To fend off the looming economic crisis, organizations are naturally turning to staff cutbacks. But now is the time to consider avoiding COVID layoffs.
The job outlook is dismal and the toll of weekly job losses just keeps climbing. When organizations need to restructure, the fundamentals boil down to reducing headcount, reducing pay or a combination of the two.
The devil is in the details. But the big questions are strategic and, of course, very sensitive.
While layoffs may be the most obvious course of action, what happens if a new vaccine arrives in the next few months? Will you suddenly need the very same loyal, experienced and skilled employees you just disposed of? With all the adverse impact on morale that inevitably comes with it?
If companies simply fire those key workers who put themselves in harm’s way to keep operations running, manning transport systems and maintaining and guarding office spaces, employers are bound to face scrutiny unlike any before — not just from shareholders but from the public too.
If less drastic avenues haven’t been explored and considered before resorting to mass layoffs, reputational damage is but one of the many hurdles you’re likely to face.
Fortunately, there are alternatives
Often a combination of cost savings actions can deliver the same reduction in people costs as a round of layoffs. By carefully exploring the options, companies can spare reputational damages, save valuable people resources, and future-proof their business, ensuring it can face the recovery phase with the wind at their backs.
Re-skilling and reassignment
Re-skilling and redeploying to other areas of the organization is one of the most innovative alternatives to staff cuts. By transferring employees most at risk of being cut and employing their skills in an area that the organization would otherwise have to hire to maintain, not only can businesses retain the individual, but they can avoid onboarding setbacks and costs.
Some companies are even successfully marketing their own employees to external organizations to take up the slack in their workload, hence maintaining their employment status.
One recent study found that hiring outside the company can cost up to six times more than re-skilling and hiring from within.
Re-skilling it isn’t merely a method to avoid layoffs, either; it can better prepare the firm to compete for years to come. According to estimates from the World Economic Forum, over the next decade, almost 1.4 million workers will become “stranded” as technological skills become obsolete. It makes sense to retrain these workers rather than lay them off to recruit different people.
A recent McKinsey survey found 77% of leaders indicate that retraining and reskilling was moderate to very important.
In the short term, re-skilling can help lessen layoffs and fill talent gaps left by the rapid technological advancements brought about by COVID-19. In the long term, it could even prove to strengthen and future-proof the organization.
By cutting salaries and reducing the working hours, organizations can save on crucial workforce and operating costs while sparing employees from being totally without income and unemployed. Employees benefit from job security, plus gain some extra “downtime” — and so it’s a win-win.
In tough economic times, many firms have resorted to shortened workweeks with great success. In fact, several studies exploring the efficacy of a 4-day work week found that employees are more productive and happier with condensed work hours. Moreover, with operating costs freed from a day less of office use, reduced working hours can help lessen company expenses too.
Coupled with a 20% pay cut, reduced working hours can bypass the need for layoffs completely.
Companies from Microsoft to Shake Shack have experimented with a four-day workweek to improve productivity and work-life balance.
Proportionate pay cuts
Before layoffs, another alternative is for organizations to reduce pay proportionately based on salary ranges in order to protect employees most at risk of workforce cuts.
For example, this may be done by reducing the salaries of your highest-paid employees by 10%, mid-range employees by 5%, and everyone else in a determined threshold by maybe 2.5%.
When this very same approach was adopted by the Beth Israel Deaconess Medical Center (BIDMC), not only did the BIDMC manage to cut costs, but employees welcomed the sacrifice made by senior leadership to minimize layoffs.
By making it clear that the overriding goal is to avoid layoffs, employees are more likely to embrace the joint sacrifices in freezing salary increases, pausing bonuses or contributions to retirement funds, bans on overtime, reduction of vacation and other cost-saving measures. All the more so if executives and shareholders show they are also willing to make temporary sacrifices, too.
Data is key
These ideas are already being used today by many employers to reduce the reliance on workforce cutbacks, and in some instances, negate the need for layoffs altogether.
For some businesses, it’s likely that turnover will return quicker than others. With these measures in place, organizations can buy time. But evaluating this is only possible if organizations are able to dig down into the entirety of complete, accurate and real-time reward data and ascertain how these tactics would apply to their particular businesses.
Too often, this crucial data is fragmented and siloed within legacy systems. Very few firms have usable access to the detailed data showing every individual employee’s total reward (pay, bonus, pension, benefits and shares.) Without this they cannot explore the broad front approach to saving cost. They are effectively so blind that the only option they have is to cut jobs.
This is short-sighted for individuals and the business, especially as the add-on systems that can quickly plug this data gap are readily available. Ensuring that decisions to cut jobs can pass the sharp eye of scrutiny is more important today than ever. One wrong move and the reputational repercussions could be severe.
It’s also prudent for organizations to participate in what’s known as a “wargame.” These novel role-playing simulations allow organizations to implement radical ideas without risking reputational damage or expending precious resources
In doing so, HR managers can test methods, including reduced working hours and pay, as well as retraining and redeployment to determine an outcome before taking the leap in real-life.
With the tide rising on a potential COVID second wave, organizations need to ensure they have everything in their arsenal to combat the coronavirus and any workforce crisis that comes along with it.