Leading by Example and Avoiding Workforce Reduction
Employees are your strongest asset, yet many organizations are choosing a reduction in force when the going gets tough. It is easy to say, “Well, we are in a financial bind, so reducing labor costs is our only option.” There are several other actions your company could take which wouldn’t jeopardize your employees’ livelihood. The best leaders know when to protect their employees, and against all odds, choose to step-up when difficult times arise. Leaders who show empathy towards their employees build an engaging and inviting workplace culture with reciprocated trust. Your employees trust you to make the best judgement for growth, while you establish trust in their workplace production.
KerberRose is here to provide insight as to why employees leave companies, the importance of company culture and developing next-level leaders, alternatives your business could take before implementing a reduction in force (RIF), and how KerberRose coaching and leadership development services can transform you into the leader you aspire to be.
Why Employees Leave
Are you curious to know why some of your employees have left? Some may say it’s because they were offered “a really great new opportunity” or they “are ready for career growth.” You’re left wondering why they couldn’t find a great opportunity with your company, or why their career growth wasn’t achievable within their current position. In reality, individuals leave companies for a variety of reasons, and if you’re looking for one overarching reason you might not find it. Some leaders incorrectly assume employees only stay for high compensation benefits, yet employees have adapted and care about more than just a paycheck. Three major reasons why employees leave former employers are: lack of respect/feeling undervalued, little to no opportunities for career growth and leadership development, and an uninviting workplace culture.
People want to know their ideas, work, and feelings matter. If an individual doesn’t feel heard and respected from their upper management or team, it can become disheartening and cause an unsettling feeling. The same goes for having opportunity for growth within the company—if these opportunities are not presented or offered, people will leave to find them. Some individuals may be happy at their current level and don’t want to move up; however, providing opportunities for those who show this initiative is a crucial part of building your next-level leaders. These motivation and emotions feed into an employee’s perception of company culture, and it’s crucial to understand their importance.
Company culture needs to be considered at all levels of an organization—from building a foundation of mutual respect between leaders and workers, to providing meaningful career development and leadership opportunities to anyone who seeks them. Employees want to feel heard and valued and know their opinions matter. Having a strong company culture doesn’t mean providing occasional lunches for good work or allowing jeans on Fridays—although those things can add to an already established positive workplace culture—it’s how your employees feel about coming to work on a Monday morning. Do they feel excited to interact with colleagues? Are they getting recognition for their work? Do they enjoy the work they do? Is there trust and respect for their leaders?
These questions matter because if a majority of your workforce isn’t answering “yes” to these questions, you have a major problem. Employees who aren’t excited about their work perform sub-par. Employees who don’t feel recognized are unmotivated to achieve. People who don’t respect their leaders won’t put in much effort to impress them, let alone engage meaningfully with their team. A strong culture is the foundation to growing a group of elite next-level leaders who will run your company long after you’re gone. Preparing this culture now will create a workforce that sustains itself by retaining and attracting top talent.
When you develop a culture of employees who enjoy the work they do, are surrounded by individuals they aspire to be, and feel comfortable to try new things without fear of failing, you see the results of higher workforce productivity and longevity of employee retention. However, these concepts must trickle from the top down, and you must practice what you preach.
If you value providing a positive company culture and keeping your employees happy, even when situations get tough, do not let employee reduction in force (RIF) be your first step—it should be your last resort.
How to Protect Employee RIF
Money is the motivator, and businesses cannot thrive without, well, business. You’ve hired these individuals to do the work of building your business and growing your revenue. So when business isn’t as great or an economic recession has hit, protecting these hard-working individuals should be priority number one. There are a number of channels you can take before reducing your labor force, those being:
- Executive/leadership team takes a pay reduction. This may seem controversial and many executives/leaders will not agree on this, yet: a 5% – 10% pay cut from a few leaders could equal another employee’s annual salary, meaning your contribution just saved someone’s job, livelihood, and protected their trust in leadership. If all of your leaders agreed to this, you could save a large portion of your employees’ jobs.
- Reducing/terminating “nice to have” expenses. A majority of companies offer “perks” of employment, such as wellness incentives, off-site leadership meetings, travel expense reimbursements, or any other discretionary spending/expenses. For the time being, take out these “additional” costs. You’d be amazed at how all of these spending habits can add up over the course of a year.
- Reduce/halt retirement plan matches. Assuming you offer a company retirement plan with a company match, you can halt these investments and be transparent with your staff as to why it’s been halted and you ideally plan to re-add it. Your employees can still invest their own money, and eliminating your company match could save you hundreds of thousands of dollars to utilize for keeping your business afloat during an unprofitable time, while saving jobs.
- Employee reduction of hours. Discuss whether or not employees would be comfortable with a wage decrease vs. entirely terminating their position. Reducing working hours could save their employment long-term, which is much preferable to the alternative. An example of this method could be all employees now work 36 hours vs. their normal 40 hours —a reduction in pay for reduced hours. This example is the equivalent of a 10% reduction in pay for everyone with fewer working hours, while saving everyone’s job.
- Reduction in pay for all employees. This method is different from the above statement, whereas these employees would still be working 40 hours and lose 10% in pay. Assuming your business still needs full-time workers, this concept could salvage all employee positions. It may cause unsettled feelings, so reassure your employees their jobs are safe, and these temporary reductions won’t last forever.
If you’re ready to take your business to new heights and achieve an engaging company culture providing growth for next-level leaders, KerberRose can help develop your organization in order to achieve this success. Our 1:1 strategy and Trusted Advisors can assist you in overcoming various organizational challenges and continuously adapt to become the leader you were meant to be. Reach out today to start the conversation and begin planning for your future leadership strategies.