Leadership Implications of a Jobless Recovery

US unemployment is ebbing; this is good news for the global economy and many organizations. But we still have a long way to go in terms of reducing unemployment—which will drive general economic growth. We also have a long way to go in terms of corporate leadership and engagement.

Successful leaders will have to address the contours of this changing environment. The recession, and business environment, has made leadership more difficult by breaking trust.



Recently, an HR leader of a Fortune 100 company told me “corporate America has changed. Now, bosses make a choice to lay you off or loose their own job. Inevitably they will lay you off.” I was not surprised. But when I started to think about it, I realized this will make leadership and engagement difficult for managers as the economy picks up.

Actually, the economy has picked up and we are seeing a jobless recovery, which has become the norm in recent recessions, according to the Bureau of Labor Statistics. Since the 1990s, we have seen jobless recoveries.

Strangely economists have been confused by this trend. Derek Thompson, of the Atlantic, weaves together several forces in his theory of jobless recoveries:

1. Executive pay is increasing linked to the stock market, and thus quarterly profitability is of increasing concern to executives. One method of continuing profitability, when faced with reduced revenue, is to reduce costs with layoffs
2. Fewer barriers to lay-offs (lower unionization, rising personnel/medical costs)
3. An increasing contingent workforce, including part time and contract workers. The BLS would consider many of these individuals unemployed. Indeed 27% of US job growth since 2007 has been temp-workers.  The real winner in the current economy are "temp-firms" like Manpower.

So, both the Atlantic and the HR executive agree on one thing—a dog-eat-dog work environment leads to layoffs.

As a consultant that spends a lot of time helping organizations develop leaders, I have to ask how to build leadership in this environment. No matter how you look at it, there is an element of trust in leadership—followers must trust leaders. Yet, in our current environment employees cannot trust their boss, well they can trust them --to lay them off to save their own job, which is the same as no trust at all!

So, the HR leader's statement seemed like a natural enough. But then I was saddened, shocked and yes concerned. I have to ask "can we develop leaders in this environment?"

Of course there are ways to address this—simply noting that the employee-employer relationship has changed is one way to honestly relate and build trust. Regardless, employers will have to develop a method of addressing this new world that requires bravery and yes, honesty.

Is your organization developing a plan to rebuild trust? Without authentic trust, I do not believe there will be employee engagement.