…and other observations from finance-savvy HR experts about the difficult job of downsizing.

David McCann - CFO.com | US

January 15, 2009

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With layoffs continuing to pulsate through Corporate America, CFO.com sat down with three veteran business management experts to talk about the thought process behind head-count reductions, alternatives to that drastic step, and how to move forward if you take it. The panelists — they were interviewed separately, but their comments have been woven together in a panel-discussion format — include:

• Jason Zickerman, CEO of The Alternative Board, a 19-year-old firm that provides peer-to-peer advisory meetings and executive coaching for small and midsize private companies. Earlier in his career Zickerman was an accountant with Ernst & Young.

What’s your opinion of all the layoffs? Facts and circumstances obviously differ from company to company, but in general, do you think corporations are cutting the right number of people? Too many? Too few?

Zickerman: It has been demonstrated time and time again through the years when recessions have hit that during the good times organizations had gotten fat. I’ve been around companies that got rid of 20 to 25 percent of their workforce and didn’t skip a beat.

But one of the big things many companies are overlooking is what it costs to rehire and retrain. An analysis of that, at a minimum, allows you to re-look at who you’re letting go versus just picking the ones with the least seniority or the highest paid. Forget those rules of thumb — they’re very shortsighted.

What else can companies do to avoid layoffs?

Zickerman: One alternative that a number of our members are looking at is moving some or all staff from a five-day work week to four days. Everyone stays employed, but you reduce payroll expenses by 20 percent.

If you communicate that properly, telling employees that you’re doing everything in your power to ensure the least-possible amount of layoffs, that you’re fighting for them and protecting them, you can get a morale boost, whereas a lot of companies are getting flattened on morale.

Or, instead of two or three weeks vacation, give five weeks, but two of them unpaid. The interesting is that the younger generations who don’t have mortgages or tuition almost look at that as a perk. It’s not as big a deal to that segment of the work force as a lot of people think.

Won’t going to a four-day week reduce your productivity by 20 percent?

Zickerman: That’s absolutely not true. The fact is, people fill their week with the work. They will be more efficient and effective, spend less time at the water cooler, stay an hour later, and get the work done.

What lessons will companies have learned from this period of intense pressure to cut costs?

Zickerman: If employees are going to be more in the weeds because of less hands on deck, you should stop to celebrate the small successes. If your organization was one that celebrated only when the big deal closed, don’t do that. Celebrate at milestones so people feel progress, which builds a winning attitude.

Companies also should help employees understand that because of what’s happened, we’re doing things differently. No one wants to feel that people were let go but nothing has changed.

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If you need to downsize in your company, you might be interested in TAB President Jason Zickerman’s recent comments featured in Business Week.

Stopping Survivor Guilt

As a senior manager in an era of massive layoffs, it’s your job to stave off survivor guilt before it lowers the morale and productivity of remaining employees

By Rebecca Reisner

From Guilt to Resentment

Members of the Baby Boom generation on your staff may be particularly vulnerable to the anxieties surrounding layoffs. “Younger people are more comfortable with the idea of people moving around and changing jobs a lot,” says Roy Cohen, a career counselor and executive coach based in New York City. “But baby boomers have the idea that you’re supposed to stay in the same place.”

So why do surviving employees, with their newly enlarged workloads, spend their time feeling guilty about layoffs they had no hand in perpetrating? “It’s not a rational reaction, but it’s only human to think ‘Why them? Why not me?’ ” says Spanier. “They feel sympathetic toward the people who lost their jobs and worry about their well-being, their economic situation.” Wikipedia defines survivor guilt in general as “a mental condition that occurs when a person perceives himself or herself to have done wrong by surviving a traumatic event.”

As an adjunct to the sympathy they feel for laid-off co-workers, employees go through three self-centered stages, says Jason Zickerman, president of the Alternative Board, an executive consulting firm based in Denver.

