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Cutting Back Without Cutting Off
By Marc Tracy
The New York Times runs a provocative article on companies that are faced with plummeting revenue and therefore a need to slash costs, but that for various reasons wish to avoid laying workers off outright, and so have resorted to creative measures to keep employees on while lowering payroll costs. It's a must-read, particularly for any small business owner wishing to take our earlier advice and reduce payroll without commiting any actual layoffs.
So what have some employers been doing? Big and small, manufacturing and retail, they've been reducing work weeks; cutting unpaid vacation; freezing wages (along with hiring); and other things. The key is, as they're doing this, what they're not doing is firing people. They are thus able to make these other cuts palatable to their employees, because everyone knows how terrible the economy is, and everyone would rather have a cut-backed job than risk being let go. Besides, everyone also knows that if their employer fails because its payroll costs were too high, then no one will have any job anyway. “Organizations are trying to cut costs in the name of avoiding layoffs,” says one Berkeley business professor. “It’s not just that organizations are saying ‘we’re cutting costs,’ they’re saying: ‘we’re doing this to keep from losing people.’ ”
So you can see why full but reduced jobs rather than layoffs are better from employees' perspectives. In fact, in some cases the motivation for such a move has come from the employees themselves--apparently, over 30% of Brandeis University's professors have already signed onto a faculty initiative to take 1% pay cuts. (Although aren't some of them tenured anyway?)
But why should an employer be interested in cutting payroll in these new ways rather than in the oldest (and, let's face it, simplest) way?
It's not just about morale, though that does have plenty to do with it--few things will get your employees more on board than knowing they, too, are making sacrifices, that they are all doing it together, and that you have gone out of your way to make sure they don't lose their jobs. But there are also more concrete considerations. At some point, this economy will bottom out and start to rise again (sounds improbable, we know, but this is how the business cycle works). When that happens, would you rather be caught understaffed and needing to go on a reckless hiring frenzy, or would you rather have all of your experienced, trusted employees already on hand?
That said, the article does close with a warning, offered by a Yale economics professor, that if it appears as though cutbacks are going to last longer than a few months, some employees may prefer a layoff to the cutbacks. That may be less than ideal, but at least you'll have tried your best, and you and your remaining employees can move on into an uncertain but hopefully employment-filled future.
Comments (0)December 23, 2008 5:37 PM
