HR Strategy: Avoiding Layoffs
As the recession continues to cut deeply into the revenues of businesses, many are struggling to decrease their costs in order to survive the economic downturn. For many firms facing financial difficulties, the standard response is to reduce their workforce.
While downsizing is often not avoidable and seen as a necessary cost cutting measure, many experts agree it is a dangerous option and should be the absolute last resort. Workforce reductions can bring high costs and hassles of their own. They can also prove to be counterproductive- increasing turnover among the best workers and creating anxiety among the remaining. Thus, resulting in lower morale and decreased productivity.
Avoiding layoffs isn't just human, it's good business practice. Layoffs can leave a company flat footed when the economy picks up. If you overshoot on the downside with layoffs, you can be putting your company at a disadvantage when the economy bounces back. While most recognize that labor can be our most costly resource, it also remains the most valuable. Employers who have laid off people have to find, hire and train new ones when the economy recovers. In many instances, new hires can be more costly because of an improved job market. Employees with specialized skills or strong customer relationships aren't easily replaced. The loss of talent and leadership can be devastating. An organization should carefully consider all of its option before making the "layoff" decision.
In order to minimize or avoid downsizing there are several HR practices that companies may want to consider instead. Some of the more popular approaches are:
- Hiring freezes or eliminating bonuses
- Reducing contributions to pension or matches to retirement plans
- Mandatory vacations
- Shortened workweeks
- Raising employee contributions to health plans
- Reducing or abolishing overtime pay
- Salary reductions
- Temporary facility shut downs
Whatever cost cutting strategies are used, I believe the companies that will be better positioned for the recovery are those who have focused on the long term and sought out solutions that preserved their talent and kept their options open for growth.