1. Whew! I made the cut.

2. I have to do all this work.

3. They don’t appreciate me.

“You’ll see changes in personality. Outgoing people now being silent. Work isn’t as good, and absenteeism rises,” he advised. “There’s anxiety and pressure, the beginning of depression in the case of some. For employees, layoffs are not in their control, and whenever someone else is holding the puppet strings, it’s stressful.”

Soon, the business itself can feel the effects of survivor’s guilt on its bottom line. Fortunately, business consultants say, survivor’s guilt is highly responsive to treatment if senior management acts early and often.

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December job-loss data are the worst since the 1930s. But don’t expect this to turn into another Great Depression.

By Dennis Romero

What’s more, Jason Zickerman, CEO and president of business owners’ peer group The Alternative Board, says entrepreneurs who are considering cutting their work forces can find creative ways to keep their people and still save money. He suggests implementing a four-day work week, extra weeks of unpaid vacation, and partial- or no-pay education sabbaticals.

“When your employees see you’re doing everything in your power to avoid layoffs, it promotes allegiance,” Zickerman says. “Challenge your team to find cost savings. If you make your employees feel that they have some control over their destiny, you will get everything they have.”

Meanwhile, Feltes predicts that while ‘09 will be a tough year economically, there will be light at the end of the tunnel starting in 2010.

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Ted Reynolds - President /Founder                                                                                                                          TEAM Funding Solutions, Austin, TX  

Learn About TEAM Funding Solutions

Ted has been active in the equipment leasing industry since 1987.  He is the founder of TEAM Funding Solutions, which started in 1992.  TEAM has a unique market niche: Funding equipment leases for weaker credit business owners throughout the United States.  These business owners typically have a credit weakness or are brand new in business.  Therefore, traditional banks will not lend to this sector of business owners.

Back in 1992, Ted recognized that almost no one was serving this unique sector of business owners.  Ted comments, “The truth is many business owners endure financial hiccups throughout the life of their businesses; and many of these people are excellent business operators that deserve credit, when given an opportunity to tell their story.”  The TEAM company mission is “Helping Customers Realize Their Business Dreams!”  In other words, helping business owners obtain credit that traditional lenders will not consider. 

The credit approval process is quite intimate; the TEAM staff collects financial statements and conducts a telephone interview for every customer that is approved.  Ted likes to say, “We roll up our sleeves to understand their story!”  It’s really a form of old-fashioned lending to people aspiring to grow their businesses.

Q&A

Why did you name the company “TEAM”?

Ted named the company “TEAM” to create a work environment that encourages staff members to combine their strengths with sound business practices.  TEAM has a staff of 11 people.  Every employee at TEAM has a written “Elevator Pitch” and 1-3 simple metrics that are recorded and measured weekly.  The TEAM Staff has a “company huddle” every Monday morning.  Ted states, “No one is allowed to sit down.  The huddle is designed to last 5-12 minutes where employees report their weekly results.  This culture substantially reduces time in needless meetings and enables all of the staff to keep a pulse on the business.”  Ted then meets with every employee, once a month, for about 5 minutes, to review their metric performance.  The company culture tries to remain nimble which minimizes the bureaucracy that can slow down the productivity of employees.  

What are your long-term business plans?

We definitely have long-term plans.  Currently our company plan is to double our sales volume by 2010.  My personal goal is to build this business as a legacy company, one that can prosper for years to come.  I believe that any business that is managed well can be sold at anytime.  However, the long-term plan is to hold on to it, continue to improve our processes and provide the staff a long-term place to work at.  Years ago, I had a couple of friends die at early ages.  This experience made me look at the journey of life and how important that journey is.  Therefore, I have also stopped worrying about retirement… as long as we are having fun and remain passionate about our daily work, I see no reason to stop working.

Ted and his wife, Cathy, are both from Minnesota.  They are blessed with two sets of twin boys.  He enjoys coaching his kids, golfing, hunting, fishing, and vacationing with his family.

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Members of The Alternative Board® (TAB) - an organization that helps private businesses grow and prosper, have overwhelmingly stated that it is the emotional support they receive from fellow business leaders that gets them through when times are tough…

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