By Sean Martin, Manager, Human Capital Practice, Deloitte Consulting

As you approach the employee cafeteria, you hear Margaret and James, two veteran employees, talking about the economy and its effect on business. "This is not the same company it was when I started ten years ago," says Margaret.

"I know," James replies. "Leadership has done nothing to address the current downsizing."

"As soon as things improve, I'm looking for a new job," says Margaret. "My resume is already up to date."

When you walk in, the conversation ends abruptly and the two employees quickly leave.

You've just witnessed your firm's culture making a quick exit. Even the most experienced and best employees do not feel valued any longer; the company has lost credibility with these employees, who no longer trust their management to lead.

In economic downturns, business leaders make hard decisions about costs, and find new ways to increase sales or revenues. With a greater focus on these issues, leaders often overlook corporate culture and the impact of the poor economy and resulting strategy adjustments. However, during times of potentially tectonic shifts in a business environment, corporate culture must be protected because culture sustains innovation, loyalty and productivity.

Culture Carries the Day — Leaders Carry the Culture

What do I mean by organizational culture? It's how things get done, how decisions are made, how information is shared, even the kind of language that is used. We recognize that culture is unique to each organization and is very difficult to replicate. As such, we believe that culture is one of the few sustainable sources of competitive advantage for many organizations, particularly those with strong brands and deliver products and services through people, like a public relations firm. When culture is disrupted by fear of job loss, uncertainty or distrust—all outcomes of economic instability—work becomes inefficient, ineffective or just simply doesn't happen at all.

Leaders embody the organization's culture. It's more critical than ever for leaders to be highly visible to employees. Listen to employee concerns, as well as their ideas. Use "fireside chats," to take the pulse of the company and determine how to respond. By being honest and transparent, and open to input from employees, leaders will engender greater flexibility in the workforce, generate creative solutions and increase employee commitment.

Aftermath of the Axe

According to a recent global study commissioned by the American Management Association (AMA), the economy is the top external influencer of corporate culture. We've all been there when HR—or security—escorts employees out the door. Does everyone just keep on as if nothing has happened? No! Downsizing can have a huge impact on employees' ability to contribute. Employees often feel pressured to work harder and take on more responsibilities even without the requisite skills. Teams are easily disrupted when leaders and members change, and individual needs can take precedence over commitment to the team, according to the study.

In addition, employees may not understand how their roles have changed or will feel insecure about their positions, creating performance anxiety and stifling their own growth and ability to make decisions. This becomes a self-fulfilling prophecy, leading to "lower overall productivity, lower engagement, poor performance, and higher turnover," the study reported. As a result, management will need to communicate its plans to employees and articulate a vision of what the company will look like in the months and years ahead.

Communicate as if Your Job Depends on it

People within public relations understand positioning and reputation management better than almost anyone else. In times of uncertainty, the less "positioning" and sugar-coating, the better. Communications need to be clear, candid and consistent. A lack of honesty and transparency creates distrust that will be hard to re-build in better times—advice PR professionals regularly give their clients. Trust is critical, especially in a business like public relations, which is largely about relationships. Lose the loyalty and trust of employees and, as the economy strengthens, they will seek other opportunities at competing firms and will take their clients with them.

Protecting culture in difficult times is as important as protecting jobs, because the strength and resiliency of an organization's culture will sustain the organization and potentially allow it to come out stronger in better times. Depending upon the organization, a culture that is team focused, mission driven, performance driven, innovative and customer centric will find new ways to do business and will create opportunities from unlikely sources. However, failure to understand where this value is created and which individuals and teams are at the core of the culture and essential to enhancing business growth can result in missteps on the part of the business. Leadership's focus will be on constantly communicating and protecting valuable assets, such as the talent that continues to be in high demand.

In the rapid pace and uncertainty of the business environment, we can overlook culture or assume that it will take care of itself. The question then is whether the culture will evolve organically in response to actions taken by the firm or whether management will intentionally hone it to support leaner operations or more focus on the business model. The desired culture is one that fits the company's competitive strategy in its market. It is part of the business model to shape and form to help achieve strategic objectives and capture financial returns. Not managing both strategy and culture together can lead to failure in strategy execution.

Sean Martin is a manager in Deloitte Consulting's Human Capital practice, where he focuses on Talent related issues. He has strong subject knowledge in recruiting, workforce planning, critical workforce segments, contingent workers and workforce transition. He leads the Recruiting and Staffing Service Offer for Talent Strategies and is considered a subject matter expert in this space.