STAFFING
When economic adversity collides with our business plan, our response to the cost issues must be prompt, and it must be right. We know that there are a multitude of costs related to our people. Reducing their hours to find some short-term relief may ultimately prove to be ineffective. Tackling these current and prospective costs too often leads to layoffs.
“There’s always a good reason for the layoffs that has something to do with making the best decision for the future,” Google CEO Sidar Pachai says. “The thing is, the only reason you’re faced with this decision at all is because whatever you thought was the best option before didn’t work out.”
While a layoff may be a right option, let’s not miss some real hazards. If resorting to layoffs is the course you elect, be ready to hack your way through a jungle of employee relations issues.
There’s always a nagging concern that a single layoff may cut too deeply, or not deeply enough, thus positioning you for “death by a thousand cuts.” A simple percentage cut of total staff may not retain the right individuals to sustain the business. After any layoff, there’s still business to transact. Who’ll be there to do it? As our living enterprises inhale and exhale, let’s not assume that, once they’re laid off, people may readily return, because with limited exception, they won’t.
In considering impacts of a staff reduction, we immediately go to the obvious: A layoff means that those laid-off employees and their families will lose their essential income. They may also suffer other traumas including the fear for their survival, and a doubting of their self-worth.
The survivors are also victims. There’s survivor’s guilt. They also take note of how management treated their laid off colleagues. The layoff events provided them with a new window into the caliber and character of their managers. The process will have a lasting influence on survivors’ loyalty and productivity. In this now uncertain environment, do they want to stay and see how they will be treated if their time comes? Layoffs deliver clear and lasting messages to the people who have kept their jobs.
Survivors need to be nurtured as the long-term assets that they are. Any added employment trauma or surprise could shake them to consider the other job options they all have. While they’re your employees, these folks are in your business every day. They will sense emerging changes. If you don’t openly share the state of the business, they will then presume “facts” — often the worst — to fill any information voids and to help gird themselves for what may be coming.
If the business is in a rough spot, they sense it, even when they don’t have the precise details. Meanwhile, their experience could make them great resources to help address the coming business challenges. It’s important that we engage with our staff to share information with them, and also to provide an easy avenue for them to support implementations and to share their insights with us.
If in response to threats to your business you prepared to aggressively wield the layoff ax, first give due thought to whether you’re losing and keeping the right people. Remember, those you lay off won’t be there to help fix the issues, or to help relaunch the eventual return to “normal” operation.
A substantial layoff may be satisfying to lenders and investors who often applaud anything that looks like cost-cutting. Keep in mind that in a difficult business environment a layoff action will compound the turmoil. Layoffs implemented for savings can actually produce some offsetting costs, such as lost productivity and employee turnoil.
Additionally, future hiring prospects who may otherwise be right to meet critical needs will know how staffing adjustments were managed, and how employees were treated. Social media shares everything.
The skills of orchestrating a layoff go well beyond the writing of pink slips. Stepping outside of extreme or timid cuts, courageous business leaders carefully consider the options to address each risk.
For example, facing the recent pandemic, New England’s Russell Morin Fine Catering was threatened by an empty order book and phones that had stopped ringing. Owner Russell Morin elected to prioritize the long term and hold onto his loyal people. He decided to lay off no one. His business swallowed millions in unproductive payroll dollars while it kept its eye on the long term.
When customer demand reemerged — at a clip beyond pre-pandemic levels — Morin’s operation stood ready, still supported by 147 of its 150 critical people.
When Google was faced with recent staff reductions, their CEO Mr. Pachai observed that, “it seems reasonable that a better way to increase profitability is to make better bets in the first place.”
In continuous planning, we’re always at that “first place.”
Stan Davis is the founder of Standish Executive Search. Standish works closely with business owners, boards and executives in New Hampshire to support company growth, change or succession. Learn more at standishsearch.com.
