Cutting staff not always the answer

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For some small businesses, there is pressure on the bottom line. I have read many stories of businesses needing to cut costs, then the next paragraph says 20, 50, 100, 200+ staff are being cut. The need to cut costs too often translates to laying staff off.

Cutting staff reduces morale and gets the negative thoughts happening among employees on who may be next.

There are other options like reducing the pay of the people you retain. It may be a 10 per cent reduction across the board that gets you through this phase. It’s obviously not favourable among employees but with proper consultation and assurances then it could make the employee feel important and more motivated to help the business. I have had clients more recently change some staff from full time to part time, reduce equipment costs by selling some and leasing it back, forcing some staff to take holidays, and cutting deals on rent as the demand for shop fronts isn’t as much as it once was.

You can also change people’s work conditions for this period. Work life balance is favourable among many employees so a program could be introduced where the employee’s work week (and their pay) is reduced to four days for example.

Changes to commission structures, bonus arrangements and other flexible payment terms can also be considered because you could find people would rather a ‘pay cut’ than lose their job.

Explaining the need for these measures being put in place is crucial. Communication is paramount.

If cutting staff is the only option, be careful. If the wrong staff member is cut, you can cause long term damage as you leave yourself exposed to the problem of how to rebuild your business when the market improves.

Consider what information and knowledge people have that you will need in the long run and find ways to either retain them or to transfer their knowledge to others.

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