The global financial crisis has led to many changes in the way business is done and in the way companies are run. Companies have had to learn how to be more efficient and leaner. More needs to get done with less resources. In order to survive, many companies have had to restructure and they have had to find new and innovative ways to do things. Measures needed to be taken not only to survive the recession, but to position themselves to take advantage of the economic upturn and emerge stronger.
There are different things that companies can do to reorganize and reduce costs, but not too many of them have a big and immediate impact on the bottom line. For many businesses, the cost of employees and their benefits is one of the largest expenses, and in some companies it is the largest expense. For example, in the city of Reading, which is now considered a distressed city, close to 70% of their budget goes towards personnel. So what goes first? You got it, employees. Reduction of employees is the easiest way to reduce costs and has the fastest impact on the bottom line.
According to an article in the World Trade Center of Central Pennsylvania's newsletter, the Business Intelligence Brief, "productivity has been rising throughout the recession in part because business has learned to get more from their employees." It continues saying that even though staff levels have been reduced "to levels far below what was normal even a couple years ago", "for the most part, the level of business activity has remained high." In other words, less people are taking on the tasks that more people normally did. The question is, is this sustainable?
Although every employee takes a different attitude as to what is going on, over time the added pressure leads to lower morale, and less engaged, and therefore less productive, employees. According to the article in the newsletter, some employees give it their all, but expect to be rewarded when things get better. Others just can't handle it and break under the stress. A third group goes thru the motions but has checked out mentally, and a forth group has lost all morale and can barely function.
Management has to learn how to deal with these different employees to reengage them to keep moving the company forward. What has your experience been with layoffs? How has it affected your company? What other ideas may be implemented instead?
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Last year my company, like pretty much every one else's, had to make the hard decision to eliminate several positions. We are a small company with an average tenure of about 15 years, so it was devastating to see them let go. The company had been up front about the position they were in the whole time. I noticed some ranges of emotion, and it was stressful, but I did not see anyone who had gotten to the point where they "lost all morale."
ReplyDeleteMy husband's company, on the other hand, over a period of time had several rounds of layoffs, then went to furloughs, and finally reduced salaries by 50% for 6 weeks, and then back up to a 20% reduction for 12 weeks. I think what was worse than the loss of salary was constantly wondering if/when the axe was going to fall. When times are troubled, communication and honesty can go a long way.