Before you downsize, consider this…

Downsizing can have long-term negative impacts on your business. It can breed destructive ill-will amongst remaining employees and leave shortages in productivity. To avoid this, consider other options to remaining profitable in a down economy.

Examine All Your Costs

Consider giving each department a mandate to cut expenses by a certain percentage. Set the guideline regarding overhead expenditure, but give the department head, or team, the power to determine what is important and what isn’t. Giving them some discretion over what is cut and what is not helps sustain respect and teamwork.

Be sure to communicate that this is in lieu of lay offs. Team members are more likely to accept the changes when they understand what is at stake and that you are taking steps to protect their jobs.

Create a Staggered Workweek

One means of tightening the belt is creating a staggered workweek. While team members reduce their hours, they can choose to work which days of the week they want. Some may choose Monday through Thursday, and others Tuesday through Friday. If you do choose this option, communicate clearly that all functions and operations must be covered.

Explore Changes to Benefits

Another place to look before implementing lay offs is benefits. Have open discussions with your team to assess the situation and explore options.

One option may be to increase employee contributions to their health-care plan. You may also want to shop different health plans. When the economy is tight, companies become more competitive with their pricing strategies.

If your company makes contributions toward employee retirement plans, consider a temporary suspension of your contribution. Communicate any benefit changes to your team as early as possible.

Start an Incentive Bonus Program

A creative strategy for boosting productivity and pushing through trying times is lowering base salary and starting an incentive bonus program. You may want to do this company-wide or among your senior level people.

Of course, this program needs to be based on being able to achieve a certain amount of profit. The better the company does, the higher the bonus. This is not only a strategy for avoiding staff cuts, but a way of motivating team members to perform their best and be more productive.

Communication is Critical

Whatever strategies your company chooses, it’s critical to communicate the policies and changes clearly. Let your team know the financials, the choices available, and why you deemed the decision you made the most appropriate at the time.
Remain committed to implementing these strategies on a temporary basis. Assure the team that when times are better, all changes will be reconsidered.