Chapter 2

The Psychological Recession

A NOT-SO-FUNNY THING HAPPENED on the way to the twenty-first century: people stopped caring about their jobs.

Until relatively recently, the most important stakeholders in American organizations were the employees. They came to work each day with commitment, loyalty, even passion, and, because they sensed that the company felt the same commitment toward them, they gave it their all.

Now, after years of downsizing, outsourcing, and a cavalier corporate attitude that treats employees as costs rather than assets, most of today's workers have concluded that the company no longer values them. So they, in turn, no longer feel engaged in their work or committed to the company. The reality of mutual codependence between employees and organizations, and the advantages gained from long-term mutual commitment and engagement, have been lost.


THE PSYCHOLOGICAL RECESSION

As many as two-thirds of U.S. employees are either actively looking for new jobs or merely going through the motions at their current jobs. While they still show up for work each day, in the ways that really count, many have quit. Figuratively, and in some cases literally, they already have one foot out the door.

They are afflicted with a condition I call the Psychological Recession. It is an emotional state in which people feel extremely vulnerable and afraid for their futures. It is especially relevant in the business world because chronically fearful people are too exhausted to be creative and innovative. They expect the worst to happen, so they see no reason to give their all.


HOW TO RECOGNIZE A PSYCHOLOGICAL RECESSION

A Psychological Recession, a dour view of the present and an even bleaker view of the future, is a natural outcome to a deep and sustained sense of vulnerability. Once established, this negative mindset reinforces people's view that the world is a risky place in which they have little or no control. In this way, the Psychological Recession feeds on itself. It increases people's fears and their aversion to risk.

There are real issues to worry about: the war in Iraq and terrorism; the fearsome outcome of the spread of a militant and radical form of Islam; rising energy prices and our continued dependence on foreign oil; and, perhaps worst of all, the very visible and widespread loss of job security.

For most people, the issue of job security is the mother lode of anxiety poisoning their view of reality. They have seen, or heard about, or read about, the people who have been laid off, through no fault of their own, and they are terrified they may be next. Economic hard times initially had an impact on hourly workers, but then the impact spread to well-educated knowledge workers. As tax receipts fell, even government workers faced cuts in their ranks. Everyone knows someone who has been affected.

This sense of helpless vulnerability is heightened by the onslaught of news stories about the juggernaut economies of China and India and about our increasing lack of competitiveness in our education systems and businesses. This deep mood of pessimism shouts, We are doomed!

Labor is strangely quiet. The unemployment rate over the last five years has averaged five percent or lower, which generally means labor is becoming scarce and thus more valuable. That, in times past, would result in an increase in worker militancy and high demands. Yet there has been almost no response to cuts in jobs or benefits to those employed and retired. In all likelihood, members of organized labor, like everyone else, are paralyzed by their deep feeling of vulnerability to a loss of jobs.

Sustained fear makes people cautious, and that includes our leaders. Governments-municipal, state, and federal-seem unable to protect people in general and from international competition for jobs specifically. Voter apathy is widespread; people see both parties as uninvolved in their welfare and powerless to help. Simultaneously, stories about corporate corruption and church sex scandals rock our belief and trust in the other major institutions we depend on.

Overall, the public perceives the country's leadership, both political and social, as ineffective, frightened, and impotent. This reinforces people's perception that there's no help to be found anywhere; in the midst of chaos, no one's in charge.

Our world feels increasingly uncertain and undependable and that makes us feel vulnerable and naked. In the search for answers, some have turned to fundamentalist religions. Others have sought comfort in defining the enemies: free trade, technology, NAFTA, legal and illegal immigrants, Wal-Mart, unions, corporations . . . a specific enemy is relatively comforting balanced against an amorphous sense of dread.

Our world feels increasingly uncertain and undependable and that makes us feel vulnerable and naked.

The psychological downturn is far worse than the 2001 economic slowdown, and its cause is not explained by outside factors like media bias or bickering between impotent "leaders."¹ This sense of pessimism is rooted in the profound and sustained feelings of vulnerability that many people are experiencing. Anxiety, depression, and a sense of being powerless are a poisonous mix.

This depressive and fearful view, which embraces a permanently half-empty glass, is now held even by many successful employed people. Clearly, skepticism and pessimism have replaced the euphoric optimism of the 1990s boom. Many people, especially those in their twenties, thirties, and forties, feel cheated and scared by the bad luck of hard times. Giving people little or no hope that their lives will embody the American Dream of upward mobility is both stupid and politically dangerous.


A PSYCHOLOGICAL RECESSION IS SELF-FULFILLING

Faced with the reality of a reasonably sudden but permanent loss of economic security, the nation has been gripped by a sense of dread. What started as a feeling of economic vulnerability has generalized into a deep, pervasive fear that there's no way for anyone to make themselves safe because there seems to be no way to regain control over what's happening to them.

