During the Great Recession I was a senior manager at a large international freight forwarding company. I remember the day the crash hit our business: January 6th, 2009. On that day, we didn’t have a single air import shipment arriving at O’Hare. The market was dead. Later that month, transportation rates briefly dipped into negative territory. Sound familiar?
January ‘09 was a crash course in cost and people management. Here’s what I did to paddle in rough waters and what I learned along the way.
Everyone knows we’re in the middle of a pandemic and that businesses are being hard hit. Now that most people are working remotely, informal conversations around the water cooler have stopped. Step up your team communication to ensure that your employees have up to date, accurate information on the company’s strategy and goals and how they can contribute to the effort. Above all, you want to be present, to be honest and to be transparent.
If your company has experienced a drop off in business, laying off staff will generate a cost savings but at a steep cost – to the individuals who leave, to those who remain, and often to the company’s stature in the marketplace.
During the Great Recession one competitor publicly announced that they would not lay off personnel. This positive message was a huge benefit to their company – it generated goodwill and loyalty, reinforced the company’s marketing message that emphasized the quality of its staff and made the company more competitive in attracting future talent. This company remains a respected market leader today – after all, it’s easier to navigate white water with a team.
Here are some cost savings ideas that are also intended to put people first:
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Freeze salaries, eliminate bonuses and revise work schedules to eliminate any scheduled overtime work
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Reduce or eliminate discretionary 401K and other retirement plan contributions
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Reduce wages, leading by example with the top executives sacrificing a larger percentage than front line workers. C.H. Robinson is an example of a logistics company using this strategy – the CEO’s salary is cut in half for the downturn. Other companies have reduced executive pay by 20%.
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Reduce everyone’s working hours per week. Given that benefits expenses are fixed, moving to a four-day work week will save about 20% of payroll costs.
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Offer the option of an unpaid sabbatical or of moving to part-time status. Family members may require additional attention at this time, making these options win-win for some situations.
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Apply for the Paycheck Protection Program if funds are still available and you can accept the reduction in flexibility.
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Furlough employees. This is much less traumatic than a layoff because the employee knows he is still employed as long as their job is still justified; there just isn’t presently enough work to be done. The business’s cash flow also benefits because generally there isn’t a final paycheck paying out wages or unused sick time. Also, in many cases, a furlough avoids the future costs of finding and integrating new staff. The employee will be on your books and continue to receive medical benefits, while also qualifying for unemployment benefits.
It may make sense to speak with your team about the options on the table before making a decision. My experience is that staff overwhelmingly prefer to make sacrifices if it helps more people keep their jobs.
These issues can be complicated on both the human and legal level. Make sure to review plans with experienced legal counsel. If you would benefit from a referral to professionals with whom we have worked, just let us know. We’re also available to assist you in adapting your workforce to changes in consumer and client behavior.
Best regards,
Lauren Pittelli
Founder