Businesses explore alternatives to layoffs
| • | Laying off workers requires tact, care |
By Joyce M. Rosenberg
Associated Press
NEW YORK — The revenues at Dave Simon's carpet company doubled in 2000, and business was so strong he started work on setting up a profit-sharing plan for his employees. In the aftermath of the dot-com crash and Sept. 11, he found himself cutting their salaries.
Associated Press
But with that antidote for his company's problems, Simon was able to accomplish something critical: He avoided laying off workers.
Dave Simon, owner of Brooklyn Carpet Exchange in New York, has cut employees' salaries but avoided layoffs following Sept. 11.
"Everyone's getting 30 percent less, but most people said, 'thank you' because we didn't get into the layoff mode," said Simon, owner of Brooklyn Carpet Exchange, a New York company that sells carpet to businesses.
Business owners worried about having to lay off workers might find there are ways to avoid what can be devastating for employees and the company itself. Some of the steps are simple and perhaps obvious, such as cutting costs. Others might take a bit of creativity.
Bob Doyle, a certified public accountant in St. Petersburg, Fla., suggested salary cuts — particularly for the owner and top management — as a first move. When workers know the people at the top are taking a hit with the rest of the staff, it will go a long way toward creating good will between employer and employees, he said.
Simon found that was true. Even with the pain of lower salaries, employees told him, "Whatever it takes," he said.
Doyle also suggested cutting back on some benefits and perks. For example, a company could temporarily curtail or stop its matching contribution to employees' 401(k) plans.
If you undertake such cuts, it is imperative to be honest with employees, and to let them know that salary and benefits cuts will prevent people from losing their jobs. "Make sure they understand this is the lesser of two evils," Doyle said.
Doyle also advised letting employees know that the cuts will be restored as soon as possible. "Tell them you'll revisit them every six to 12 months," he said.
While in many companies employees are the biggest expense, they shouldn't bear the brunt of cutbacks alone. All the overhead in business should be re-examined.
Doyle noted that using the Internet might help reduce costs — he noted that professionals like accountants or lawyers who need to take continuing education courses can save on travel expenses by doing them online. He also recommended companies try to join buying consortiums to lower their purchasing costs.
There are other, more unusual ways to avoid layoffs, as Simon found. One day it came to him that he could spin off part of his company to employees.
Five of Simon's workers worked in a recently acquired residential business. Simon approached one of the employees, who had been part of that business for 18 years, and offered to create a franchise-like company that would be autonomous but buy carpet from Simon.
The employee jumped at the chance, and they cut the deal. Simon no longer had the five people on his payroll, and he also held on to revenue for his own firm.
A big factor in avoiding layoffs is being sure all your employees understand the company's situation and the need for them to pitch in. That can be tricky — you want workers to know they need to be more aggressive or more aware as they do their jobs, but you also don't want them to panic or feel overwhelmed by pressure.
But some extra pressure might help employees who aren't producing, said Norma Menkin, co-president of Gainor Staffing Co., a New York employment company.
Menkin said sales people who aren't bringing in revenue should be put on notice that they need to work harder.
The responsibility for keeping business rests with other employees as well, Menkin said.
"Everyone is a sales person, from the receptionist who answers the phone, even the accounting department," she said, noting that poor service can make your company lose customers and revenue — and lead to layoffs.
