Fast Company: As Recovery Simmers, Limit Lagging Layoffs with Flexible Downsizing

Great news… 90% of economists in a recent survey by the National Association of Business Economics predicted the recession will over by the end of 2009!  But hold the champagne.  These same economists saw unemployment rising as high as 10.7% in the second quarter of 2010, plus:

  • The Congressional Budget Office’s projected a jobless rate of 10% in 2010, and
  • During the week of May 16th, “the total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring.”

Historically, jobs lag behind a recovery as employers wait until the last possible moment to ensure the rebound is sustained.  As a recent Hewitt Associates study of 518 HR leaders found, even though most believe an upturn will start by year-end, many are “contemplating additional cuts.”

In other words, we are not out of the woods in terms of layoffs; therefore, it’s a perfect time to revisit flexible downsizing strategies to minimize job cuts.  As I’ve pointed out for more than a year in numerous posts (20 Reasons to Promote Flexible Alternatives to Layoffs) , reduced schedules/salaries, furloughs, unpaid vacation, job sharing, sabbaticals, telecommuting and compressed workweeks allow companies to manage labor and operating costs without having to let as many people go (for specific examples check out the recently updated Downsizing Flexibility Champions Honor Roll).  If a recovery is starting to simmer, it makes even more sense to try to hang on to your people, rather than scrambling for talent when business begins to pick up.

According to a recent Watson Wyatt survey, U.S. employers increased their use of reduced workweeks and mandatory furloughs; however, as with any innovative approach to tackling a problem, there are challenges to the wisdom of these flexible alternatives.

Concern #1:  Employees won’t go for it.
When I started writing about flexible downsizing to reduce job cuts in early 2008, the first response was, “Sounds good, but employees won’t go for it.”  So, I decided to find out by including questions in our nationally-representative 2009 Work+Life Fit Reality Check survey of full-time employees conducted by Opinion Research Corp at the end of March (+/- 4% margin of error).

We found that 9 out 10 full-time employees said they would be willing to accept a change or reduction in their schedule, or take a pay cut to avoid layoffs. Here’s the breakdown of the specific flexible downsizing options from which respondents could choose (there was no statistically significant difference between men and women):

78%     Four-day workweek, but the same amount of hours worked
59%     Add additional unpaid vacation days to the year
59%     Take one to two weeks unpaid leave, known as a furlough
48%     Share your job with another individual
47%     Reduced hours with reduced pay
41%     Work on a project basis as a contractor
41%     A pay cut, but the same amount of hours worked
31%     Take a month or more unpaid sabbatical
5%       None of these

Are people going to jump for joy when their schedule changes or if they make less money?  No, that’s unrealistic. But, I find there’s a pragmatic understanding that these are extraordinary times.  And most people, perhaps begrudgingly, will make trade-offs to keep their jobs. One conclusion from the data is that not everyone is interested in the same option.  Therefore, organizations might want to include a broad range of cost saving flexibility in any downsizing strategy and let managers and employees choose the options that work best for the individual and the business.

Concern #2:  You don’t save money and you will lose your top talent, therefore, the answer is to cut poor performers.