Economies across the globe are under distress due to the ongoing pandemic. To combat the situation, organizations are taking a variety of cost saving measures and the most common of them being layoffs. But the question is should leaders opt for this easy option or there are better solutions available at their disposal to explore?
The fact is, layoffs have proven to be more expensive than what the companies save in short term. Companies invest a lot of time and money in hiring, training and building an emotional connect with a set of talent. When they are laid off, all that investment becomes “zero”. On top of it, the cost of severance and possible litigation adds to it. Thirdly the fear and negative impact it creates amongst the remaining employees, becomes quite counter-productive to the organization.
Therefore, the need of the hour for the leaders is to be more pragmatic in exploring smarter options that not only save cost, but also reinstate the commitment from employees across the board to ardently support the revival process.
In an unprecedented situation like this, a cost-cutting is inevitable, but leaders who manage this process with a far-sighted and empathetic view, create more value for the organization in the long term and come out of the crisis stronger.
A 2010 study by Ranjay Gulati of Harvard Business School, divided organizations into those that were ‘preventative’ (who focused on severing costs early in the recession) and those that were ‘progressive’ (who focused on cutting costs mainly through ‘operational efficiency’ as opposed to cutting jobs), eventually finding that 56 percent of the prevention-focused companies fared better at recession’s conclusion as against only 23 percent of who opted for cutting jobs early on.
Therefore, leaders must explore better alternatives to job cuts before deciding on layoffs. Below are few alternative options organizations across the world have tried successfully at various times of economic downturn. You may explore and pick the ones that suit your business situation:
- Focus on operational efficiency. This is the most important criteria to make an organization competitive, yet the most ignored by leaders.
- Restructure business and realign jobs. You might have enough skills to support the renewed business strategy. A job analysis and competency mapping exercise would help here.
- Roll out extensive work-from home programs and save facilities cost. You must start focusing on employee’s productivity than trying to manage their time.
- Downsize physical office infrastructure as less employee need to be in office.
- Freeze hiring for a period and allow natural attrition to lower payroll burden.
- Cross train people to optimize the existing resource utilization.
- Convert few less utilized full-time employees to part-timers temporarily. You can re-convert them when the business picks up.
- Offer voluntary retirement to employees closer to superannuation age.
- Offer voluntary Sabbatical to people who may be looking forward to taking a break while their job is secured.
- Enforce voluntary or involuntary furloughs to give temporary break.
- Implement marginal and decelerating pay cuts across the board, i.e. higher % for seniors and lower for juniors. May compensate the pay cuts with stock options.
- Remove or reduce variable pays and benefit programs temporarily.
- Terminate or renegotiate terms for contract workers, particularly for non-essential ones.
- Eliminate overtime or reduce working days / hours.
- Review all subscriptions and eliminate those not to be used in near terms.
Employees acceptance to any or all of the above options would certainly depend on how open and transparent the process has been. You may involve the employees by inviting ideas and suggestions from them on what the company should do. By showing that their opinion matters, you will have stronger buy-in for the initiatives you eventually prioritize. People normally stand by the leaders who empathize with them, even if they have to manage with lesser benefits, as they would realise that the organization is forced to take those measures to save jobs.
If you want to assess your organization’s readiness to deal with the current situation and explore best possible options in your organization’s context, you may write to info@moccasin-wolverine-718846.hostingersite.com