A small business owner told me the other day he recently met with his staff and jointly worked out an arrangement where employees voluntarily reduced their hours to help account for the recent slow down in business. Rather than layoff a few employees, it was decided that everyone would share in the pain and work together to solve the company’s financial dilemma. Rather than sending talent to the exits, this company is poised to quickly respond in full force when the recession lifts. Teamwork was their response to bad news rather than cutting coworkers.
Why is this CEO motivated to approach his company’s economic issues in this manner? I suspect it is because he is closer to his people. He sincerely cares for them as individuals. This small business owner has to look employees in the eyes most every day so he is motivated to work out a solution rather than simply pull out a quick fix tool and layoff employees.
Employees of large corporations are not so lucky. Their CEO’s and leadership teams are typically far removed from the workforce. A Fortune 500 CEO can simply call their human resource division and command, “layoff five percent of the workforce.” Workforce reduction plans can be developed and implemented without senior management getting their hands dirty. Employees are given the tragic news and sent home with little or no interaction from leadership.
This impersonal approach is why you will notice the initial response to economic bad news from medium to large companies is to layoff workers. The same companies who often state, “our employees are our most important asset” are the same companies kicking people to the curb at the first sign of bad economic news. To appease shareholders and initiate positive action in the eyes of Wall Street, a layoff is considered the expected and financially responsible quick fix.
The really bad news is that employee layoffs rarely result in long-term cost savings. The data does not support this knee-jerk reaction to reducing expenses.
It is not hard to find bad news. Evidently bad news sells advertising and all the network news programs have signed up for a double portion of negative news coverage. This has created a steady diet of fear and frustration for business leaders who typically stay electronically plugged in most of the day.
From a positive people practices perspective can we logically think through this layoff strategy? Are there not other alternatives to handing out pink slips? The Wharton School of Business has made these following suggested alternatives to layoffs:
- Voluntary retirement and attrition
- Company-wide salary reductions
- Reduced-salary sabbaticals with benefits
- Reduction of working hours
- Hiring freezes
- Cancellation of company business travel
- Suspension of the 401(k) matching contribution
- Develop and implement employee performance standards
When faced with challenges, leaders and employees will rise to the occasion and deliver viable solutions if an atmosphere of teamwork is propagated rather than an environment where everyone must fend for themselves. Before handing out pink slips, involve the team to determine preventive and innovative alternatives to the dreaded layoff.