Hilary Simpson and Nadine Delamillieure, of Oxford-based management consultancy Rewley Associates, explain how managers need to approach inevitable change in the current economic climate

The rhetoric of austerity is now firmly embedded in the national consciousness and the full impact of the Government’s deficit reduction programme has started to become apparent.

The cuts affect not only the public sector, but also private sector companies of all kinds and sizes which supply the public sector with goods and services, and the voluntary organisations whose projects and services rely on state or local authority funding.

Significant job losses are inevitable in the public sector, with knock-on effects in the private and voluntary sectors, although to what extent is unclear.

Those who must lead the implementation of the austerity measures face an unenviable challenge.

We have no up-to-date guide to cutting spending in this way and our culture continues to send out the opposite message.

As a result, leaders are faced with a situation where the headlines talk of the toughest budget for a century, while the rest of the media is still dominated by an ethos of unlimited consumption.

Those responsible for leading organisations also face a shortage of advice.

Since the General Election, much has been written about the austerity programme by economists, but many management advisers are still offering solutions to yesterday’s problems.

So what kind of management thinking can help those whose job it is to manage in the new austerity?

Leading by example:

In the age of austerity, those in leadership positions will need to lead by example. It sounds simple enough, but many leaders have great difficulty in adopting appropriate behaviour in changed circumstances.

The Government has put its money where its mouth is with a five per cent cut in ministerial salaries and the continued freezing of the Civil List.

John Hutton has been asked to lead a review of ‘fair pay’ in the public sector. Terms of reference specifically include “the need for senior staff to show leadership in pay restraint.” Although this is essentially a symbolic gesture, it acknowledges the importance of leadership by example.

As the reality of public sector pay freezes and inevitable job losses come home to roost, the salaries and — perhaps unfairly — the lifestyles of senior managers are likely to come under scrutiny as never before and those that don’t ‘get it’ are unlikely to stay the course.

A cool head:

Reductions in expenditure of the order demanded by the austerity programme require a rare combination of determination, compassion and cool analytical thinking.

Leaders will need a clear rationale for their decisions, coupled with a real understanding of the personal pain that job losses will cause — not just among those who lose their jobs, but among those who remain, in the form of ‘survivor guilt’.

A long, hard look at cost structures, business processes and organisational structures will be required as decision-making moves into previously uncharted territory, and some radical rethinking may be needed.

A new approach to change management:

An austerity programme at this level demands a new approach to change management.

Traditional change management theory has relied on persuading employees to suffer short-term discomfort in return for bigger and better rewards later on.

In the current climate, it may be more appropriate to look at change as a form of loss, not unlike bereavement. The question ‘what’s in it for me?’ is replaced by ‘how can I adjust to this?’ and ‘how can I find meaning in this?’ Based on this approach, organisations need to:

* Expect and even encourage conflict, as people need the opportunity to react and to articulate ambivalent feelings

* Respect the autonomy of different kinds of experience, avoiding the urge to tell people how they should feel

* Allow time and patience. Simply explaining the rational case for change — however compelling — will not ensure its acceptance.

So those leading a process of change must listen as well as explain, giving people time to reconcile themselves to difficult changes in a variety of ways.

* Contact: Rewley Associates 07887 560 379/07986 247422 Web: www.rewleyassociates.com