When you let a long-term employee go, you may be saving a weekly wage, but you also lose years of priceless knowledge that person has accumulated about your business and your industry (knowledge that may be hard to replace or that may very well end up benefitting a competitor).
You also lose the good will tied up in all the relationships that employee has established over time with your suppliers and customers; good will that will take an equally long time to build back up again.
Then there is of course the cost of rehiring. When things pick up again, as they inevitably do, you’ll face all the expense involved with recruiting new staff and training them to the level of the employees you let go.
So rather than opting for short-term gain and longer-term pain, it might pay you to look at other cost-cutting measures first, because there are a number of ways to reduce your costs, without reducing your workforce.
If employees are faced with the choice of working shorter hours or not working at all, most will take the first option. Making some full-time jobs part-time (even for a couple of months) can save your business money, while still retaining valuable experience and intellectual property.
Job sharing is an example of this, where two part-time employees share the same full-time job. It not only effectively removes a job from the payroll, but it also saves on physical space, as neither employee is there at the same time as the other, so only one work station is required. Done on a larger scale, this could even allow you to downsize to smaller premises.
Most businesses have busy and quiet times and one way to get better value out of your staff is to alter their rostered working hours to better match the needs of your business.
In other words, if business is always slow early in the week and then frantic on the weekends, why not have all but a skeleton staff work from Wednesday to Sunday, instead of a traditional Monday to Friday week.
Enforce Annual Leave
If you encourage employees to take their annual leave rather than accumulate it, this can help your balance sheet too. If all employees are willing to do it, you could make real savings and you could even introduce a mixture of paid and unpaid leave to sweeten the pot.
You would have to roster it carefully though, to make sure you didn’t leave any area of your business under-staffed for too long, as this could adversely impact profitability and create burn-out and resentment amongst those staff covering for their workmates on leave.
While this is quite a painful option, given that in uncertain economic times employees need every dollar they can earn, if faced with being laid off, most would accept a pay cut instead.
A small cut, possibly compensated for by some benefit that costs you nothing could amount to substantial savings.
It would need to be implemented across the board however (and include yourself and upper management), otherwise it would simply create resentment and reduce productivity.
Ask For Ideas
The people who know where the waste is are usually those doing the job, so introducing employee incentives would allow you to tap into a new area of potential savings.
Small incentives such as a free lunch, or a day off could give you access to a whole raft of cost-cutting ideas that you may not even have considered. While they might be small savings individually, if you are able to implement enough of them, they could make a real difference.
Other Ways to Save
As well as getting better value from your employees, there are plenty of other ways to trim the fat and survive until better times return. These include such measures as:
Leasing rather than buying your business equipment – thus turning depreciating assets into operating costs and attracting tax incentives;Renegotiating contracts – looking for new suppliers and getting better deals from existing suppliers;Improving efficiency – going paperless, switching to a VoIP phone system and generally opting for technology that saves money and increases productivity;Reducing energy consumption – downsizing premises, and reducing heating, cooling and lighting costs;Focusing your marketing – not cutting advertising altogether, but placing less emphasis on long-term branding and more on short-term profit-making; orCutting expenses – conference-calling wherever possible as opposed to flying staff around for meetings and reducing expense accounts across the board.
Economic downturns are generally short-lived, so belt tightening needs to be done without affecting long-term profitability.
As can be seen, there are lots of ways to make short-term gains without suffering the long-term pain that would inevitably result from losing your most valuable assets … your employees.