Why is it important to retain senior managers during recession

Leadership plays a crucial role in deciding the fate of an organization. Although leadership is not synonymous with management; it is definitely an essential characteristic of a good manager (Redman, n.d.). Competency and commitment of the senior management is fundamental to the success of a firm.

Importance of the senior managers

A firm’s senior managers are responsible for establishing the firm’s vision, goals and objectives as well as the desired organizational norms and behaviors. The task of a senior manager however does not end here; as accomplishment of these goals and adherence to such desired norms also come under the purview senior management of the firm. The senior management in an organization develops the necessary organizational culture and ensures that the activities in every business function of the organization are in alignment to the organizational culture. Besides, the allocation of organizational resources and provision of the required infrastructure; the management of labor relations and maintaining trade-offs with the suppliers; identifying the need for change and adopting the required change management policies; everything rests with the senior management of the company (Redman, n.d.).

Attrition at senior levels during recession

Despite holding such powers and authority in an organization, the attrition at senior management levels is significant, especially during times like recession (Cote, 2013). Exit of a senior management in any organization is always a matter of serious concern but the things become worse when it happens during a period of economic slowdown. Recession is the period when there are massive layoffs, disposable incomes of consumers squeeze and businesses confront huge losses (Leach, 2011). During such times, it is inevitable to retain the senior management and this may lead to:

  1. Knowledge transfer: Senior managers in an organization are the pool of knowledge and experience. Departure of senior managers are not only the physical departure of human beings but it is also the transfer of knowledge from the organization (Morgan et al., 2005).
  2. Disclosure of business secrets: Recession is the time of massive layoffs. Firms terminate non-performers and keep a close watch on competitors’ employees. Employee poaching is very common during economic slowdown. Although it is not ethical, such employee poaching offers fair chances of disclosure of business secrets to the competitors (Elegbe, 2010).
  3. Mass attrition: Senior managers often have large numbers of followers in the organization. Any outward movement of these managers or leaders may be followed by mass attrition in the organization. This may prove detrimental to the organization especially in times of recession.
  4. Worsening of firm’s image: Such departures of senior managers from an organization are circulated extensively in the media. This spoils the firm’s image and may also lead to a subsequent fall in the prices of firm’s stocks.
  5. Employee motivation sinks: During recession, the morale of employees sinks. Non-performers are terminated, salaries are revised, and newer norms are introduced creating a situation of panic in the organization. Senior manager’s leadership is vital at such times to keep the employees motivated and engaged with the organization (Elegbe, 2010).
  6. To implement change management: Recessions are often followed by multidimensional changes in the organization. The firm may decide to withdraw specific product lines or shut down particular businesses as well. Besides there are policy changes, reshuffling, compensation revisions etc. Change is rarely welcomed in the organization because it disrupts the routine. As such, there is need to retain senior management to motivate employees at all levels to accept change and contribute towards change implementation (Cote, 2013).

The firms however need to understand that the retention strategies they adopt for employees at middle levels and lower levels cannot be adopted for the senior management as well. The reasons for senior management’s attrition are usually different and so does the retention approach too. Firms should refrain from ‘one-size-fits-all’ concept here.

References:

  • Cote, D. (June, 2013). “Honeywell’s CEO on How He Avoided Layoffs.” Harvard Business Review.
  • Elegbe, J. (2010). Talent Management in the Developing World: Adopting a Global Perspective. England: Gower Publishing Limited.
  • Leach, G. (2011). “Six Dragging Anchors: the UK economy in 2011.”
  • Morgan, L., Doyle, M., Abers, J. (2005). “Knowledge Continuity Management In Healthcare.” Journal of Knowledge Management Practice, April 2005.
  • Redman, N. (n.d.). “Module 4: Responsibilities of Senior Management.” International Atomic Energy Agency. Retrieved from: http://www-ns.iaea.org/downloads/ni/training/man-sys-mod4.pdf.
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