Why Employees Are Like Napkins…

...and other observations from finance-savvy HR experts about the difficult job of downsizing.

Everyone has heard the garbage phrase, “Do more with less.” How could that happen? Were there people sitting around and wasting time? Not likely. Companies have already cut to the bone over the past two decades. The truth is, an enterprise is going to do less with less. But it can decide consciously and deliberately what the “less” is going to be.

I guess that means you’re not a fan of across-the-board head count cuts.

Meyer: That leaves it to individual managers to decide what the “less” is. Then what you get is a patchwork quilt of failures, and the entire enterprise becomes ineffective at doing anything at all.

Higgins: I call it cutting peanut-butter style — 7 percent across the top, spread evenly. It seems fair, but when I had to implement it I knew for a fact that some areas had more fat and in other areas I’d be cutting muscle. That’s something CFOs should try to influence.

What else can companies do to avoid layoffs?

Higgins: Say you want to move 150 engineering jobs to India to save money — a typical scenario being looked at. Comparing wage rates, benefits, and other costs of employment, it looks like an easy decision, because the cost of maintaining those engineers in North America is maybe 2.5 to 3 times higher. But you also should factor in the cost per hire, which includes cost of turnover and continual replacement. If in North America your turnover rate for engineers is 10 percent but in India it’s 50 percent, you could come up with a scenario analysis that says if wages in India were to rise another 20 percent, which is likely, you would be at a break-even level.

Zickerman: One alternative that a number of our members are looking at is moving some or all staff from a five-day work week to four days. Everyone stays employed, but you reduce payroll expenses by 20 percent.

If you communicate that properly, telling employees that you’re doing everything in your power to ensure the least-possible amount of layoffs, that you’re fighting for them and protecting them, you can get a morale boost, whereas a lot of companies are getting flattened on morale.

Or, instead of two or three weeks vacation, give five weeks, but two of them unpaid. The interesting is that the younger generations who don’t have mortgages or tuition almost look at that as a perk. It’s not as big a deal to that segment of the work force as a lot of people think.

Won’t going to a four-day week reduce your productivity by 20 percent?

Zickerman: That’s absolutely not true. The fact is, people fill their week with the work. They will be more efficient and effective, spend less time at the water cooler, stay an hour later, and get the work done.

Discuss

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