Feeling this way, people become preoccupied with trying to make sense out of the chaos of their lives, as if by understanding it, they could somehow control it. But it doesn't work, and it never will work, and here's why. Paradoxically, people who are profoundly scared seek out worst-case examples because that confirms their world view and gives them a sense, however fleeting, that they were right about something. The prolonged, sustained fear that is characteristic of a Psychological Recession assures that good news will be discounted while bad news is accepted as the stuff of reality.

The tragedy is that focusing on fears only reinforces them. In understandable but irrational ways, people who are frightened move ever forward toward panic. In this way, a Psychological Recession is self-fulfilling.

The media barrage of bad news doesn't help. The same "echo effect" that contributed to the boom of the 1990s is now having the reverse impact by reinforcing today's gloomy scenario. Somehow, all television stations end up playing the same video of the same plant that was closed, the same workers who were laid off, the same children whose school was closed, the same contract to outsource work to India or China . . . and the loop of information plays endlessly. When the same message is trumpeted, debated, illustrated, and referred to by "experts," the convergence of the cacophony of its echoes makes it "a fact." The notion that something might be just a possibility or inference or idea or opinion is transformed through obsessive, pervasive repetition into a certainty.

The discourse of threat and gloom is never challenged, which only ratchets upward the self-fulfilling nature of the phenomenon.


PERCEPTION VERSUS REALITY

Today, feelings of being alone and vulnerable are proving more powerful in shaping people's attitudes than the actual facts. Over the last five years, the American economy has sustained a strong recovery, with an average annual growth rate of three to five percent. Interest rates are low, unemployment is low, inflation rates are low. Still, Americans are gloomy.

Greed should be trumping fear, yet it's not. Reality has been nullified by exaggerated, irrational fear. At the very time that the strong recovery should have led to confidence and pride in America's ability to thrive despite ongoing chaos, increasing competition, and threats, instead the American people have lost confidence in their leaders, in institutions, and even in the nation.

How to explain this? In part, it's the difference between national averages, which are vague and amorphous, and individual reality, which is anything but. While the national figures are very positive, many individuals have good reasons to be gloomy: slow growth in wages; benefits increasingly at risk; the insurgency in Iraq and the never-ending possibility of terrorism at home; corporate and government malfeasance; and job growth slower than gains in productivity, which means employers don't need to hire more people to meet increased demand.

People are always astute about what is happening to them. While they may feel unexpectedly wealthy because of their homes' appreciation or the general recovery of the stock market (today's average investor is a middle-class person with a household income of about $65,000), everyone who has a job in a successful large company knows that neither annual increases nor their jobs are guaranteed. Similarly, anyone who owns a small business is aware that increasing competition from many sources is a permanent state of affairs.

Still, given the fact that the overall economy is healthy, the widespread view that it's doing poorly now and the future will be worse is far more a matter of perception than of fact. In March 2004, the American Research Group found that 44 percent of people polled believed the country was still in a recession -even though the last recession ended in November of 2001 and was followed by an annualized growth rate of 6.1 percent, the fastest in 20 years.²

The media have certainly played a major role in the glass-ishalf- empty view; the Media Research Center reported that in August 2005, 62 percent of the news stories on the three main TV networks portrayed the economy in a negative light and negative stories on the economy outweighed positive stories by four to one.³

This apparent contradiction between a humming national economy and a widespread sense of foreboding in individuals is easy to understand when we look at it from the perspective of psychology. People are simply anticipating the terrible things that could happen to them, and their absorption with their vulnerability increases the sense of being alone and defenseless. In this way, psychologists are far more relevant in terms of explaining the narrow range of today's stock indexes than are economists.


WHO IS AFFECTED?

Everyone. The impact of a Psychological Recession is more widespread than most people realize because nearly everyone personally knows people who have been directly affected. The result is that even those who are still working are anxious and fearful. They watch their former colleagues, especially the "golden ones," struggle through months or even years of unemployment. They see their companies continuing to downsize, use temps and outsource, and they're afraid they may be next. Stress is everywhere, and it is unrelenting.

At the same time, work itself has become a major source of tension, because when costs must be lowered, the arithmetic of higher productivity means that more work has to be accomplished by fewer and fewer people. This translates to longer work hours for everyone who has a job.

But it's not simply a question of overwork, of too many hours. When people are anxious at work, they're afraid that no amount of effort is good enough. To make themselves safe, they work very hard at everything. They don't feel secure enough, and therefore are not courageous enough, to differentiate among tasks and set priorities. When every task is treated as enormously important, work never ends. There's no closure, no sense of satisfaction of a job well done. People on permanent overload are exhausted, and exhaustion is not a prescription for treating fear and anxiety.

Even more fundamental to our sense of stress is the fact that we have gone from too much (unearned) security to too little. Most people now feel that, even though their performance is excellent and their skills are germane, they have little chance of earning job security. While economies, organizations, and customers are benefiting because of the economy's competitiveness, many individuals are newly vulnerable and downwardly mobile in a world in which work migrates because much of it can be done anywhere.

