Gary Holdren hasn’t had to face the worst.
But that doesn’t mean he hasn’t thought about it. Even though Huron Consulting Group Inc. has basically done nothing but grow since its inception in 2002, Holdren, who is the company’s chairman, president and CEO, is like you. He worries, and he realizes that the rough waves of the current economy aren’t going to calm overnight.
And the more conversations he has with clients at Huron, a management consulting firm, the more he hears people concerned with how they’re handling those tough spots.
“What everybody is going to face, and clearly this is something right now when you talk to friends, is knowing the right decisions to make on cutting people and cutting costs,” he says. “These are people, these are families, these are lives and livelihoods, and how you decide whether to stick with those people. Do you decide to make the best times of it, or do you just cut costs and cut heads and move on?”
Holdren has had to face those decisions head-on to keep Huron above the curve, and he did so to the tune of $615.5 million in 2008 revenue, up from $504.3 million in 2007.
Keeping that head of steam during the first wave of economic downturn wasn’t easy, but it starts with the ability to trim your budget while maintaining your core. That process requires you to take stock of your people and your costs and make decisions about what cutbacks you are willing to make in the budget. Once you’ve got that figured out, Holdren says you have to use the power of your credibility and integrity with employees to explain it. You need to be candid and honest in explaining how the cuts you made make your company stronger.
Figure out who’s performing and who isn’t
Going through a budget is never easy, but it’s a little bit easier if you know the things that have to be held sacred. At Huron, there are some functions of the business that Holdren simply can’t cut.
“The thing for me is we just have to be sure that we’re giving good client service and we’re being loyal to true performers who have been good for Huron in the long run,” he says.”
Finding those things you have to keep goes back to your basic vision. Huron prides itself on client service and holding up the people who excel in that field, so those areas don’t come under fire. Once you get past that, Holdren says, there is no one- or two-step process to trimming the budget.
“There’s no secret sauce,” he says. “What you’ve got to do is look at the line items, look at the details.”
That means an evaluation that should lead you to who your performers are — and, more importantly, who they aren’t.
“You owe it to all your employees and shareholders that you aren’t keeping people around who aren’t performing,” Holdren says. “So if you haven’t done a good job of assessing your people, the first starting point is (making) sure that if 5 percent of the work force is not performing, you do what’s best for the 95 percent.”
If you don’t have a system for figuring out who is up to the task, something Holdren does might work for you. Each of Huron’s nearly 3,000 employees has a goal-setting meeting with his or her manager at the beginning of the year where they set goals for the employee. If people have promised to improve on things and simply have not, you might have an easy answer to your hard decision — especially if you mix that in with their overall productivity.
“The way I basically explain this for our employees is, the worst place you can be is to not to do what you said you’re going to,” Holdren says. “So you’re the employee at the most risk if you’ve decided not to follow the conditions of employment. Now some people cannot follow that and be a good performer, but if their performance falls, then they’re at risk. If you have done everything Huron has asked of you and you’re making a good effort and just haven’t had as good a year, OK, you’re going to move up the pecking order. If you do everything Huron asks and had a good year, then you’re pretty bulletproof.”
And while Holdren has great sympathy for how an economic downturn can hurt his people’s overall performance, he also knows that looking at the performance across several peers will show you who is hurt by the market and who just isn’t performing.
“The one thing that I will not tolerate is people not being in the marketplace or not giving effort,” he says. “So first and foremost, you can imagine with 175 to 200 managing directors not every one of them is going to give the same effort. So, from that perspective, it’s pretty easy for me when I look at the results to know the decisions that we need to make. It’s very, very obvious about people who are market relevant, who are team players and who give you effort.”
Work through the budget
Holdren doesn’t like the idea of letting people go any more than you do, so there are many things you can do after you look through the production of employees.
“Once you get through that exercise, and this is exactly what Huron is going through right now as we budget for ’09, you say, ‘OK, if we decide to keep all of these people, then what we may have to do if revenues don’t come and times are short, then people may have to get less bonus,’” he says. “So, in essence, we’ve kept the team together, we’re going to get less pay, but we’re going to stick it out for a rainy day.”
