Do You Remember... ?
Some of us recall a time when an individual was fairly certain to remain with an organization for all of his or her adult life. Most people who left their jobs did so voluntarily or were let go because of “performance problems”. How strange that sounds now!
The Invention of Downsizing
“Downsizing” as a company policy was invented in the early 1980's—some say as a way to respond quickly to the Wall Street quarter by quarter demand for positive economic performance. Employee compensation represents the highest percentage of business costs. If sales fell off, or new products failed, or there was a merger of companies, or the economy slowed down—it seemed logical to reduce staff to bring the costs down to meet the budgetary constraints or duplication of work.
Alternative Steps to Take
The distress and embarrassment associated with terminating long term employees in that culture—where employment would continue indefinitely if an individual was loyal and hard working—drove many organizations to look closely at other expense reduction opportunities before taking this drastic step.
Here are some alternative expense reducing steps:
Solicit cost cutting ideas right away from the employees. In addition to getting to the right people in your organization that can have a direct impact on reducing expenses, this will raise awareness that the company needs to address some serious economic issues. Forming committees to concentrate on reducing waste or redundant processes can be extremely beneficial.
Company-wide shutdown. This can be time that accrued vacation could be used that will reduce the financial liability.
Reduced workweeks. This has the same effect as a salary reduction, but on a short- term basis.
Initiate a hiring freeze. This will have an immediate effect on reducing labor costs. Cautionary note however: managers at all levels will become reluctant to deal with performance issues that would force a termination.
Salary reduction or no merit increases. Morale is an issue in this area but introducing one or both of these measures as a last step before staff reductions will indicate to all the seriousness of the situation.
In taking these steps before reducing staff there is 1) an opportunity to limit the number of employees that will lose their jobs; 2) give advance warning to the group that there are significant economic issues that need to be addressed; 3) allow for a period of adjustment to handle the increase in tasks for those not impacted.