The business cycle: It is often a fact that “What goes up must come down.” Many of us like to think that we have built a machine that will keep our business on the upward trend forever.
The reality is, even if we pass one cycle, eventually something will provide a down draft.
When a business slowdown occurs, a common action is to lay off part of the workforce.
I have conducted layoffs in my career and learned how detrimental they are to an organization. In most cases, layoffs serve to aggravate a situation.
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An important question is, “Are your associates part of the business or are they just a tool?”
Most people want to feel safe knowing that if they go to work every day and give it their best, they can be sure of continued employment and security for themselves and their families.
The immediate impact on the organization following a layoff on those employees who remain is best described by Elizabeth Kubler-Ross in her 1969 book, On Death and Dying:
Denial and isolation as remaining employees can’t believe that their coworkers are gone and wonder who is going to do the work of those who received pink slips.
Anger as they share the story of the personal circumstances of employees and their families who are without jobs with their family, neighbors, customers, competitors and media.
This anger prompts the best talent to sharpen their resume and they are the first to go.
Bargaining as you consider cutting all pay, reducing hours or other alternatives. It is almost always offered after the fact and is not a good plan. Ask yourself, “how many really want a pay cut?”
Depression is inevitable as rumors of more layoffs continue and many look for other jobs.
Acceptance finally arrives to the survivors, however, many times the impact is so negative to the company that another layoff happens as the rumor mill predicted.
The alternative is to develop a no-layoff policy, with some possible exceptions such as natural disasters.
This requires a plan and strategy for working with the workforce and managing costs in various phases of the business cycle. When the planning process is implemented in the growth phase, you can use the down cycle to make your company stronger. One method is creating mix of full-time, part-time and temporary workers.
Proper management of performance is another component that is often avoided. You must deal with people who are not really producing hurting the bottom line and but also harming the morale of others.
With proper planning, moving workers whose jobs may be eliminated can be moved into another position.
Offer another job, at similar skill levels, keep the salary the same for 90 days, and tell them that during that period they can look for another job inside or outside the organization, or at the end of the 90 days, stay in the job they have been assigned to at the pay level for that job.
The fact is that people want a job, even if it isn’t with your business.
It is important to have outplacement services and to give employees advance notice of termination. Traditional human resource consultants will tell you employees will disengage if they know they know their position is being eliminated, but in my experience, they work as hard or harder than they ever did.
Most middle managers want to say that anything other than a layoff is impossible.
That is just not a fact. Happy people produce a superior product because it is part of them, and isn’t that what you want?
John C. Johnson, who is former president and CEO of Holy Cross Hospital in Fort Lauderdale, is a veteran executive who has managed large organizations.