The idea upset a few employees, but in a market where job losses are headline news, Holdren says most people are happy to have a job and the potential for continued high earnings.
“I’m trying to keep all of our employees grounded in these are unusual, tough times,” he says. “Having a job and us not cutting your base pay, not cutting benefits and giving you a good environment to work in, you ought to be thankful that you are working for this company. Don’t mope around that maybe you didn’t get a $5,000 to $10,000 bonus.”
Beyond the savings in bonus pay, Holdren looked at annual outgoing expenses.
“The third thing you examine is all the things you’re spending money on,” Holdren says. “Do you really need to travel? Could you cut back a little bit on training? You just have to go through line by line.”
When you go through that process, you have to make a decision on what things mean to your culture and your business.
“Just a little example is whether you should cut Christmas parties,” Holdren says. “Our people have worked so hard, and our young people enjoy getting together and seeing each other at such a joyous time, and those things are just too short run. You need to continue to have some things that are key to your culture and spend less in other areas.”
To Holdren, the cost of cutting a company event like a Christmas party would be more damaging than cutting some of the company’s travels during the year. He takes a similar look at the budget Huron has for entertaining clients. While it would save some money to cut that expense entirely, he knows that many of his clients have cut their own entertainment costs. This means keeping some of the budget will actually give him an advantage.
“Some clients would say at this stage, ‘I don’t want you to spend a lot or be extravagant,’” he says. “But there will be other situations where if they haven’t been able to do anything because of their (financial situation), and they might want something, so you just have to kind of look at it on a daily basis and see what the value proposition is.”
These are decisions you have to make on a case-by-case basis, but the key is to keep your company vision in mind to preserve the things you can in both your company culture and your value to your customers or clients.
Talk people through the process
Holdren was fortunate enough to play a round of golf in Florida with Jack Nicklaus awhile back, and he picked up a tip. Surprisingly, that tip had nothing to do with his short game. A third man playing with them was a bit older, and he shared his thoughts on doing good business.
“He said, ‘Son, whenever you do a deal or whenever you’re dealing with any person or any matter or any contract or anything, when you shake hands with someone, it’s your word. Make sure that both parties feel like they were treated fairly in any negotiations, that no one feels that they won or lost,’” Holdren says.
And while Holdren still brags that he came pretty close to Nicklaus’ score that day, he holds onto that advice even more dearly.
“First and foremost, people have to believe that you’re trustworthy,” he says. “If people don’t believe they can trust your word and they don’t think that you care about them and that you’re only in it for the money, that’s really a slippery slope.”
Part of building that is a simple philosophy Holdren has: “Don’t say something you just think they want to hear.” He lived that when he had to tell people that the bonus structure would be different for 2009.
“We recently had a conversation about bonuses, and I think it might have missed people’s expectations, but I think they appreciated the honesty and the candor,” he says.
In order to keep that candor, be present when the big announcements are made. In fact, Holdren addressed a new class of employees toward the end of 2008 because their starting day had been delayed by a few weeks.
“I went out and told all of them why they started late, why we decided to do what we did, what had happened to Huron,” he says. “And in some ways, it would have been easy to just say we’re not going to honor our commitment to you, we could have just not hired them and it would have been easy. So I told them what happened to the business, why it slipped a little bit, why we had to defer the hiring, why college hiring wasn’t going to be as much this year and how we’re going to sort of lean on employees and bonuses might not be as good. I told them the things that I suffer with every day as a CEO, and people appreciate that.”
Being present for those types of announcements helps humanize the tough decisions you have to make. It won’t always have employees doing cartwheels about cutbacks, but it will allow them to see you as an honest leader doing the best you can. To Holdren, living by those principles is what will make your long-term success as a leader.
“You have to be honest, and you have to be principle-based, and you just can’t vary from it,” he says. “It could be bringing someone in and telling them to leave because they’re not performing or making a tough decision that’s principle-based or that’s the right thing to do but that’s maybe not the best financially. If you don’t live by that, then you don’t really have much to live by.”
How to reach: Huron Consulting Group Inc., (312) 583-8700 or www.huronconsultinggroup.com