With a rocky economy many businesses are still struggling to stay afloat. Those companies that survive the difficult times do so by making changes and cut backs. The decision to downsize can be difficult for all employees, but it may be necessary for the survival of the business.
Reducing staff numbers can have an immediate effect on financial controls. Layoffs are frequently the first option people look at when the decision has been made to cut back on the human resource front. However, there are other options that may be explored. Here are some strategies to manage downsizing.
Reduce Hours to Manage Labour Costs
Many employers will ask the staff to reduce their hours. Perhaps going to a four day work week, or cutting two hours of work a day. This way management can avoid layoffs and retain many of the workers. With this program the company can increase hours once business improves. They will not need to hire and train new employees down the road. The hours can simply be reinstated. This is a good option for businesses that are affected by seasonal fluctuations.
For the employees the risk of being unemployed is reduced. There will be some people who can not cope financially on the reduced schedule. As a result some turnover should be expected.
Reduced Pay Structure
Freezing pay increases is another way to cut back. Although it is not a popular means to save money, in some cases it can be appropriate. If an industry is struggling across the board then the employees are very limited in finding alternative employment. A wage freeze may be what the business needs to stay competitive and most employees will understand.
Demotions and job share programs are another way to reduce labour costs. This kind of restructuring can create a more efficient system. Again, employees will have mixed feelings. They may not like being demoted, but may appreciate not being laid off. The external labour market will determine how they react.
Downsizing Through Attrition and Retirement
Simply not replacing the employees that turnover can reduce labour cost. Early retirement can be an option for some of the more experienced employees who typically will be the higher earners.
As far as impact on morale is concerned, this is an excellent option. However, this takes time and if a business is in crisis it may be too late to try this approach. Even if a more aggressive approach is needed taking into account the projected turnover will be an important step in determining the number of layoffs.
Layoffs
After all other options are explored it will become clear if layoffs are required. Layoffs certainly have an immediate effect on the day to day labour cost. However, be sure to consider the additional cost of severance pay and job counseling that may be incurred.
Lay offs also have an emotional cost. Employees who have been good productive members of the workforce could be let go. The remaining employees often feel stress and anxiety over their own job security. Low morale will have an effect on the entire operation of the business.
Remember, all changes to employee work hours, salary, and layoffs will need to follow the legal requirements the business is governed under. In Canada each province has an Employee Standards Act that lays out guidelines. Changes that significantly alter the job parameters require notice that may vary depending on where the business operates.
Downsizing is a difficult task to manage. Look for ways to reduce labour costs before beginning layoffs. Reducing hours, making changes to the pay structure, putting a freeze on hiring, and promoting early retirement are all ways to reduce costs. As a last resort, layoffs may be required to keep the business viable.
Reference:
Monica Belcourt. Kenneth J. McBey. Strategic Human Resource Planning. Toronto. Thomson Canada Ltd. 2004.
Monica Beauregard. Maureen Fitzgerald. Hiring, Managing and Keeping the Best. Toronto. McGraw-Hill Ryerson Ltd. 2000.
Suzanne McIntyre - Suzanne McIntyre is enjoying a new and exciting career as a freelance writer. After a long career and time as a stay at home Mom she ...
