3 Alternatives to retrenchment

Dear Reader

I’m writing this bulletin from the beautiful and historical city of Berlin where I’ve been attending the International Bar Association’s employment law conference on ‘Key Employment, Labour and HR Challenges for Today’s Multinational Employers’.  It’s been a very stimulating and thought-provoking conference and I’d like to share a few thoughts with you, which I believe are relevant whether you’re a big multinational or not.

In times of trouble we need to uphold our values
We’re all experiencing the impact of the tough economic times in some form or another. How do we react? Do we simply think of the bottom line and look at ways of cutting costs, and staff, as the first solution? Do we drop our value-driven programs that drive important initiatives like diversity, work-life balance, corporate social responsibility because we ‘can’t afford’ them or consider them less important in the current context? Do these measures in fact help our bottom line and are we shooting ourselves in the foot if we downsize or drop these initiatives in times of trouble?

6 negative consequences to taking the conventional retrenchment route
A keynote speaker at the conference gave a thoroughly researched presentation which suggests you should think twice before downsizing because:
1. Cutting people results in a number of hidden costs which may offset the apparent gains you achieve through retrenching.
2. The employees you retrench leave the business with their skills, experience, know-how and information about the business and, in some cases, also their customer connections.
3. It may cost you a lot to regain or rebuild if times improve and your company needs to rehire.
4. There is also a significant hidden cost in the morale and dissatisfaction of your employees who are left behind, who view themselves with much less job security. Sometimes this results in your really good people (the ones you really want to keep) leaving of their own accord.
5. Even those who don’t leave can be less productive for some time because of the unsettling effects of a downsizing exercise.
6. Customers also become disenchanted with companies that retrench. For example, the service they get declines because there are fewer people doing the job or they have to deal with new and unfamiliar faces. Customers often react to a downsizing in one company by taking their business elsewhere or reducing the amount of business they do with that company. Either way your business may lose revenue.
So, think carefully before simply embarking on retrenchments to save costs.

Consider these 3 alternatives to retrenchment...and retain skills, experience and customer connections within your business
1. Reduce working hours
2. Place employees on enforced leave
3. Place staff on short-time or part-time working hours.

By offering flexible working options to your employees, you’ll help yourself through tough times and your employees may even see these alternatives as beneficial, if they’ve campaigned for such flexibility in the past. Remember you can’t impose these changes unilaterally – you would have to get agreement from your employees.

Commit to your employees, offering them job security and win invaluable loyalty. Stick to these values and help yourself through the tough times. You’ll emerge ahead of the game and your competitors when things improve.

Make the most of a bad situation
These times can present a unique opportunity: you can hire talented employees who may have been retrenched by your competitors!
The bottom line is you should think things through carefully before you simply leap into a retrenchment exercise or drop an initiative you previously introduced to retain your employees.

Until next month...

Susan Stelzner
Editor-in-chief