How to better manage and avoid workforce reductions

Michael Benedek is its CEO Datonicsan online data company and a pioneer in integrating audience data into programmatic platforms.

There has been a lot of uncertainty in recent years and companies continue to face an unpredictable environment. From the sharp drop at the start of the pandemic to the massive boom that followed, the “Great Resignation,” and now a somewhat stagnant economy with a relatively low unemployment rate, there are few reliable indicators for business leaders to plan with confidence.

In July 2022, the unemployment rate of 3.5% was the lowest it had been in 50 years. Many businesses continue to hire, with employment forecast more than doubling in July. At the same time, some industries are experiencing a slight contraction. The tech sector in particular has seen rounds of layoffs in recent months. As of August 2022, 38,000 tech workers have been laid off.

With such economic uncertainty, how can business leaders best prepare?

Preparation for business contract

According to the Harvard Business Review, ensuring the right approach to a reduction in force (RIF) is so important that companies should invest in training employees to be prepared for such a scenario. Complications and unwanted effects can arise when an organization does not see the value in such training, as it is time-consuming and expensive for managers. In such cases, managers should seek out mentors who have prior experience handling RIFs to provide guidance on appropriate procedures.

Having a script is important. Conversations can quickly become fueled by emotion, and staying on message in an authentic way is crucial. One way to practice is to recruit a fellow team member to help role play. In this practice, managers should envision the worst reactions from employees and develop strategies to deal with these heightened emotions. Managing the employee’s emotions isn’t the goal, but being empathetic goes a long way. Direct communication will help employees cope, and moving away from vague language that leaves employees confused about their position is essential. A written follow-up will also help send a clear and consistent message.

To help those who are laid off, it’s important to have empathy and see the situation from the perspective of those affected. What will be their main concerns? Is there financial compensation in the form of severance or bonuses and will their benefits remain intact?

It is also worth considering the discussion in a comfortable environment. A private space that allows employees to express their feelings is beneficial. So, also, it’s a very convenient time, like Friday – so they have the weekend to decompress and process.

Shopify presents a good example of this process. Earlier this year, the company predicted a global decline of 10%. Shopify’s CEO acknowledged the uncertain times in an email to his staff and made it clear that those in “recruiting, support and sales” roles are at risk of being laid off. Shopify included specific severance details: 16 weeks of pay plus one week for each year of service at Shopify. In addition, Shopify offers career counseling, interview support, and resume-building assistance to those who may lose their positions.

RIF Prevention and Conservative Development Planning

For many companies, downsizing may not be the best solution, as it can stifle growth in the long run—especially in this uncertain economy, where unemployment remains low. Other strategies, such as temporary reductions in wages, can be good measures to adopt. Another approach may be to onboard new employees as part-timers.

Keeping employees motivated and engaged is key to driving long-term growth. One way to ensure employee satisfaction is to introduce and continue to implement workplace flexibility and keep remote work intact. Understanding the work-life balance of employees as they go through uncertain times will go a long way in fostering a productive environment and engagement.

Another strategy is to prioritize recognition and reward processes. When employees are appreciated for their hard work, motivation levels increase and they are more motivated to produce at a high level. Recognizing good work on a regular basis boosts employee morale.

Conservative Development Planning

Investing in your business when you’re trying to be frugal can seem like a counterintuitive approach. However, if you think smarter and assess your business needs, it could be the right one.

Difficult times present an opportunity to change, adapt and rethink business models.

Investing in new technologies can be a way to ultimately reduce major costs and automate systems while remaining cost-effective. At the same time, investing in professional development for your leadership team will help them face obstacles more effectively and efficiently in the future.

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