During difficult economic times, “layoffs” are often one of the first fears that enter professionals’ minds. Whether it’s a sudden economic downturn or a looming recession, many business leaders resort to laying off staff in a desperate attempt to keep their companies afloat. Even successful tech companies and large financial corporations sometimes exercise this type of cost-cutting measure.
However, layoffs don’t have to be the only solution. Below, eight members of Young Entrepreneur Council each discuss one thing companies can do to avoid laying off staff when times are tough and why it may be a better solution for the future.
1. Find Ways To Create More Value
During uncertain economic times, instead of going on the defensive and laying off staff, I truly believe these are the times when management should focus on creating true value for their customers. At GROW, we dedicate 100% of our focus to bringing our customers true value, which then translates to receiving more business, staying profitable and continuing to grow our business. – Isabelle Shee, GROW, Worden Management
2. Consider Temporary Pay Cuts Or Reduced Hours
Instead of laying off staff, the company can ask employees if they would be willing to reduce their hours or take a temporary pay cut to help the company weather the tough times. It’s crucial for the company to communicate openly and transparently with employees about the situation and to be fair and equitable in any reductions that are implemented. It is also helpful to offer support services such as counseling or financial planning resources to help employees through the transition. This can help preserve jobs and maintain morale. Overall, it’s important for companies to be proactive and consider all options when faced with tough times. – Vikas Agrawal, Infobrandz
3. Audit Your Spending In Other Areas
When times are tough, it often makes sense to do personnel cuts. Often, cuts are undertaken in order to achieve “break-even,” where a company is making as much money as they spend—a rarity in the tech startup world. If cutting team members isn’t possible, companies can sometimes achieve break-even by auditing their spending and making cuts there. For example, your company may be able to cut certain partners, vendors or SaaS tools you’re using, or reduce them to a lower tier. Another tip here would be to approach your most expensive contracts or vendors and request a reduced rate or a discount. – Cooper Harris, Klickly
4. Focus On Cash Management
There are many things that can help you avoid layoffs, but it all boils down to cash. The overused phrase “cash is king” is especially true during periods of volatility that cause mass layoffs. Securing an adequate line of credit, diligently building up a reserve account, analyzing and cutting unnecessary expenses and holding off on large purchases or expansion are ways to ensure your business can operate efficiently before the worst-case scenario of having to trim the headcount occurs. A friend’s organization restructured their leadership team’s compensation when the pandemic hit to prevent having to lay off staff and then rewarded them when things leveled out. There are multiple ways to avoid layoffs, but cash management rules all. – Joel Mathew, Fortress Consulting
5. Invest In A Cross-Training Program
One of the best ways to avoid laying off your employees is to invest in a robust cross-training program as soon as possible. If your team members are flexible and can work in multiple roles, you can shift them around when one department or role stagnates. We constantly work on cross-training our teams, even when things are going well. A team with diverse skill sets and abilities is a must-have for business leaders across all industries who want to ensure maximum productivity and job security. – Chris Christoff, MonsterInsights
6. Embrace Remote Work
I think that embracing remote work and asynchronous communication is a great way for companies to avoid layoffs when times are tough. Having a remote workforce allows businesses to reduce costs by eliminating the need for an office space and its associated expenses, such as rent, utilities and equipment. In addition, investing in asynchronous communication tools can help businesses become more efficient by enabling employees to work at their own pace without sacrificing quality. This can lead to cost savings, which in turn can help companies avoid layoffs and keep their staff on board in tough times. Ultimately, embracing remote work and asynchronous communication is a great way for companies to not only reduce costs but also increase productivity. – Syed Balkhi, WPBeginner
7. Consider All Sources Of Financing
Look carefully at your financial situation and honestly assess whether you really need to lay off employees. Keep in mind that economic conditions typically swing back and forth. Holding onto valuable employees is good for the long-term health of a business, not to mention morale. If cash flow is a problem, look for all possible sources of financing. Consider programs from the Small Business Administration (SBA), which has a debt relief program as well as loans. There are also Economic Injury Disaster Loan (EIDL) advances. If you get paid via invoice, an invoice factoring or invoice financing service can help you gain steadier cash flow. – Kalin Kassabov, ProTexting
8. Leverage A Mix Of Contractors And Full-Time Staff
When times are tough, one of the best things companies can do is make use of mixed labor. In fact, it is advisable to do this before determining the optimal composition because as market conditions change, so do a company’s needs. By using a combination of contractors and full-time employees, companies can avoid having to resort to major layoffs. This approach is always wise, as it allows businesses to maintain a core team of employees while tapping into the skills and expertise of contractors when needed and letting go when business is slow. The digital world has opened up opportunities for companies, even the traditional offices, to access contract workers. That opens an avenue for the business to be lean and remain competitive without losing its trusted workforce to layoffs. – Tonika Bruce, Lead Nicely, Inc.