Entrepreneurs are naturally wired to be knowledgeable about growing their businesses.
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However, sometimes the market or economy does not cooperate, and there are times when profits move in the wrong direction. If this occurs for any length of time, you may be forced to take steps to shrink your business.
And that frequently means layoffs.
Because jettisoning workers often falls outside entrepreneurs' expertise, you may not have any idea how to handle layoffs – or how to maintain the loyalty of employees who do not lose their jobs. Here are some tips for successfully navigating a round of layoffs:
Be fair. You can bet that the entire downsizing process is being closely watched and judged by your employees. Make sure that you provide adequate notice and/or severance to those who will be leaving the company.
Be clear. You must unambiguously articulate why these workers are being let go. If the layoffs are the consequence of a reduction in overall sales or the elimination of a division, you must plainly spell out why you cannot keep these employees on your payroll. Most importantly, you should convince everyone in your company that you did not dismiss these workers for personal or arbitrary reasons.
Consider alternatives. If it is possible, give the employees on the chopping block a chance to keep their jobs. Some possible alternatives include:
a company-wide (but hopefully temporary) pay cut
a company-wide furlough, unpaid vacation program, or temporary shutdown
changing the status of some workers from full time to part-time, thus eliminating the benefit costs
allowing employees to "job share," or work a few days a week in pairs so that no one worker loses 100% of his or her income
Even if these options are not feasible, it will demonstrate to your surviving workforce that you did all that you could to avoid laying off their co-workers.
Don't overburden those who stay on. Tell your employees that their workloads will not substantially increase as a result of the layoffs. Then follow through on your promise by making adjustments to your business plan. Nothing crushes morale more than shuffling all the job responsibilities of a former worker onto one who is being retained.
Make visible sacrifices. It is vital that your surviving employees see that you are cutting back on costs as well. That may mean nixing fancy client lunches, flying coach instead of business class, or delaying cosmetic office improvements. Spending money on perceived luxuries after kicking personnel to the curb will hurt your standing with your subordinates.
Find (low-cost) incentives for your workers. Be proactive about taking care of your remaining employees. This might require some innovative thinking because of cost constraints. Some ideas are:
relaxing the dress code on certain days (or permanently)
putting together potluck lunches or cooking contests (like chili cook-offs, bake-offs, etc.)
providing free or discount certificates (movie passes, 2-for-1 meal coupons, etc.) as rewards
Talk to those who are left. Let your remaining employees know that they are valued. Attempt to calm their fears about the future of your company. Invite them to express their concerns or ask questions about their job situation. Open communication can go a long way to bolstering morale during a downsizing.
In short, take care of the employees you retain, and they're likely to stay behind you as your business turns around. But if you let office morale slip, you may find yourself replacing workers who flee elsewhere due to a "sinking ship" mentality. And that could retard or even quash your plans for getting your company back on track to profitability.