Problem: Management Decision

Managing HR in a Recession Managing your staff has its little ups and downs. Signing on a new employee is exciting. Terminating one is not so fun. And annual performance reviews tend to wrack your nerves a bit. But the task facing you now is truly daunting. The economic recession seems to have touched everyone, and your company is no exception. You face a major budget deficit. It is possible for you to make cuts in administrative costs, programs, and perks to address the problem. Still, staffing cuts seem unavoidable, and it's your job to wield the axe. You've read studies that suggest layoffs do not really lead to better productivity or profits, so you're skeptical about whether this is a good way to save your bottom line. You know that layoffs ought to be a last resort. After all, they cost more than the severance packages would suggest. Layoffs might damage your reputation for attracting the best talent: Who wants to go to work for a company when they can't be confident their job will be secure in a year? On the other hand, no one's job is terribly secure in this climate. You also might be losing your best potential for leadership.

Things will eventually improve, and you don't want to find yourself with a gap in talent you'll have to rush to fill when they do. The rehiring costs might be more than retaining the employees you have. And there's also the cost in morale among the employees you keep on board. After crunching the numbers and thinking hard about the variables, though, you still conclude that some action is necessary to cut your staffing costs. You've got options, though. You've been inspired by the creative ways other companies have handled this problem. One company offered its employees an opportunity to take 6 months off to work on a public service project while retaining partial pay. That cut staffing costs, kept employees busy who would otherwise be idle due to slow business, and kept them on the payroll. You've read about many companies instituting tiered, or graduated, pay cuts or cutting hours to part-time. Some states even have a program to kick in unemployment wages to replace part of the lost pay.170 Whatever you do, you know you have to be left with a group of committed employees who will see the company through the recession and recovery. And you know you'll be better off if even the layoffs are managed well.

Questions: 1. What factors will you consider as you decide how to make the cuts (whether to downsize or to keep employees on board while cutting costs)?

2. What can you do to help employees manage the transition to less work or no work?

3. What concrete steps could you take to maintain morale in your company?