Alternatives to save your non-profit money and help avoid giving out pink slips.
The first and foremost reason why layoffs occur is to save money. In the non-profit world, funding is often dependent on a contract, a grant, donations, or a combination of all of these. When funding gets cut, so often do employees, and those left behind are responsible for picking up their slack.
According to business writer F. John Reh, job cuts are usually knee jerk reactions to create a short term fix. In many cases they cause more harm in the long run than good to the organization. Despite this, time and time again we hear in the news or read in the papers that yet another company has cut back its workforce to cut costs.
Below are two common myths around layoffs, and some perhaps surprising truths, that may make decision makers consider alternatives before resorting to layoffs.
Myth #1: Layoffs Save Money
William McKinley et al, make the point in “Organizational downsizing: Constraining, cloning, learning” that despite the fact that downsizing is used as a way to reduce costs, there is considerable evidence to the contrary. In fact, sometimes expenses may actually increase over the long term.
A survey conducted by the Wyatt Company indicated that fewer than half of the respondents using job cuts to reduce costs actually met their cost reduction targets. This study showed the direct cost of dismissing an employee earning an average salary of $30K per year is approximately $7K, and the cost of hiring replacements can range from $5-$50K per employee depending on relocation costs. McKinley concludes that since companies tend to ultimately replace some dismissed employees, the above figures clearly show that downsizing is costly.
Myth #2 Laying off Poor Performers will Save Money While Boosting Productivity
Organizations will often approach job cuts with the strategy of letting go of its least productive employees first. While this strategy makes logical sense, it’s important to keep in mind that layoffs by their very nature create an atmosphere of uncertainty. It takes a very secure person to not question whether they will be next even though they are a top producer.
A common result of this uncertainty is that top talent will often be the first to search for, and find, another job. Those that haven’t found another job may likely suffer in terms of morale and motivation. The result for the organization is often not only a reduction in quantity, but a reduction in quality, of the overall workforce. Secondly, whether an organization can continue to fulfill its mission with the action of layoffs will depend on the skills, talent and motivation of the people left working post-layoff.
Non-profits contemplating layoffs would be wise to consider more than just the hoped for cost savings from a layoff, and plan for secondary effects. Poor morale and the resulting reduced motivation will likely impact productivity and innovation.
Common Sense Alternatives to Layoffs
Layoffs are painful for everyone involved, and despite best intentions there may not be an alternative to eliminating some jobs. Before resorting to them, consider the ways listed below others have used to save money and avoid giving out pink slips.
Freeze
While establishing a hiring freeze means everyone has to pitch in and work harder to take up the slack, when given the choice of that or resorting to layoffs the former is often more attractive than the latter.
Move
Consider moving employees from areas where you have a staffing surplus to other areas where there is a need. Although this only works when those in your workforce are willing to face a new job description, many would agree it is better to find an alternative use for an employee than to let them go.
Cut
While offering job sharing, reducing work hours and/or establishing unpaid furloughs are short term measures no one likes, they may help your organization survive the cash flow bump. Consider them if you are hopeful your business will rebound in the near future.
Request Volunteers
The old adage “it can’t hurt to ask” certainly applies in today’s challenging economic times. By asking for volunteers, you may discover full-time employees willing to go part-time for personal reasons.
Sabbaticals
In 2007 Accenture offered six-month to one-year voluntary sabbaticals for highly skilled employees – who could go off to do whatever they wanted with 20 percent of their salary and benefits. When the sabbatical finished, employees were guaranteed their old jobs back. Almost 1,000 employees jumped at the opportunity.
This allowed Accenture to cut costs without losing valuable people that would be expensive to replace and train when the economic situation turns around.
With any of these initiatives, communication is critical so everyone understands they are carefully considered alternatives to job eliminations.
The Last Resort
The above measures may resolve your non-profit’s need to resort to layoffs, and you will not be in the position of lamenting your losses when the economy improves. At the very least, they may buy you some much needed time to consider alternatives to improve your cash flow situation and obtain more funding.
Yet despite your best efforts, there is still no guarantee that you may have to resort to pink slips. Organizations that make concerted efforts to communicate effectively during turbulent times, and make employees feel invested in the process, will be a lot better off than those who do not. And when the economic storm passes, these organizations will be perfectly positioned to rehire willing employees who remembered that the layoffs were indeed a measure of absolute last resort.
