Archive for December, 2009

Surviving Tough Economic Times Part III

Tuesday, December 29th, 2009 by Clyde A. Lettsome, PhD, PE

In tough economic times, tough decisions must be made. Probably the toughest decision for most entrepreneurs and managers is related to personnel, their employment, and their compensation. Because this is the time of year when most bonuses are paid and employee evaluations are done, it seemed like the appropriate time to broach this topic. If your business is still facing economic hardship and you need to make employment and compensation decisions, there is one thing you should understand.  Money isn’t everything.

Everyone understands that in tough times tough decisions must be made. No one wants to get laid off, but they all know that a few of them will be. Before you rush to do so, consider this: employees want to be treated with respect, maintain dignity, be appreciated. They want you to be considerate, find creative ways for manage money, and they want you to show leadership when you take action.  When making personnel decisions, consider the following:

  • Layoff Low Performers and Disruptors– Show employees who work hard and fit the company culture respect. Remove the low performers and any disruptors. Show no favoritism to persons you socialize with on occasion outside of work. This assures those that remain that you are fair.
  • Cut Hours – Allow hard working employees that fit the company culture to maintain their dignity. For many people their job is their identity. In addition, if they are the head of their household the loss of a job can be emasculating. So, if sales are down, reduce hours before reducing people further. Consider a 30hr work weeks instead of 40hr work week. This allows employee keep their dignity, it reduces anxiety associated with possible job loss, and it reduces the number of idle hours due to loss of work.
  • Freeze Salaries And Swap Benefits – Show your appreciation even when you have to take something away. During tough times it is difficult to justify raises and maintain benefits. If you are faced with the dilemma of adjusting compensation, consider maintaining the “here and now” and” what if” benefits before considering the “future” benefits.  Start by reducing retirement matches and reducing bonuses.  Then work your way towards further reducing salaries and finally reducing healthcare compensation. These actions may cause morale issues for employees, so consider cheaper benefits to make up for the loss of income. Examples:
    • Flex hours – Employees can use this to spend more time with family or look for a second job.
    • Work at home – Employees can use this benefit to avoid driving to work every day (gas savings and less stress) and spending more time with family. See Part II of this series on how to do this.
    • Free snacks and beverages – Create a “Silicon Valley” environment which encourages employees spend more time (like lunch time) at work and build stronger coworker bonds. Thanks to the internet you can find lots of ways to keep this cost extremely low.
  • Rehire As Contractors – Be considerate and use laid-off workers as contractors when you need temporary skilled help. This keeps your payroll taxes low while delivering skilled workers that know your company procedures and company culture. In addition, it demonstrates your loyalty and further boost morale of those still employed.
  • Offer Internships to College Students – Save money by exchanging experience for help. Consider hiring college students for low skilled work. In a recession, they are not immune. They too are having a tough time finding work. Many of them will opt to work for cheap or free in return for experience.
  • Be A Leader – All of the previous ideas will go a long way to creating employer-employee trust in tough economic times, while assisting you in reducing your payroll cost. However, this would be incomplete if you do not demonstrate that you are making sacrifices also. This may mean you take a pay cut or even don’t get a salary at all. Also, do not be afraid to “roll your sleeves up”. Work alongside your employees. If it means working on the factory floor, the retail floor, or in the stockroom, do it.

You will gain the respect of your employees even though you may have had to slash jobs if you take the steps above and consider more than money when you act. If you do not, when time gets better, you will find your employees leaving not because of money but because of the treatment, and this could cost you more long term.

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