Managing Lay-offs with Dignity

With the potential for layoffs facing more and more companies, the realities of laying off great workers is confronting many business owners and managers: owners and managers who have never before faced this hard act. To help ease the pain for the employees being laid off, the owners and managers making the hard decisions, as well as those employees staying behind, I thought I’d share a 5 Step approach that may help you, your employees, and your business. It will not work for many of your businesses given union contracts, etc. but if it helps some others – use it.

Everyone knows the economy is uncertain and most employees are rightfully concerned about job stability. When people become nervous, the rumor mill kicks into high gear. We all know the rumor mill can destroy individuals quicker than many things. So if you haven’t yet: start communicating now. Lay out clearly how your company is and will address future business slow- downs.

Step 1 – Hold a “State of the Business” meeting with all employees and let them know the current state of your business.

Let your employees know what your plan is for layoffs and how you’ll handle lay-offs if your company needs to resort to them. Share with your employees the following – or your own plan – for dealing with a slow down. The important thing is to communicate clearly the state of your business now and what will cause you to move to the next step.

Step 2 – Reduce management salaries.

Should business start to slow down and you need to more proactively preserve cash and control costs, don’t immediately lay-off the lowest paid, front-line workers. They’re the people who do what your business is known for. Do what you can to retain them.

Instead, consider doing what a few of my clients are doing: Cut management salaries. Tell your employees this during your State of the Business Meeting. Let them know, you’re working to protect the front-line workers’ jobs, so the first wave of cost reductions will be borne by the management team. (One client cut all executive salaries by 15%; all mid-level managers by 10%.)

If you, like one of my clients, has a manager who “jokingly” asks, “But I’ll still get my bonus won’t I?” consider my response. “Absolutely. But first I want to sit in the meeting you’re going to have with the employee(s) who will need to be laid off in order to pay you your bonus. I want to hear how you explain to them that you will still get your bonus while they lose their jobs. Once they give you the O.K., you’ll get your bonus.”  (Yeah I know it’s mean, but – duh. No bonuses.)

Step 3 – Reduce or completely eliminate any overtime (within the law.)

Again, this needs to be clarified during your initial Meeting, but let all employees know the ability for your company to pay – and their ability to continue to earn and live on – overtime rates is gone. Give your employees time to mentally shift and realize they may need to dramatically cut their living expenses and not count on overtime pay or consider it their “normal” income any more.

Step 4 – Reduce worker hours and cross-train.

Again, where possible, instead of completely eliminating positions, reduce worker hours to preserve cash while allowing employees to maintain an income stream. If you haven’t yet, this is also a critical time to cross-train and to provide additional training for staff. When things turn around, they’ll have solid skills. During slow times, they’ll continue to provide value for your business by working — maybe on things they’ve never done before — but they’ll be working and continuing to broaden their skills.

Step 5 – When you can’t hold off a lay-off any further. Lay off staff.

Hold conversations with them to further clarify what they’re next steps may be. Provide them with information on continuing benefits, unemployment, etc. Don’t treat them as if they’ve committed a crime by standing guard next to them as they pack up their personal items and then escorting them out of the building. Allow them to say good-bye to colleagues and leave with dignity.

The above steps may not work for your business. But at least have a strategy in place for how your company will face business downturns and then clearly and regularly communicate that plan to your staff. Most importantly, keep your employees informed of your business ‘progression to the next Step. Let them plan with you how to deal with the change in business and their employment situation. It’ll help you and them face a difficult time together with mutual respect and dignity.