Making "Cents" of Workforce Reductions

by blogadmin 1. July 2009 06:27

When times are tough most employers look to reduce costs by looking at their payroll expense.  Many of the options employers consider are reducing their work force, cutting benefits, or reducing salaries to balance the bottom line.  These solutions seem to be simple and to have a direct benefit with immediate results.

However, before deciding on one of these actions, a wise employer will ask the following questions:

*Will we lose the very talent we need to grow our business and market share?

*How will losing this person affect our clients?

*How will these changes affect the morale of the team?  Will some consider looking for other opportunities that seem more stable?

*Can we use this down turn in business to reposition or refocus our marketing strategy and equip our teams for the future?

*Do we have an expense issue or a growth issue?  Should we be investing in marketing and other measures to grow our business versus just cutting costs?

There are no easy answers to be sure, but asking the right questions will certainly lead to better decisions.  Remember, if you reduce your work force, someone else (perhaps your competitor) will hire them.  Will they be willing to come back when the economy improves?  It would seem highly unlikely.

Do you want to run the risk of providing trained, talented staff to your competition?  These are talented staff members that might also draw some of your clients to that same competitor.  Talented people can earn money anywhere.  They will most likely work for employers who will reward their skills and commitment and continue to invest in them regardless of market conditions.

The other factor to consider in making this decision is to review the economic impact of work force reductions.  While you will no longer pay their salaries; there will still be other costs involved.  Some of those costs include severance pay, unemployment compensation (including higher rates for the future), training others to do their work, as well as the lost business created by the image that your organization is not doing well. 

Sometimes the answer will be to select one of the above options.  Be sure to think through these questions to ensure a wise decision and plan.  Then you can move forward with confidence, knowing that the best days are still ahead!


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