Layoffs ? a Last Resort

If you are an employer of staff – from two to two thousand – the worldwide recession may mean you are considering making some of them redundant. However, advice from experts in the human resource field suggests this may not be the best option. Some of them fear employers are getting rid of staff without thinking of the consequences, reminding them that employees are often key to the success of a business, so that the cost of getting rid of staff is greater than the savings that will be made. They quote Peter Drucker, management guru, who said: “Layoffs should be a last resort…discarding skills and knowledge is a short-sighted strategy.”

Jens Butler, of Ovum, a business advisory firm, says, “What’s needed is long-term vision.” Certainly up to two thirds of the costs of running a business can be spent on employment, but staff are an investment that is hard to re-make. Staff members often have knowledge of the business that has been hard-won over years of experience. When good times return – as they will – that experience will need to be regained by new employees – a costly and difficult task. As well, there is the need to pay redundancies, where these exist – and the added cost of advertising, selecting and re-hiring staff later. And a cost that is difficult to quantify is the affect of staff cuts on the morale of those who remain. It’s difficult to put your best foot forward if you are constantly looking about for a knife in your back.

Current thinking is that this recession will not last as long as some have predicted, meaning it is best to hold on to the very real talent that your staff members provide.
What can managers and employers do meantime, in order to hang on to their staff? Some tips provided by the experts include the following.

- Suggest staff take unpaid vacations – they may even enjoy them.
- Remove bonuses for senior positions – they don’t really need them.
- Consider instituting shorter hours on a rolling basis – four-day weeks are proving popular in some places.
- Give away recruiting for now – if a staff member leaves voluntarily, is it possible to leave the position unfilled?
- Put off capital expenditure – it can be made when the economy recovers, but a staff member lost is usually lost forever.
- Cut back temporarily on pension and insurance schemes.
- Focus on expansion and diversification, thinking laterally.

Not all these measures will apply to every firm, but putting even a few into practice can enable substantial savings that will allow the retention of those people whose understanding, ideas and vital networks continue to bring life to a business.

As well, communication between employer and staff becomes very important when the threat of redundancy looms. Human resource experts stress that workers must be kept informed – on a daily basis, if necessary – about how the company is faring economically. “Then they are given the opportunity to help with their own survival,” says one business advisor, “and it can be surprising how many ways they can find to do things a little better – more cost effectively – than they could in the past.”