Why Employees Are Like Napkins…

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

We’ve talked to a number of experts who advise that to do layoffs effectively, companies must identify their most valuable performers. Is that really so hard to do?

Higgins: Companies can avoid getting rid of their top salespeople and other performers. It’s their future talent that they often don’t recognize and throw away. And those people are very hard to get back. With workforce planning, you can be aware of who your feeder pools are and the profiles of those who tend to be successful in your critical jobs. Just like with professional sports, it always costs less to fill from within than to hire on the free-agent market.

What lessons will companies have learned from this period of intense pressure to cut costs?

Meyer: If the company has decided what it will not do, what not to buy, now it can set aside an appropriate amount for innovation, product experimentation, process improvement, and customer relationship development. And professional development — the company should invest in its employees as part of its pricing algorithm. Most companies set the billable time ratio way too high, like around 70 percent. That leaves too little time for those other things.

Zickerman: If employees are going to be more in the weeds because of less hands on deck, you should stop to celebrate the small successes. If your organization was one that celebrated only when the big deal closed, don’t do that. Celebrate at milestones so people feel progress, which builds a winning attitude.

Companies also should help employees understand that because of what’s happened, we’re doing things differently. No one wants to feel that people were let go but nothing has changed.

Aside from head count considerations, any advice for getting through the financial crisis?

Zickerman: More than ever, it’s critically important for businesses to have a cash flow projection for at least 90 to 180 days. You’d be amazed how many companies don’t.

We’re also telling people not to duck their bankers. Now is the time to really have a relationship. When you suddenly need to speak to them and you surprise them, things can go really bad. Let them know what’s happening so they don’t pull credit lines unnecessarily.

We’re advising people to watch their purchases and negotiate terms on their accounts payable. If you are in a strong cash position, leverage that. Tell your vendor that if you pay cash and right away, you want a substantial discount. On the other hand, if cash is tight, tell them you need 45 days, not 30 days. You’ve got to be really aggressive in managing your cash flow.

But on the other end, manage your accounts receivable very closely; don’t let any customers over-extend themselves and make their problem your problem. Get very aggressive on your collections. You need to work both sides of the fence.

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