10 February 2014

Crises in businesses are normally met with cost savings and cutbacks. But to invest in new paths of development in parallel is one way of beating the crisis, a case study from Helix at Linköping University shows.

The industrial enterprise studied, with 600 employees in Sweden, Poland and China, was hit –like many others – by the 2008 global financial crisis. Staff was reduced in the acute phase in 2008, but on the whole not only did the company come out of the crisis unscathed, it came out strengthened. The three Helix researchers Henrik Kock, Peter Nilsson and Andreas Wallo have followed the company in a research project since 2009. They took part in the directors’ meetings 25 times as observers, and also interviewed key persons.

They state that right in the middle of the white-hot crisis, the company management organised workshops and discussed new paths of expansion, new customers and products and training efforts – what the researchers called “hitting the gas”. At the same time, they “put on the brakes”. A unit in the Czech Republic was closed down, 256 employees were dismissed, and several outsourcing agreements were renegotiated to reduce costs. Even the salaries of the group’s CEO and deputy CEO were lowered.

Able to expand

The company not only survived the crisis, it was able to expand. In 2010, most of the dismissed employees were re-employed. Collaboration had been established with several new customers, and operations in China had expanded substantially. A new line of business had also been developed.

The learning environment found among the management team is one of several important causes that the researchers bring up. “The ceiling was high” – all the members took part in discussions, inventorying and critically evaluating possible proposals, and gave feedback. They were encouraged to think “the other way,” bring out the critical, to “scuttle this”.

“But there were also examples to the contrary,” Mr Wallo says. In sensitive issues or when things had to move quickly, there wasn’t the time for discussion.”

Psychological security

He also points out that the management group is a highly skilled one; many of the members have had positions of great responsibility in international companies. This certainly contributes to the comfort they felt in letting their ideas be critically reviewed. Confidence, openness and tolerance for perceptions that go against the majority are what characterise the management group’s discussions, according to the researchers who talk about “psychological security”.

One example is the operations in China, where a Chinese local manager who had experience with Swedish management was recruited. Among the first things he did was to set up a suggestion box and to encourage the employees to bring suggestions for improvement. This was met at first with a lot of suspicion; the staff was worried that bad suggestions would be punished. But suggestions for improvements began to come in that were also implemented, and the mood changed. Today, despite a relatively low level of wages, the company in China has a lower staff turnaround than comparable companies.

The researchers emphasized the ability to hit the gas and the brake at the same time as both important and unusual. In crises, it is natural to focus on braking.

“Especially during a serious crisis, it is easy to lose the thoughts of development,” Mr Kock says. “We think that this company’s way of handling crises is quite unusual.”

Helix VINN Excellence Centre: http://www.liu.se/helix?l=en&sc=true