A couple of years ago a client of mine was brought here to the bay area to work for a fine establishment that while still young had an excellent reputation. He was there 2 months before he lost his job; then again so did everyone else! The business closed rather unceremoniously. Why? The owner's accountant sat down with him & said, "you lost $1,000,000 last year; your other business is feeding your kids, so you have to shut this place down!" He did & my client & his staff were out "pounding pavement."
Trying To Stay Afloat
This is a rather drastic scenario but more commonly today we are seeing companies who are a little more aware of their financial situation trying to stay afloat through the use of workforce reduction [commonly known as layoffs]. Sometimes companies pull this particular trigger too quickly without examining alternatives. Recently I attended an HR training sponsored by Fitzgerald, Abbott, & Beardsley that highlighted some options for companies.
Alternatives To "RIFS"
What are some alternatives to reductions in force [RIFS]? There are three general categories which I am going to put under three subsections: money, tasks,& lifecycle.
The "money" alternatives include:
- Salary & bonus freezes
- Bonus reductions
- Deferring salary increases
- Altering benefits [ex. greater cost sharing & higher deductibles]
- Of course, hiring freezes
"Task" related alternatives include:
- Declare a moratorium on temporary & part-time workers
- Work furloughs
- Reduction of work hours [& pay]
- Execute terminations based on legitimate & documented poor performance
And finally, "employee lifecycle" alternatives, which include:
- Informal "severance packages"
- Formal [& therefore covered by ERISA] voluntary attrition programs [using early retirement incentives & voluntary resignation incentives]
An Employer's Moral imperative
Without a doubt, an employer's first obligation is to its board & to its stockholders. However, while recognizing that the primary goal must be to stay alive, in my view, trying the more atomistic measures first is an employer's moral imperative before putting large numbers of people out of work. Why, because an employer's human capital is its most valuable asset.