When times are tough, companies seek the quickest way to shed costs.  Unfortunately, this often means a knee-jerk reaction that results in layoffs. But just because a layoff--or downsizing--brings quick results, does not mean that it is the best long-term decision. As with any business decison that an organization must make, all cost-cutting measures should be fully studied and a plan that addresses short-term and long-term needs must be considered. And because people are an organization's most valuable asset, every possible alternative must be explored. The following are viable alternatives to layoffs that should be considered as part of the long-term plan for profitable recovery:

1.      Pay cuts:

As reported in the May 4, 2009 issue of Business Week, One alternative that is coming into play is being dubbed the 10% (or so) solution. Executives at companies such as Hewlett-Packard, New York Times, and Best Buy are cutting pay. While this strategy seems simple, no one gets fired and the organization does not have to do a massive rehire when the economy makes a comeback, there is risk. Most employees expect cuts in or hold on raises and bonuses, but their base pay is supposed to be protected. However, most people would rather have a pay cut than be unemployed. This does not mean that wage and salary cuts are an easy way out. There may continue to be anxiety over the possibility of future layoffs after the pay cuts.

The process for handling pay cuts is as important as the process for handling layoffs. Here are tips for implementing a wage or salary reduction that will help to mitigate the damages such as low morale and anxiety:

·         Communicate openly and honestly - explain the reason for the pay cuts; tell employees that you value them and that you are doing everything you can to avoid layoffs

·         Implement pay cuts incrementally based on performance

·         Avoid cutting the pay of top performers

2.      Maximize resources by reassigning employees to other departments and job functions:

If you have the ability, move people around to other jobs in the organization, pulling from areas that labor is less needed and moving to areas that have holes to be filled or that are better able to handle the additional labor costs. To do this effectively:

• Communicate openly and honestly – explain the reason for the move. Do not soft-pedal the impact on the employee. For example, do not tell the employee, “This will probably be a temporary move” if you know that it is a permanent reassignment
• Assess the employee’s knowledge, skills, and abilities (KSAs)
• Match them with a job that fits their KSAs

3.      Asses the company’s organizational structure to be sure that you are operating as lean as possible, taking measures to eliminate waste in physical resources, policies, and processes in order to bring money to the bottom line. When organizations take a hard, objective look at the organizational structure, it is often surprising the waste that is discovered and that when eliminated, can contribute significantly to the profits of the organization, reducing or eliminating the need for drastic measures that affect the workforce and inhibit the company’s ability to deliver products and services to the customer.

Example: After the September 11 attacks on the United States, as you can imagine, attendance at the Walt Disney World and Disneyland Resorts dropped to their lowest levels in 30 years and yet no front-line employees were laid off! Raises for salaried management were deferred for one year; employees, salaried and hourly alike, were reassigned to different areas to better allocate the human resources; hours were cut from front-line jobs, depending on the status of the individual; salaried and front-line employees were given a chance to take vacation time that was already on the books. When the business came back, and it did in December for the holidays, Disney had retained its intellectual capital and those very important right-fit Cast Members (employees), maintaining the company’s ability to deliver the magical experience to guests.

It is important to remember that a critical component of ongoing productivity during tough times is the trust and integrity that you maintain with your employees. A key strategy is to maintain open lines of communication regarding the state of the company. The idea of keeping bad news from employees never works. They often hear through the grapevine or even the news media that the company is struggling. If you do not share this information with them, you are setting yourself up for more challenges than you bargained for as the workforce becomes discouraged and distrustful of leadership. Always remember, if you do not tell employees what is going on, they will make it up!

If unfortunately, despite all of your best efforts, you cannot avoid downsizing, the following guidelines will help you to make the best of a very difficult time:

1.      Communicate openly and honestly

·         Fill in the information gaps for your employees; share market data, the state of the company’s profits, and keep them informed of possible future actions

·         Don’t create an environment of mistrust by lying or glossing over the real situation – it is almost impossible to regain trust once people know that you have lied to them.

2.      The manager must deliver the bad news directly to the individuals who are being laid off

·         As difficult as it is, never delegate the delivery of the layoff news. People tend to trust their manager first and the company second.

·         Deliver the news personally and in private. Companies must allow time for the manager to have a one-on-one conversation with the person being let go.

·         Be respectful and be prepared to listen. Give the person time to react. Everyone is different and the manager should expect that they will encounter different reactions from different individuals. Some will be angry and vent, some will cry, some need time to reflect, and others may need facts and explanations, i.e., “How did you choose me over the other person?”

·         Provide outplacement support. The manager should ask, “How can I help?” The employee may need help creating or updating his or her resume. Make sincere efforts to help them start moving towards a new future. These efforts will also show remaining employees that you are treating them as people, not as line items on a budget.

·         Support the survivors. Employees who survive the layoffs will begin to have doubts about their futures with the organization. They need up-front communication about how their jobs and their goals may change. They will want to know what the future of the organization looks like from management’s perspective. Address each concern with rational discussions.

·         The CEO should be visible and available to the managers as well as the employees. Prior to layoffs, he or she should provide coaching to the managers to assist them in delivering emotional news. The CEO has a powerful impact when she is willing to personally deliver a statement to the managers and employees regarding the necessity for these drastic actions and what she believes to be impact on the company’s future. At the very least, she should present the managers with a written, prepared statement that they can share with all employees.

Saying that layoffs are difficult is an understatement. However, if done right, the organization can minimize the damages, ensuring that laid off employees do not become ambassadors of ill will in the marketplace and by ensuring that those employees who survive the layoff stay focused on the goal and the future of the company.