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Procter & Gamble Co.'s experience has been exemplary. About three years ago, during a management seminar I led with P&G's top managers, I described the importance of prediction, understanding, control and compassion during tough times. That prompted then-Chairman (and former CEO) John Pepper to describe how, in the "bad old days" P&G closed its plants as quickly as possible, with as little explanation as possible. As Pepper put it, "we tried to get out of town as fast as we could." But they learned that giving advance notice, telling people why the closing was necessary, giving displaced people as much help as possible, and being compassionate about the layoffs helped protect P&G's reputation as a caring and well-managed company. It also helped P&G boost productivity after the announcements.
Jerald Greenberg, a management professor at Ohio State University, has conducted perhaps the most compelling study of the power of compassion during tough times. Greenberg studied three nearly identical manufacturing plants in the Midwest; two of the three plants (which management chose at random) instituted a ten-week-long, 15 percent pay cut after the firm had temporarily lost a major contract. In one plant where pay cuts were imposed, management conveyed the news in a curt and impersonal manner, through an executive who announced: "I'll answer one or two questions, but then I have to catch a plane for another meeting." In the second plant, a detailed and compassionate explanation was given, along with apologies and multiple expressions of remorse. The executive also spent a full hour answering questions, including inquiries about how long the pay cut would last and who would be affected (increasing predictability) and about steps that workers could take to help themselves and the plant (increasing control).
Greenberg found fascinating effects on employee theft rates. At the plant where no pay cuts were made, rates held steady at about 4 percent during the ten-week period. What was striking, however, was the difference in theft rates in the two plants where cuts were made. Where a curt and inadequate explanation was given, the theft rate rose to more than 9 percent. But in the plant where managers took time to explain the pay cuts compassionately, theft rates rose only to 6 percent.
After pay was restored at the two plants, theft rates returned to the pre-pay-cut level of about 4 percent. Greenberg suggests that employees stole more in the two plants where cuts were made to "get even" with their employer, but stole the most from the plant where managers exhibited no compassion and offered no good explanation for the cuts. The reasoning? Workers there felt they had more to get even for!
What all of this suggests is clear: How managers choose to implement change is critical to the success of the changes. Compassion is vital to good management, and adds corporate value, in good times and bad. And the best part? It's free.
Robert I. Sutton is co-author with Jeffrey Pfeffer of The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action. He co-leads Stanford University's Center for Work, Technology and Organization. Professor Sutton's next column will appear in June. Please send comments to firstname.lastname@example.org.
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