Are You Laying Off or Pouring On?

According to the Maine Department of Labor, 2,400 Mainers have lost their jobs in the last year, putting Vactionland’s unemployment rate at 5.6% (these numbers are seasonally adjusted). The number is not horrible, and Cumberland county’s rate is only 4%. As things slow down, though, maybe you are thinking about letting some of your staff go.

Before you make that move, read this article, by Kelly Spors on Independent Street. I have discussed keeping employees before; I have always felt that layoffs hurt more than they help, especially in small business.

Spors gives a few common sense reasons why layoffs are bad for business, then addresses the alternatives:

• Hiring Freeze
• Hour Cuts
• Pay Cuts
• Benefit Cuts
• Get Rid of the Weak

While I agree with the premise of the article, I take issue with the order of alternatives. Getting rid of the weak should have been done before you needed layoffs! Even in good times, business owners should not hang on to toxic or unproductive employees. In any company, wasting valuable payroll money on someone that is actually hurting the company should not be tolerated. Continually communicate with your employees to ensure everyone is on the same page and working on the same team (sorry for the mixed metaphors).

With that exception, the rest of the list is fine- though quite unattractive. Being faced with not enough money to pay all the bills is never a good situation. You feel responsible for your employees and cutting wages and benefits is not something you want to do.

So, here are my two cents (or five, as it were):

1. Stay ahead of your finances by making projections about next month, next quarter, next year. Be realistic about not only what projects/sales you will have, but also how much cash will you have coming in or going out. Try to foresee where you will have cash shortfalls or project shortfalls in coming months so you can adjust now.
2. Get your core team together and lay the financial information out on the table, so everyone can see the stakes.
3. Get ideas from everyone on the team on how to boost revenue to prevent having to cut costs.
4. Set goals and decision point dates, so everyone knows what is coming.
5. If you still have to give a pay or benefit cut, make sure you take one too- of the same amount or bigger. If you have only good employees, laying even one of them off will hurt your chances of coming out of the tough times stronger than your competitors.

While it may sound lofty to assert companies should not layoff employees, the goal is really to get you to think longer term. The reason you’re faced with layoffs in the first place, many times, is due to failure to make changes months (or even years) ago- and wishful thinking. Think long term about your budget, and think long term about your employees.

The last thing you want is a quality employee going to work for a competitor because you got rid of him or her for short-term cash (think Johnny Damon and the Yankees).

If all else fails, hire Terry Tate, the office linebacker, to increase efficiency around the office:

Mike Freeman
Maine Small Business Financial Planning

‘Canned’ image created by ViajeroJT.

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