I'm a Software Project Manager currently facing a hard situation: our company is having some hard times (mainly due to financial things) and lately people are generally pessimistic, apathic and/or easily angered.
Generally, I have a very strict and hard management style: I point out mistakes and fix them ASAP, raise warning flags and resolve small conflicts with a strong intervention so they cannot grow bigger.
However, as my developers are getting more demotivated due to the things happening I am starting to lose my "leverage power". People suddenly started to hate to be corrected, became less dedicated to delivery quality and delivering good quality becomes really hard for projects.
What approach is best for me to take up in such situation? Lately I became slighly softer when I interact with everyone and I try explaining bad things with a calm and humble manner but this only barely buys time. I feel like I need a major strat change.
Have you had such experiences? How did you overcome them? What has worked and what not?
EDIT: If I look back in the history, good leaders had dealt with hard times by establishing even stricter rules. (to the very contrary of the humble soft PMs graduated various funny unversities nowadays). But I am afraid if I do this some people might resign (considering the bad background and the better choices they might have).
Thank you. :)