It's bad luck to work for a company like this in an economic downturn
Companies where managers give little emotional support to employees are more vulnerable during an economic crisis, Corvinus researchers have found. The study, published in the Economic Review, found that in addition to management style, excessive profit orientation and a lack of respect for employee selection can also put firms at a disadvantage.
In the March issue of the Economic Review, published at the beginning of April, researchers from Corvinus University of Budapest explored the reasons for the lower-than-expected turnover, which can be linked to management practices. In their study, they sought to explain the differential impact of the industry shock caused by the coronavirus epidemic, based on 286 factors. The university's Competitiveness Research Centre carried out a comprehensive survey of the management practices of Hungarian medium-sized companies in the years before the epidemic, which the researchers used to examine the correlation between different attitudes and performance during the crisis. The study's authors are Bence Kiss-Dobronyi, PhD student at the Corvinus Institute of Operations and Decision, Erzsébet Czakó, professor at the Budapest University of Economics and Business, and Dávid Losonci, associate professor at Corvinus.
The research looked at the characteristics of companies that experienced a more significant decline in sales after the economic shock of the pandemic compared to the expected level in their sector. Turnover was also adjusted for the company's past performance relative to its sector. The researchers considered this decline in sales to be an objective sign of vulnerability.
When you don't get emotional support from your boss, the company as a whole suffers
The results suggest that companies where managers are less likely to have a relationship-oriented leadership style are more vulnerable, and therefore less likely to consider it their responsibility to provide professional and emotional support to their employees, as well as to provide professional leadership and supervision, among other things.
Interestingly, the study also found that companies where managers consistently prioritise making more profit are also underperforming
Firms where managers are less likely to recognise HR systems, where they see staff selection as less strategic than in other firms, and where retraining is less common are also underperformers
.Companies with weaker digital readiness are also more vulnerable, as are those that are family firms (where the owners have been involved in the management of the company). It is a warning sign if the firm relied less on external funding before the crisis, and also if the organisation has less widespread use of environmental management systems.
"The picture that emerges from the research of companies that have performed worse than expected during the crisis - i.e. companies that have underperformed even relative to themselves - and of management is that employees are seen as a factor of production rather than as human resources to be empowered and retained, as colleagues. Related to this is that these companies tend to prioritise the pursuit of higher profits over other goals. In addition, we see a prominent role for digitalisation capability, the importance of which has been confirmed by many during the crisis," said Bence Kiss-Dobronyi Kiss-Dobronyi, PhD student at the Corvinus Institute of Operations and Decision, and first author of the research.