…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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