Director: Corporate-911
I have always been outspoken about the fact that some businesses face financial distress because of disruption that has been caused by the external environment. In these cases, financially distressed businesses can do little to control the situation.
The Covid-19 Pandemic is a classic case of this. The Pandemic saw the rise of many businesses that offered products and services that dealt directly with the Pandemic. Examples of these are companies that offered deep cleaning services for businesses and car washes that offered the deep cleaning of vehicles (through Covid Fogging).
While there will always be a demand for the first service, the demand for the Covid Fogging of vehicles has all but disappeared. I recently read an article on the Forbes website which discusses how to deal with the layoffs associated with a business scaling down.
Step 1: Once you decide, move swiftly and take responsibility
The Forbes article points out that the most important thing executives can do is get layoffs done quickly. You don’t want to drag it out over a year.
When layoffs are unavoidable, go to your people immediately. Apologize and be honest; acknowledge that you thought it was going to be nirvana for longer and you misjudged economic and business conditions. Explain exactly what happened and why. Take responsibility.
Step 2: Get it right with severance
The article adds that you wouldn’t be laying people off if you didn’t need to cut costs. But it is critical to do what you can to go above and beyond with severance. Don’t skimp here. Be as generous as possible.
Whatever the financial hit of paying severance is, take it. These are one-time expenses, and if you’re a public company, the Street is going to care way more about how you are preparing the company for the way forward than the one-time cost of paying severance. Doing right by your employees will help them during difficult times and also help moderate the negative impact on morale.
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Step 3: Protect morale, chart the path ahead
The article points out that when layoffs happen, leaders are not just communicating to those who will lose their jobs. They also have to reach the team that remains and give them a reason to not just keep working but to go above and beyond to get the company back on track. Make sure that people are clear on what needs to happen for the business to thrive, then add an incentive. Let your people know that once you get down the road and overcome the immediate challenges, they will be rewarded for their hard work, whether that means profit sharing, bonuses, or some other kind of benefit.
Morale will be low among the people who are left. Make sure they have a clear picture of what success looks like and how to get there. Employees will also likely feel the weight of an increased workload after a layoff. They need to know that hard work will be recognized and rewarded when the time comes. They must trust leaders to follow through on these promises. (If you haven’t already built a culture of trust before hard times, it’s all the more difficult when the going gets tough.)
The article points out that your team needs to know that you aren’t immune to the pain either. Executives will need to take pay cuts and reduce perks. If you’re laying people off and reducing bonuses, your reduction needs to be even bigger. People need to know that you’re right there with them. This is often the most criticized and scrutinized aspect of an organization’s strategy for creating a healthier future. Consequently, highly paid executives must be willing to acknowledge and publicly and transparently participate on a percentage basis.
When layoffs happen, it can be tempting for employees to start looking for greener pastures. Sometimes, if it’s a sinking ship, this may even be the right move. No matter what, layoffs are challenging, and it’s up to leaders to communicate that they can also be an incredible opportunity.
The article adds that your best performers should step up and get the job done. Make sure they know their efforts will be recognized. Even during hard times, good new leaders can be born from adversity. Existing leaders will want to take care of their people who are going above and beyond. And when things turn around, good leaders will ensure that everyone benefits. Your people need to understand this is the case.
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Teams win with trust and integrity
The Forbes article points out that teams, whether in football or finance, survive hard times because of integrity and trust. Everybody is happy when the season is going well, but if seven guys are hurt, and you’ve lost the last three games, morale can sag.
Leaders have to step up. And so does the team. If your wide receiver and quarterback are injured, then the defense needs to carry the load a little more. But that attitude has to start with your leadership.
Forbes makes all the right points in dealing with unavoidable layoffs because there is no business or opportunity.
Given the pressures we now face with increased load shedding, rising interest rates and inflation and low to zero growth scenarios, managing the retrenchments of resources and people requires thoughtful and responsive leadership.
Robin Nicholson is the Director of Corporte-911 and is a Senior Business Rescue Practitioner.
