Laying off Employees To Save Money May Cost More Long Term
When the economy is experiencing a slowdown, business owners have a wide range of challenges to address. But there is no stickier situation than what to do about staffing. Dealing with the human element is about more than just cold hard numbers, and it is difficult to take the emotions out of those decisions.
If sales start to slip, company leaders might feel an overwhelming impulse to lay off workers. But human resources professionals say careful consideration should be given to that course of action. A company’s business strategy, financial strategy, and labor strategy should all be interwoven. While layoffs can be a last-ditch cost-cutting measure to improve the bottom line in the short term, this reaction can end up costing more money than it saves in the long term. After the business rebounds, it will be expensive to find people to fill those roles again. Employers estimate that bringing a new employee on board can cost as much as three to four times the salary of the position for roles requiring higher-level skills.
Time is Money
In addition to the hard costs, the soft costs can really add up. It takes time to get new people up to speed. And it requires a time investment from other staff people too. In addition to human resources professionals, other managers must also invest time and efforts in the hiring process. That can include screening candidates, conducting several rounds of interviews, and participating in meetings to make final hiring decisions. The time that company executives burn finding new staff diverts them from achieving the company’s core goals. There is also team productivity to consider. Work teams are intertwined, so losing a member of the team is disruptive and detrimental to a steady and smooth workflow.
When you lay off workers, they are usually gone forever. They might go back to school, change careers, retire, or they could wind up working for a competitor, taking the knowledge they learned at your company with them. When you lose a dedicated employee, you are also losing the knowledge, skills, and abilities they spent years sharpening at your organization.
Alternatives to layoffs can include rolling back wages or reducing shifts for some workers from five days a week to four. Or perhaps you can afford to keep staff on the payroll, but you don’t have room in the budget to offer incentives that will assure retention, such as raises. In this era of The Great Resignation, you must keep your talent happy. How can you do that if you don’t have the cash to dole out raises?
There are creative ways to make your company a more appealing place to work, such as extra paid time off, flexible schedules, and allowing staff to work from home sometimes. Or you could offer better health benefits and retirement plans. A profit-sharing program is another attractive motivator because everyone benefits when the company grows.
Invest in Staff
A recession can be the perfect time to enhance the skills of your workforce. That can include offering additional courses, certifications, software training and mentoring to your staff. This can improve their performance and productivity while also cross-training them to handle various roles and responsibilities, which can lessen the bite of a recession.
If you can swing it, this is an opportunity to hire talented candidates who your competitors have lost, or you can seek out people who could be trained in your field. Thousands of mortgage brokers were laid off when the mortgage market crashed in 2008. Savvy companies started hiring them for sales roles, training them for their specific needs and ultimately beefing up their teams with people hungry for jobs.
No matter what you decide when it comes to staffing your business during a downturn, communicating with your people with compassion and candor is crucial, both for the reputation of your business and because it’s the right thing to do.