their bosses have got, feel that they you know can deliver in different places that suit them around their working and life balance, then they will really, really work hard for that company, and I do think this is a very good time to be doing that.  You can, you know you can cut so many overheads and things like that, if you look at it from a purely sort of business perspective, there’s loads of advantages on cost to doing this.

H: Yes it strikes me that there’s an opportunity with flexible working, the technology’s there and mobility’s there now if you want to go green you can get rid of your offices, you can get people working from home, they’ve got a better work / life balance.  I mean we’ve just had a question in from Lucy in Bridlington.  Lucy says “Given that everyone’s worried about the economy, isn’t it now a great time to go freelance and spread your risk?” Well if the opportunities are there Lucy yes.  Sian?

S: Yes I think again it would be very much about which industry you’re in.  Just talking about the media, I’ve never had so many people calling me who are freelancers desperate for some work at the moment.  It is tough out there, there’s no doubt about it.  So it probably does depend on – 1) the industry and 2) the skills you’ve got.  I mean actually if you’re a freelance in HR, you are in much demand at the moment, particularly if you’ve gone through this process before, and you know you can go in and you can advise on change and you can help with internal communication, then it’s a great time to go freelance.

M: Yes I would be really careful about giving up a job that you’ve got and going freelance at this particular moment.  I mean it may be appropriate but my instinct is to think very, very carefully

S: I agree yes

H: Perhaps to hold on to what you’ve got.  But the reality I suppose is for a lot of people who perhaps are facing redundancy or who have been out of work, the reality is you may not get a full-time job

S: No

H: I suppose we’ve had the growth of what, portfolio working now

S: Yes

H: Is that a new feature developing feature, something that’s going to continue do you think Martha?

M: Well certainly in my own case it was kind of unexpected but has happened, the portfolio working, and it’s got great benefits, you know the variety is interesting.  I think sometimes, I mean personally speaking I can feel a bit frustrated about, you know that you see things at this level rather than spend proper time and depth in things.  I think that it is a trend, I’m sceptical about how much people, how much experience people need before they can actually kick into a portfolio life, because you need to think very carefully about ok what’s my skill and how am I going to be able to apply it to these different things if that’s what I want to do

H: Indeed, benefits for the employee, but Sian benefit briefly, benefits for the employer as well perhaps?

S: Yes there are I mean it depends on, again the type of job we’re talking about, but obviously there’s an immediate financial benefit if you’ve lost somebody on a full time job and you’re recruiting in somebody on a freelance for project work or however it may be.  Of course with the whole technology thing there’s a lot of jobs now that you don’t even need to be in this country to do, particularly on innovation and ideas I think there’s a lot going on in the whole networking thing, and ways of getting people to suggest ideas and pay them just for the idea effectively, rather than have a big R&D development departments and innovation departments. So there are a lot of interesting things, but I still come back to this fact that I think that if you are showing trust and you’re using people flexibly, you will get a very, very engaged person out of it, and that person will go that extra mile at a time when, you know, all employers need people who are going to do that extra something to try and keep the business going.

H: Indeed.  Well we’re almost out of time but briefly Martha in the last few moments – things are looking a little depressed

M: Yes

H: The 10% are feeling concerned although it’s only affecting them but everyone else is feeling the gloom.  Do you see anything positive in the economy now?

M: Not at the moment, I don’t and I’m normally a very optimistic person but at the minute I think it’s tough and I think it’s going to get a bit tougher, so I’m looking towards kind of the end of 2010 I think before we can start seeing those green shoots, but I just want to end on one thing, if anything has been taught to us this week via Obama it’s that value in standing up and painting a vision which everyone can be inspired by and you mentioned before about people talking in organisations, I think however big or small your organisation whether it’s 100,000 people or whether it’s 10 people, you can never over-estimate the importance of saying ok, this is what I’m thinking about the world, this is how I want you guys to be involved with our company and this is what we’re going to try and do.  It might not be easy but this is what we’re going to try.  And I think everybody walks away from something like that feeling a little bit better about what’s going on.

H: Well thanks very much indeed, we’re just about out of time now.  Well I hope you have enjoyed watching and if you’d like help on any issues faced by your business, please make the website Smallbusinessadvice.tv your first port of call. There’s a wealth of regularly updated information there which I hope you’ll find useful. And for those of you looking for glimpses of sunlight amid the gloom, and we’re not talking about green shoots, next time we’ll be looking at exporting your goods and services. That edition is scheduled for 13:00, that’s 1 o’clock to you and me on Thursday February 5th.  Please make a note in your diary.  And if there are any other subjects you’d like us to tackle here, please email us with your suggestions. Thanks very much indeed for watching.  Goodbye.