Getting Back To Business

A business crisis challenges the abilities of every leader. The fear created by uncertainty can cloud decisions and paralyze even the savviest managers. A wrong move, such as massive layoffs before alternatives are considered, can dramatically affect how well a business survives the crisis. It may also position it poorly for recovery and spur qualified employees to leave.

Companies that survive and rebound have learned to plan for their future. They assess their current employees’ skill sets, determine what skills will be required in the future, and create special ways to cut costs before laying off staff. They have learned that sustainable growth with the right people on board is critical to restore profitability rather than temporarily save by cutting heads—and jobs.

Witness this example. Grace Perry, an executive with Lathem Time of Atlanta, an 80-year-old, 150-employee family business that manufactures and designs timekeeping products, saw firsthand the dramatic impact of an economic downturn on the business. Perry said that to cut employees across the board would have hurt the company more than it would help.

Yet the firm found it mandatory to cut costs to stay in business. Here’s what Lathem did, and it worked. It showed employees first that it was willing to try everything possible to avoid layoffs. The average employee had been on board 15 years. But to cut costs without layoffs became more of a challenge. The company tried something novel. It cut labor costs, not heads, by asking employees to accept a reduction in work hours.

Employees were supportive. They agreed to take a salary reduction and work 36-hour weeks or four 9 hour days plus a half-day on Fridays if needed. This benefited both sides—labor and management. The company saved money, was more in control of its costs, and did not lose anything in terms of productivity. In fact this streamlined the operation. Furthermore, employees had longer weekends, which meant they were more rested and focused on their workdays.

Interestingly, Perry said that the move provided residual benefits. Managers were forced to stay on their toes and look at how individuals worked in their teams. Work processes were changed, and it forced Lathem to take a look at what it was doing. Moreover, the firm did not have to pay for overtime.

This was not enough, however. To reduce costs more, the company resorted to two small rounds of layoffs that involved about 20 employees. In addition, some employees, who were close to retirement, left of their own volition. Management looked at each area and saw where it could afford to make cuts. Seniority was not the main strategy; rather, it was the importance of the job. Management looked at the products, the costs to produce them, and where it could afford to let one person go in each area.

This approach proved successful. Perry noted that if the company had not tried to cut costs early on the way it did, it would have lost money. This would have ultimately resulted in larger layoffs. As it turned out, the company recovered. Furthermore, employees were an integral part of arriving at a solution. They were communicated with frequently, were made aware of the difficult situation the company faced, and were dealt with in a straightforward, honest manner.

Such stories abound throughout corporate America as examples of companies that have learned to understand the value of alternatives to layoffs.

The desire and opportunity to work are the fuel for an effective organization. After implementing the Headcount Solution, an organization will still be facing many business challenges, but the job will be made easier with a work force that has been preserved through a crisis, held together, and has become stronger as a result. The painful journey through a business crisis lays the foundation for taking advantage of new opportunities and new successes that lie in the future.