As businesses cut costs to get through the recession Natalie Butler reveals the potentially damaging side effects on team morale.

The current climate is tough for businesses of any size and whilst some claim the economic downturn is showing signs of improvement, its effects will be with us for some time. Consumer spending is low, profit margins are tight and there is an increasing need for management to show that every penny spent is contributing to the bottom line.

Survival is understandably very much at the top of every business agenda, which often translates to cost-cutting measures – from pay freezes to reduced business travel. However, losing sight of the effect that cost-cutting strategies can have on a business can also be damaging.

It’s generally accepted that cost-cutting measures – especially redundancies – damage staff morale, but unfortunately it can be the only option when the alternative option is going out of business. However, there is another hugely important aspect of office life that can be adversely affected in tough times, even when redundancies aren’t on the agenda – teamwork.

We recently carried out some research which found that 70 per cent of owner managers of SMEs rank teamwork as one of their top three most valued attributes for staff, however more than a third have a noticed a trend of employees becoming more insular since the onset of the downturn. Successful leaders have always recognised the necessity of teamwork and to take a quote from Alexander the Great: ‘Remember upon the conduct of each depends the fate of all.’

In a business, every member of staff has an integral role to play, and the need to work together becomes all the more crucial in times of struggle. So why is teamwork taking a dive as employees become more insular? Firstly, whether you’ve had to make redundancies or not, employees will naturally be feeling less secure in their jobs.

Whereas before you might have been happy to share and work your ideas through as a team, there’s now a greater inclination to hold back and claim those ideas as your own in the hope it will put you in better stead should you need to defend your job. If one employee becomes more insular as the ‘look after number one’ adage is put into practice, it encourages others to follow suit.

It is then that businesses will find themselves in trouble because creatively and innovation will suffer. It’s a common phrase but a good team really is greater than the sum of its parts. There is a second factor causing greater insularity in businesses; the simple fact that there are fewer opportunities to meet with colleagues and business associates.

e-Skills UK has said that over the next year, 61 per cent of companies will be putting more emphasis on reducing costs . We’ll continue to see bosses reducing business travel (particularly overseas), cutting expense accounts, making redundancies, freezing headcount and encouraging staff to work that little bit harder. That means there is less time and budget for meetings either in or out of the office forcing employees to work more by themselves rather than share ideas in a group.

So it’s clear that teamwork is inadvertently suffering and that’s bad for business. However businesses need to find a balance between reducing costs and at the same time minimising the impact on teamwork. What’s the solution? Unfortunately, there is no ‘one-size-fits-all’ answer to the downturn and its effects, as every business will have different needs, operations and employees. However, some basic concepts can be applied in most cases:

Transparency

Keeping the team informed is the only way to settle unease and ensure everyone is working towards the same goals. Staff are more likely to be open and willing to share their own ideas for improvements and developments if they feel they are trusted.

Team activities

Even if cost-cutting means cancelling the monthly drinks session or staff outing, try to make sure other, more cost-effective activities are still occurring. Team-building activities do not need to be expensive, but keep staff motivated and informed as to business objectives. It is important that internal efforts to have regular meetings are kept up, and that managers ensure individuals do not feel left out.

Online alternatives

When financial strains demand cut-backs on business expenses such as travel, it is essential to prevent it impacting on relationships with clients and customers. Increasing the frequency of conference calls, making sure that face-to-face meetings are used more efficiently and looking at online tools such as web and video conferencing can be useful ways of collaborating with external colleagues.

As we ride out the recession, businesses need to ensure that short-term solutions don’t impair staff morale or leave the company disjointed. Teamwork is vital to the success of any group, whether social or professional, and steps need to be taken to keep everyone working together in spite of cutbacks.

Natalie Butler is Cisco WebEx’s UK country manager.