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3 Frequent Questions on Managing Team Morale During Recessions

by Ooosh Coworking X Happyer

Economic recessions, like expansions, pose unique challenges for startups and small- and medium-sized enterprises (SMEs). What to prioritize? How to adapt and transition? How to make the right tradeoffs? These are questions that all small business leaders need to wrestle with in times of economic downturn.

Given this is the global context in which we find ourselves today, it is the right time to talk about the kind of paint points startups and SMEs are facing. Two of these pain points surround employee morale and wellbeing, and cost-cutting and layoffs. Before diving into the details of how to approach these issues during periods of economic stress, there are three important principles to keep in mind.

Profitability is important and necessary, but good, productive employees are essential to sustainable growth. As the old song goes, “you can’t have one without the other.”

Cost-cutting, a common tactic for weathering economic storms, mustn’t come at the expense of culture. The people who will help a company maintain, if not thrive, until bluer skies will be those who sense that their employers are looking out for their best interests.

Don’t hit the panic button. Keep a clear head and look for possibilities. Lean into your team, seek to build community, and work to strengthen the collaborative bonds between members.

For companies navigating through economic downturns, there is thus an imperative to preserve a culture that will inspire more and not less commitment among employees, encourage collaboration and ideation, and position your company as an employer-of-choice. These are precious outcomes, given that human capital is a company’s greatest asset.

That said, it is understandable that layoffs do occur. They may not be desirable, but sometimes they are necessary. When they are, it is important to approach them responsibly, taking care to communicate the “bad news” in a way that respects the dignity of the person being let go.

The rest of this article will cover in detail how companies in economically challenging situations can manage employee morale effectively and to their advantage, how they might perceive and understand the need to lay-off staff, and how to approach lay-offs in way that is respectful, if not mutually beneficial.

Staying super-charged: How to manage employee morale

Here at Ooosh, we believe that there are unique advantages to co-working environments during times of economic downturn. And although the material benefits of working at one may come to mind first, it is really in the connections among members where the magic happens. In contexts of uncertainty, touch points with others in similar circumstances who are trying to figure out their next steps is invaluable.

This is because recessions affect everyone. They put a big question mark over the job market, the competitive arena, and the consumer environment. Uncertainty, at least in the beginning, reigns supreme. Which can and does have negative psychological effects on employees. If sales are down or margins tighten, will your job be around next year? What about next week? The possibility of employee spirits dampening is real and can pose major headaches for owners and leaders, given that they are often dealing with their own stressors and challenges. Co-working environments facilitate connection and strive to create contexts of optimism and engagement. This can be especially helpful for those running companies, given that part of the process of company culture development and management is supplemented by the co-working space itself.

Speaking of culture, what are some of the community activities that co-working spaces provide that can keep spirits high and wills strong during challenging financial periods? Imagine regular happy hours, where friends and colleagues can relax over a drink and some casual catching up; imagine festive celebrations, where members come together to rejoice and give thanks and wish well the person or team or community being celebrated; imagine table tennis and similar games that more often than not end in bouts of laughter and hilarity; imagine, imagine, imagine. These activities are meant to build community, strengthen connections between professionals, and soften the edge of oftentimes stressful workloads.

If a leader decides to invest in a co-working set up for their staff, in view of the benefits as well as to communicate a gesture of goodwill, the returns may be many-fold. Ask yourself: What is the real value of taking good care of your staff?

Facing the inevitable: When layoffs are necessary

Although co-working spaces may not prevent lay-offs as such, we are convinced they offer a life-giving environment for doing so. And we aren’t just speculating; we’ve seen it, one example being where an employee of one member company was let go only to be hired by another. These are the kinds of stories that we want startups and SMEs to hear. Below are three benefits that co-working spaces offer companies facing lay-offs.

A co-working environment is full, to varying degrees, of employers. If you are facing the necessity of letting someone go, be the #bestbossever and network a little on their behalf; maybe other member companies are hiring and need the skillset of the person being laid off. It is a small gesture that could have a major impact on your ex-staff’s next steps.

For those companies who may be possible targets for recently let-go staff, operating in a context of familiar faces is a great way to onboard talent when it becomes available. Interacting with the same people every day builds rapport, leaves a track record of impressions, and can make the eventual hiring of them a known quantity.

Entrepreneurship lives on good ideas. Co-working spaces are to nurture such ideas and foster creative ways for businesses to collaborate and support each other’s success. During times where there is pressure to cut labor costs, consider a strategic coffee with a member about how to share headcount to reduce costs and supplement skill gaps. These kinds of innovations, however temporary, are what make co-working environments unique. Believe in the possibilities.

And these are just the beginning. Companies that truly leverage the co-working space experience create virtuous feedback loops that never stop giving, including when difficult decisions like laying off staff need to be made.

Doing the difficult: How and how not to deliver “bad news”

Letting a staff go can be emotionally taxing and awkward. Most managers would avoid it if they could. But this perception of lay-offs as drudgery does nothing for doing it with integrity. And integrity is exactly what is needed. At a co-working space, you have the option of leaning into other members’ experience. The ability to ask your neighbor for help or to share their experience letting staff go can help make the process smoother. Below are a few helpful hints when you need to lay someone off:

DO think through your reasons. It is important that you communicate a legitimate reason for letting someone go. Be ready to explain it, however briefly.

DON’T fire anyone spontaneously or without warning. If you are letting a person go due to financial pressure, ensure something of the context is communicated in meetings or through notifications of some kind beforehand. If because of poor performance, ensure you’ve communicated a warning signal in prior performance reviews or one-on-one’s.

DO inform them of your decision in-person. Even in difficult situations, presence matters. It communicates warmth and concern. Pair this with a thought through reason and you are on your way to leaving your soon-to-be ex-employee with a positive last impression.

DON’T delegate and DON’T announce it around others. Avoid having a staff that isn’t the direct report of the person being let go communicate the news of their firing; it can sow confusion, leave bad impressions, and result in undesirable word-of-mouth interactions. Moreover, communicating it in earshot of others violates every employee’s legitimate right to privacy; given the vulnerability involved in letting someone go, all measures should be taken to avoid embarrassing them.

DO be optimistic and encouraging. Things like referring a laid off employee to a business that may be hiring for their skillset, communicating your ongoing availability to them for networking purposes, offering to write them a recommendation, and so on, can soften the blow of being fired. Always try to leave things in a spirit of hope.

A parting word

Ooosh Coworking and Happyer are dedicated to seeing startups and SMEs succeed, regardless of global economic outlook. We can and will walk with you in the challenges you face, and are eager to work with you on creative ways to flourish. If you are looking for a place of professional connection and collaboration, we look forward to hearing from you.


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