The effects are widespread. There is confusion and tension at work and at home. In many families, traditional gender roles have moved closer to a unisex model of shared responsibilities, with no one having any real downtime. And, while the pressure at work has grown as organizations are squeezing out every possible percentage increase in productivity, it is harder and harder to find excellent child care. There seems to be no rest for the weary! Technology, in the meantime, has created a boundaryless world in which everyone is reachable, at any time, wherever they happen to be.

Not surprisingly, the Psychological Recession lies especially heavy among the young baby boomers and GenXers, who came of age at the height of the good times and launched their careers believing there were no limits. Today, many of these young and educated people are in denial or in despair, convinced theirs is a lost generation. Some have become waiters and waitresses, doing pick-up jobs that need little training or education, some returned to school, and others went home to mom and dad.⁴

A generation whose members had the highest expectations and believed in the value of their education has become cynical and depressed. No wonder the mood is one of despair. If the future is dour for them, the future is bleak for all.


WHY IT MATTERS

We all know the mantra:

Get profits up.

How?

By cutting costs.

What's the biggest cost?

Salaries, benefits, pensions, vacations, training, sick days . . . anything to do with people.

What can you do?

End long-term commitments to employees and downsize, lay off, outsource and use temps. Wall Street rewards it, and shareholders are happy.

That's very appealing and logical in the short term. But, in the longer term, not seeing employees as stakeholders and not making a commitment to them is a truly dumb strategy. It's dumb because it produces powerfully negative financial outcomes.

In later chapters, you will be presented with a vast array of data that in no uncertain terms document the connection between how employees are treated, how they in turn perform, and how that in turn affects the company's financial performance. The sheer volume of evidence is overwhelming and indisputable. In the meantime, consider this thumbnail statement.

When people are perceived as a cost and not a resource, when they are treated as a liability and not an asset, when no one seems to know or care that they are there, they don't work well, and they don't stay.

That bears repeating: They don't work well. And they don't stay.

* In one recent Gallup survey, 17 percent of those interviewed were actively disengaged and were trying to subvert the organization in which they worked.⁵ Fifty-four percent were passively disengaged; their bodies were still in the office but they had essentially left. Fifty percent were ready to change jobs. No organization can flourish when half of its employees want to leave and almost three-fourths do not feel committed to the organization or engaged in the work it does.

* A growing number of people, especially those in their twenties and thirties, are leaving the fast track because work demands keep rising while satisfaction and payoffs continue to decline.

In 2005, Next Generation Consulting reported the results of its study on work trends.⁶ They found that people who create and use knowledge, especially younger knowledge workers, were eager to reinvent their work experience so they could feel fulfilled. Within a balanced life, they wanted to work hard at work that was meaningful to them. In contrast, they found, the actual experiences of many knowledge workers are leaving them burnt out and frustrated.

For example, Spherion Corporation, a major supplier of part-time employees and outsourced workforce management to many global corporations, has been conducting research on the values and motives of employees for more than six years. Its most current data find the level of employee discontent is so great that the United States could incur more than $600 billion in workforce costs because of turnover in the next three to five years.⁷

With the breakdown of any implicit or actual contract based on mutual benefits and responsibilities between employees and organizations, increasing numbers of employees, especially women, are switching to the nonprofit sector, are striking out on their own, or leaving work altogether.

Organized labor stands to benefit from this growing dissatisfaction. The litany of losses is familiar: massive layoffs, sending work offshore, slow growth in wages, and reduced benefits in health care and pensions. When unions use these losses as a rallying cry for the workforce to mobilize and join up, many people will find that appealing. A stronger labor movement has huge political implications. With the help of sophisticated tech nology, organized labor's political machine has been able to get millions of union members, who usually vote Democratic, to the polls in recent elections.

A Psychological Recession is not just an idea; it is a real phenomenon with real consequences, all of them bad. When people are scared and depressed for a long time, despair and fear replace confidence and optimism. Try running a company with workers who feel like that. In the larger economic picture, it is really dangerous that a Psychological Recession characterizes most people's views and moods when two-thirds of our gross domestic product is based on consumer spending, which is profoundly affected by consumer confidence.

The widespread Psychological Recession is largely the result of organizations no longer responding to employees as key assets. There can be no question that this has led to too many scared, alienated, and uninvolved employees. Feeling as if you're being endlessly pushed from here to nowhere and no one cares is not an ideal condition for individuals, their organizations, or the nation. The headless horseman is not a good role model; we need leaders who really believe it when they say that people are the most important asset.

© 2008 Judith M. Bardwick.
All rights reserved.
Published by AMACOM Books
http://www.amacombooks.org
A Division of the American Management Association
1601 Broadway, New York, NY 10019
To order call: 800-250-5308
Email: pubs_cust_serv@amanet.org