In tough economic times, ‘layoffs’ are often one of the first fears on the minds of professionals. Whether in the face of a sudden economic downturn or a looming recession, many business leaders are resorting to laying off staff in a desperate attempt to keep their businesses afloat. Even successful technology companies and large financial institutions sometimes adopt these types of cost-cutting measures.
However, layoffs need not be the only solution. Below eight members of Council for Young Entrepreneurs each discussing one thing companies can do to avoid having to lay off staff during difficult times and why this could be a better solution for the future.
1. Find ways to create more value
In uncertain economic times, rather than getting on the defensive and laying off staff, I truly believe these are the times when management should focus on creating real value for their customers. At GROW, we dedicate 100% of our focus to providing real value to our customers, which then translates into winning more customers, staying profitable and continuing to grow our business. – Isabel Shee, GROW, Be Management
2. Consider temporary pay cuts or fewer hours
Instead of laying off staff, the company can ask employees if they would be willing to reduce their hours or accept a temporary pay cut to help the company get through the tough times. It is critical for the company to communicate openly and transparently with employees about the situation and to be fair and equitable in any savings made. It is also helpful to offer support services such as advice or financial planning tools to help employees through the transition. This can help save jobs and boost morale. In general, it is important for companies to be proactive and consider all options during difficult times. – Vikas Agrawal, Infobrandz
3. Control your expenses in other areas
In difficult times it often makes sense to implement staff reductions. Often cuts are made to break even, where a company makes as much money as it spends – a rarity in the world of tech startups. If cutting team members isn’t possible, companies can sometimes break even by controlling and cutting their expenses. For example, your company may remove or downgrade certain partners, vendors, or SaaS tools you use. Another tip here is to approach your most expensive contracts or suppliers and request a reduced rate or discount. – Cooper Harris, clickable
4. Focus on cash management
There are many things that can help you avoid layoffs, but it all comes down to cash. The commonly used phrase “cash is king” is especially true during periods of volatility that cause mass layoffs. Securing an adequate line of credit, diligently building a reserve account, analyzing and reducing unnecessary expenses, and delaying major purchases or expansions are ways to ensure that your business can operate efficiently before the worst-case scenario of having to downsize. workforce occurs. A friend’s organization restructured their leadership team’s compensation when the pandemic hit to avoid having to lay off staff and rewarded them when things leveled out. There are several ways to avoid layoffs, but cash management takes care of everything. – Joel Mathew, Fort advice
5. Invest in a cross-training program
One of the best ways to avoid having your employees laid off is to invest in a robust training program as soon as possible. If your team members are flexible and can work in multiple roles, you can shift them if a department or role stagnates. We are constantly working on cross-training our teams, even when things are going well. A team with diverse skills and capabilities is a must-have for business leaders across all industries who want to ensure maximum productivity and job security. – Chris Christopher, Monster Insights
6. Embrace remote work
I think embracing remote working and asynchronous communication is a great way for companies to avoid layoffs during tough times. With an external workforce, companies can reduce costs by eliminating the need for office space and associated costs such as rent, utilities, and equipment. In addition, investing in asynchronous communication tools can help companies become more efficient by enabling employees to work at their own pace without compromising on quality. This can lead to cost savings, which in turn can help companies avoid layoffs and keep their workforce on board during difficult times. Ultimately, embracing remote working and asynchronous communication is a great way for businesses to not only reduce costs, but also increase productivity. – Syed Balky, WPB Beginner
7. Consider all funding sources
Take a good look at your financial situation and honestly assess whether it is really necessary to fire employees. Keep in mind that economic conditions usually fluctuate back and forth. Retaining valuable employees is good for a company’s long-term health, not to mention morale. If cash flow is an issue, look for all possible sources of funding. Consider programs from the Small Business Administration (SBA), which has both a debt relief program and loans. There are also advances on the Economic Injury Disaster Loan (EIDL). If you are paid by invoice, an invoice factoring or invoice financing service can help you get more stable cash flow. – Kalin Kassabov, ProText
8. Employ a mix of contractors and full-time employees
When times are tough, one of the best things companies can do is leverage mixed labor. It is even advisable to do this before determining the optimal composition, because as market conditions change, so do the needs of a company. By using a combination of contractors and full-time employees, companies can avoid having to resort to major layoffs. This approach always makes sense, as it allows companies to maintain a core team of employees while leveraging the skills and expertise of contractors when needed and letting go when things are slow. The digital world has provided opportunities for companies, even the traditional offices, to access contract workers. That opens a way for the company to lean and stay competitive without losing its trusted workforce to layoffs. – Tonya Bruce, Lead Beautiful, Inc.