26 Sep How to Right Size Your Company for Any Economic Climate
Concerns about an economic downturn are building. As such, you need to make sure your business is prepared. In fact, these preparations are to-dos you should be doing to keep your business nimble regardless of economic conditions. If your business is agile in terms of both your strategic business plan and your corresponding people plan, you’ll be ready to pare back your workforce if need be, and expand quickly to keep up with demand as things improve.
Start by analyzing all aspects of your business, not just your talent. What would happen if your top three clients had to pull back or cease their spending with you? How would you manage profitability? Then look at how that would that impact your employee base and your different business units. Are there new products or services that you should consider adding that compliment your core business offerings prior to any fluctuations in the market? Conversely, do you have products that sit on shelves costing too much to store? Do you have services that you offer that aren’t profitable and should be jettisoned? Your business plan should be a living document as should your people plan.
The worst time to prepare for a recession is in it. Well in advance (and by that, I mean now) you should be looking strategically at the many job functions in your organization and how they drive your business objectives as well as understanding how each of your people fits a role. Every job in your organization should have key performance indicators by which you measure performance. These metrics should be objective.
If you do not have a sound list in place for each job or if you haven’t reviewed it lately, go to O*NET OnLine, https://www.onetonline.org/ for detailed list of duties for most roles. An in-house HR expert or outside HR consultant can also help with this type of analysis including whether a job is truly a full-time role and if your compensation is competitive.
Beyond the skills, review the behavioral and cognitive requirements in your job models for every role in your company to ensure that you have the right people who can implement your business strategies.
Managers should use the PI Management Strategy Guide and the Relationship Guide to best prepare for ongoing coaching and performance management sessions with each person on their team. Employee performance should be tracked regularly, not just once a year. If there are gaps in the ideal behavioral and cognitive requirements of the job and the employee, use the Coaching Guide to make sure there is focus on actionable attainable outcomes. Remember, you cannot change people. They are who they are and those are their strengths. Those strengths may not align with the job requirements, so when coaching, focus on specific tasks, actions and responsibilities that are measurable with clear deadlines for improvement goals. Give positive feedback as performance improves and the work gets done as expected. If things do not continue to improve, document that.
This feedback is preferably given and documented regularly through the year, as opposed to once a year. “I also see performance reviews that talk about attitude, appearance, and generally things that aren’t necessarily related to job performance,” said Christine Crews, SPHR, SHRM-SCP, Vice President, Human Resource Services at Employers Association Forum (EAF), a non-profit corporate member-based HR association. “While interpersonal communication is important, when we are evaluating performance, it needs to be based on the functions, duties and responsibilities of the job.”
This documentation is critical especially if layoffs become necessary down the road.
Should economic conditions deteriorate to the point where a reduction in workforce seems imminent, try to consider other options first such as shifting employees to other departments or business units, cutting back the number of hours employees work, or cutting back compensation by a certain percentage across the board (e.g. 20% cut for leadership, 10% for management and 5% for front-line employees). Other benefits can also be reduced or eliminated even temporarily to maintain the workforce such as wellness programs, tuition reimbursement or vision/dental.
“If you are one of those executives and you just announced layoffs or reduced pay or benefits, do not roll up in the parking lot with a brand-new Lexus,” said Crews. “It’s happened and created even lower morale for employees.”
If layoffs become necessary, make sure you are working with your HR experts and legal counsel to prepare for everything from decisions on separation pay to communicating the layoffs. They will also help with any legal or compliance requirements. Again, it’s best to get everything in order now, so you have a matrix for these separation decisions in place and reviewed by an attorney.
“In terms of who is laid off, we have to be mindful to ensure we do not select people who could be adversely impacted based on gender, age, race, or other protected classes,” said Crews. “First, determine what criteria will be used to evaluate who is staying and who is going. How many people do we have to lay off? What departments will be affected? Then, identify what skill sets we need to maintain our business continuity. Using criteria such as skill sets and documented performance can help defend the company against a potential lawsuit based on discrimination.”
Finally, craft your message for your employees who remain to prevent unease or rumors so that you can get back to business. Remember to look at the behavioral drives of the employees to ensure the message resonates with the different people in the organization.
Taking all of these preparatory measures will help you should the economy suddenly shift. This will ensure that your people plan stays in alignment with your business plan in any economic climate.