How Do You Make Hard Decisions on Employees? Four Points

Situation:  A company needs to adjust expenses to control costs. It’s largest expense item is payroll. They are evaluating three options to adjust staff costs to anticipated revenue. Alternative A – Cut everyone back to part-time. Alternative B – Cut a few employees, but keep retained employees busy. Alternative C – A balanced approach between these alternatives. From others’ experience, which is best? How do you make hard decisions on employees?

Advice from the CEOs:

  • The unanimous response from the group – for employees, Alternative B is the most positive approach. Extended cutbacks in hours has been painful for all and led to grousing. Once staff were cut it helped retained employees to focus on their work.
  • When it comes to vendors, use Alternative A – don’t pay everything that you want to pay, but pay what can be paid consistently and predictably. It is critical as this is done to make sure that promises are kept.
  • When it has been necessary to make cuts – how has employee morale been maintained?
    • In the short term, those who remained have been happy to have a job. Longer term, companies have had to do more than this.
    • One option is to set quarterly revenue and expense targets. When gross or net margin targets have been exceeded, companies committed to share some of the excess with employees.
  • Before making any decisions, have a meeting with employees and openly ask them what they’d like to see that will help to build company culture and enthusiasm.

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2 thoughts on “How Do You Make Hard Decisions on Employees? Four Points

  1. Paul Mailhot

    I witnessed alternative “C” work well some time ago.
    A medium sized company faced a similar problem in a severe and prolonged downturn affecting most of the economy.
    They kept everyone working three (3) out of five (5) days per week. Some were on the first three days and others the last three days. Wednesdays were full staff.
    When needed they temporarily increased relevant functions to five (5) days.
    Overall costs were reduced and every aspect of the operation remained functional. And they kept their staff reasonably intact.
    Cheers,
    Paul

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