Creative strategies to avoid layoffs in difficult times

The economic downturn has had unfortunate consequences for the Canadian workforce so far. Statistics Canada recently reported 34,000 job losses last year.

Experts warn the worst may be yet to come.

In difficult times, cutting staff is sometimes a vital component of many successful restructuring efforts.  

And yet, terminating a significant chunk of one’s workforce may offer nothing more than a short term fix, and the trade-off prove to be an unfortunate one: relief from bottom-line pressure in exchange for low workforce morale, bad publicity and loss of talented employees.

So how may businesses improve the bottom line, while avoiding major staff cuts when profits take a dive?

At least one expert believes this may not be as much of a tall order as it sounds.

Companies that are able to weather tough economic storms “thoroughly investigate various options and creative strategies” before considering staff cuts, according to Jason Zickerman, president and chief operating officer of The Alternative Board, a Westminster Col.-based peer advisory group comprising business owners and C-level executives.

These companies, he said, realize the costs of replacing productive employees, regaining momentum, and winning back public goodwill often outstrip the savings provided by layoffs.

A recent Robert Half International survey on staffing concerns of 100 Canadian senior executives revealed that staff retention is indeed a top priority of many companies.

Thirty-five per cent of respondents cited staff retention as their biggest worry, while staff morale was the second-greatest concern (23 per cent).

Twenty-two per cent said recruitment worried them the most, while another 17 per cent claimed productivity was their greatest staffing concern.

But whether you’re an employer or employee, there are ways to ease your staffing concerns – and it might not be as bad as you think.

“We’re finding people really are focusing on retention,” said senior research analyst Jennifer Perrier-Knox of Info-Tech Research Group, London, Ont.  “This is no time to lose people.”

Here are some tips on how to retain staff and take care of the workers you just have to let go:

1. Inventory of units and functions – When companies want to reassure investors they are protecting the bottom line they talk about “streamlining” and “restructuring”. This often includes actions such as budget cuts, closing of obsolete plants or branches, administrative overhauls, selling of non-core operations, or improving internal processes.

Very often it’s the non-layoff components of a restructuring package that deserve credit when the turnaround comes, but many executives focus on cutting staff because this provides immediate results.

“Don’t cut staff to look good with investors,” says Zickerman. “Find the real problems and fix them. Investigate current processes and operations and then make changes that will help the company perform better.

Identify productive workers and those vital to your operations or plans and keep them.

“Make sure employees clearly understand the selection process when you decide to cut an under-performing unit or function,” he said.

2. Plug the leaks – In a down economy cash is king. Make sure the cash flow is secure and for 90 days upwards. Ensure that receivables and payables are up to date and will not cut you short. With payables, try to negotiate for longer payment schedules. With receivables, offer customers incentives to pay on time. Liquidate old stock for cash.

3. Salary cuts, shorter work week, leave or sabbaticals – It doesn’t always have to be an in-or-out situation. Some companies institute a shorter work week.
It is no longer uncommon for even unions to enter into a period-specified agreement with management for a salary or benefits cut in exchange for job security.

Acxiom Corporation, a global interactive marketing services company, instituted a 5 per cent mandatory pay cut, plus an additional 5 percent voluntary pay cut tempered with increased stock options, to stave of job cuts.

415 Productions Inc., a San Francisco-based Web development company offered its employees either a 5 per cent pay cut, or a four-day work week reflecting the appropriate decrease in salary.

Many companies carry out a seasonal lay-off wherein workers are called back when production ramps up later in the year. Some companies offer employees a temporary leave of absence.

Years ago, Accenture, a global management consulting firm, announced a voluntary sabbatical program called “flexleave.”

The program offered some 1,400 consultants 20 per cent of their salaries and continued benefits over a six to 12-month period and stock options were kept in place. During their leave, the employees were allowed to take another job, as long as it was not with a competitor.

Chip maker Texas Instruments “lent” several human resources personnel to vendors for as long as eight months with the intention of bringing them back to their original positions after the period. The vendors reimbursed Texas Instruments for the workers’ salaries and agreed not to offer the people a permanent job.

Sometimes no matter how much you rack your brains there’s no option left but to let some people go. When this happens, Zickerman said, the company must do it’s best to help the leaving employees get back on their feet and then make sure to ease the burden on those left behind.

To those who are losing their jobs, offer as much support as your organization can bear. If possible provide people with ample warning so they can prepare.

In the late 1990s when the Princess Margaret Hospital (PMH) in Toronto consolidated with several other downtown hospitals, PMH scheduled several comprehensive “barn house” information meetings with employees to explain its lay-off process months before the lay-offs were to take place.

Alternative positions were offered to those qualified and re-training funds were given to those let go.

Managers can also ease the hardships of a job loss by providing letters of recommendation if not referrals and jobs leads when possible. Some companies can even look into possibility of transferring retrenched workers to partners and affiliates.

For those left behind, the work can be expected to be more daunting. There may be a lot of fear and uncertainty about the future.

“Nip it in the bud,” says Zickerman.

He suggests that at the outset companies must ensure employees are provided the information they need in a timely manner to make sense of what is happening around them and make intelligent decisions.

“Be truthful and forthcoming about information, schedule meetings with executives or managers who can explain the reasons behind and the selection process for the layoffs, and what the prospects are for the remaining employees.”

Companies must also be clear in outlining the new and revised workloads.

“Prioritize both tasks and customers. Eliminate work that doesn’t work. You can’t do the same volume of work with less people,” Zickerman said.

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