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The Headcount Solution. How to Cut Compensation Costs and Keep Your Best People Authors: Crandall F. Published year: 2002 Pages: 29-32/143 |
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Summary
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In the information economy it’s what’s in people’s heads that counts. If you lose your best people, it will be almost impossible to survive the crisis of a downturn and the return of profitability.
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Creative reduction of compensation costs and alternative work arrangements should be put in place before layoffs to reduce the number of employees that will have to be terminated .
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The headcount solution is a seven-step process that will cut costs and also retain the best people to help companies successfully recover from a business crisis.
Chapter 2: What Companies Are Doing to Cut Costs and Keep Their Best People
Key Principles
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Companies are putting many innovative initiatives in place to avoid cutting critical business skills. These include across-the-board cost cutting and alternative work arrangements.
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Across-the-board cost cutting reduces the need for layoffs.
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Alternative work arrangements keep people involved with the company and at the same time reduce costs.
Much of this chapter is based on the results of a research study the authors conducted with WorldatWork, the world’s leading not-for-profit professional association dedicated to knowledge leadership in compensation benefits and total rewards, to determine how companies cope with cost-cutting layoffs and at the same time maintain competitiveness . Specifically, the goal was to discover if companies that resort to mass layoffs also try to maintain their human capital by finding alternatives to layoffs. If they do, is the strategy successful? And are companies attempting to keep critical skills and their best people during a layoff ? Here are the results.
Companies That Participated In The Survey
Almost 6500 companies were contacted for the survey of layoff policies and practices in October 2001. About 19 percent, or 1245, responded. Companies of all sizes were part of those answering, as shown in Table 2-1. The size of companies ranged from fewer than 100 employees to more than 10,000 employees .
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Range |
Percentage of Respondents |
|---|---|
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Fewer than 100 employees |
11% |
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100–999 |
34% |
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1000–2499 |
14% |
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2500–9999 |
24% |
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10,000 or more |
17% |
The survey included organizations from diverse industries. However, five industries accounted for more than 50 percent of those responding: manufacturing, hi-tech health care, insurance, and wholesale-retail trade. Manufacturing alone accounted for 20 percent, and hi-tech accounted for 14 percent of the survey database.
The survey responses were almost evenly divided among companies that had conducted layoffs in the last 12 months (49 percent) and those that had not (51 percent).
Summary of the Survey Results
To avoid cutting into the core of a business’ people strengths, numerous initiatives are put into place to retain the best employees . Two approaches are used. The first involves across-the-board cost cutting that ranges from reduction or suspension of pay increases and hiring freezes to actual pay cuts. The more that overall compensation costs can be cut, the fewer number of layoffs will be needed.
The second approach involves identifying people who have important skills and finding alternative ways to keep them involved with the company such as contract workers on temporary assignments or similar approaches. These approaches have worked for hundreds of companies. As the headcount solution unfolds in subsequent chapters, we will relate case studies and experiences of the survey participants as well as simulations drawn from the authors’ experience.
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The Headcount Solution. How to Cut Compensation Costs and Keep Your Best People Authors: Crandall F. Published year: 2002 Pages: 29-32/143 |
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