With recession knocking on our front door, tough times lie ahead. It is by far the most stressful business scenario most of us have seen. The writing on the wall is clear. The only way that companies can survive the downturn is by drastic cost cutting coupled with containment. And, in the desperate rush to cut costs, many organisations are laying off people.
However, widespread and indiscriminate staff downsizing brings its own share of dangers, as precious human capital will be lost. Besides, such callous layoffs can embitter the remaining survivors too. They end up feeling hurt, unappreciated and resentful, and will jump ship at the first opportunity. In fact, many dejected and dismayed employees are just biding their time until they can leave!
What goes sadly ignored is that companies actually need to preserve their highly skilled employees, especially in bad times. They are the ones who will help organisations to not only survive, but also recover when things start getting back on track. It is not just retention, but even the company’s ability to attract and recruit new talent that is smashed to smithereens by such insensitive behaviour.
As Fred Crandall, co-author of The Headcount Solution: How to Cut Compensation Costs and Keep Your Best People points out, “During this downturn, the best companies will take a look at their future focus. They will not just lay people off, but ask, how can we get through this and keep the people we need to build the company in the future? ”
The drastic way out
It is imperative that companies should look at the future and not blindly lay off people, instead they should try to get through the tough times with them in tow. Other ways apart from layoffs to contain or cut costs can be found.
The cost-control strategy that emerges is linked to compensation. Companies can opt for various measures like:
• Reduce or suspend annual pay increment
• Reduce or suspend bonus and incentive pay
• Cut back on vacation and other benefits
• Implement salary cuts
They can even consider rewarding employees for standing by the company and also restore pay to pre-reduction rates, once the economic conditions improve.
In addition to this, there are other useful measures like offering options like paid sabbaticals, voluntary severance or early-retirement packages to employees. Even hiring freezes, contracting arrangements, job sharing and other flexible work options emerge as effective alternatives to layoffs.
Actually, there is no limit to innovative cost-cutting measures. For instance, one company organised a novel ‘cost cutting ideas’ competition and was flooded with outstanding responses. Needless to say, the financial impact of implementing just some of these fresh and unique ideas was mind-boggling! Not to mention the amazing boost it provided to employee job satisfaction and loyalty.
A touch of sensitivity
There is always a good way and a bad way of going about cost cutting. Their implementation will determine the company’s very survival and success. If they are not carried out properly, it can de-motivate employees and make them head for the nearest competitor or even attempt to sabotage their own company.
The best approach is to be candid with the staff and clearly communicate the seriousness of the situation. Be upfront and explain the need for emergency measures aimed at cost cutting. Employees will be better able to accept and adjust to the changed scenario once they understand the facts of what is really happening and why. The honesty will also put paid to any rumours, confusion, fears or isolation.
The management should also make sincere efforts to join hands with the employees in a campaign to ‘save our company’. It should seek their ideas, carefully listen to their viewpoints and also let them participate in the decisions. It should maintain constant and open communication to share information and keep them abreast with the changing situation.
Once employees start feeling that ‘we are in this together’, it will generate greater buy-in for even tough measures.
What is important is that management should never promise what they can’t deliver, as employees will only end up disheartened and lose their trust in the company. Moreover, compensation cuts should be consistent and across-the-board.
Layoffs should be earmarked only as the very last resort. If the situation still gets progressively worse despite the company’s best efforts, implementing a methodical lay-off strategy by choosing the correct employees based not on loyalty or performance, but critical skills and competencies will help. It is very easy to mistakenly dismiss the wrong people who may actually help the company recover later.
Whatever a company does, it should always act in a smooth and compassionate manner with proper planning. It will help to gain goodwill, loyalty and preferred employer status, forming an effective foundation for imminent recovery!
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