Navigating a downturn in business with your employees.
The rising cost of living, the economy slowing, people starting to spend less, means some businesses are tightening their belts. From what I am hearing and seeing, at this stage, some industries are feeling the pinch more than others, such as hospitality and retail, however this is having flow on effects to other industries. While locally we are yet to see high volume lay offs or redundancies, businesses that are feeling the pinch are starting to look at where and how they can manage and reduce their costs.
When there is a downturn in business one of the key areas of our business that we need to take a good look at is our people. With the downturn in business this can result is reduced work volumes meaning we don’t have enough work for our people and for many business labour costs can be one of the biggest expenses for the business, hence the need to reduce those labour costs in a downturn.
Having to reduce your workforce as a business owner / manager can be one of the hardest parts of the job, it can be exceptionally stressful and take a toll mentally, physically and emotionally. There are a number of legal requirements when it comes to restructuring your workforce so before you jump in and take action, I’d encourage you to do your research and get professional advice to make sure you are meeting the legal requirements.
Often the first thought is that we have to let people go however there are other options to consider to manage your workforce during a downturn and reduce costs.
Cost Modelling and Needs Analysis
While it might feel like the thing to do is jump right in, rip that band-aid off and take swift action by letting people go to reduce costs, taking a step back and really understanding your business needs and costs is the best first step. Doing this with your Accountant, HR Consultant or a Business Coach/Mentor is really valuable as often someone independent and not emotionally invested in the business will see things differently and identify other options / courses of action.
Really understanding your workforce make up is key; the mix of full time, part time, casual employees, your employee costs (who costs you how much per hour, including additional benefits and perks), the resourcing that you need on what days/shifts (the mix of management / supervisors / team members to effectively get the job done).
Looking at projections for the months ahead, forecasting revenue and understanding a best case scenario and worst case scenario helps you to then forecast your employee costs for each scenario.
Once we know our projections we can then look at options for re-modelling our workforce. Maybe we haven’t been rostering or structuring our resources as efficiently as we could and there are options to consider on how this can be better done. Are employees working overtime that is adding significant costs to the business when if we rostered people differently, we could eliminate or reduce overtime costs? Are minimum hours and split shift penalties costing us when we could roster people differently to reduce these costs? Sometimes because we have done something a particular way for so long it can be hard to think differently, hence the value of working with someone independent to help you consider new and different options.
Communication
How much information you share with your employees during a downturn is always a question I get asked. The answer is, it is different for each and every business and depends on many factors such as the relationship you have with your employees, managing your legal obligations but no one wants to keep their employees completely in the dark and in my experience, your employees won’t be naïve to the situation. They will have likely noticed the reduced workloads, the reduced customer enquiries and customer spend. Saying nothing at all and not communicating with your employees about what’s happening can sometimes only make matters worse and cause un-necessary stress and pressure for your people.
Developing a communication plan is hugely valuable in this situation. This way you can consider what information you can share and when it’s best to do that while still ensuring you meet your legal obligations. Sometimes when we communicate as openly as we can with our employees, they may come forward with other options and ideas that might never have been on your radar. Maybe one of your team had been thinking about going part time or reducing their hours, maybe someone was thinking about taking a long period of leave to travel. You just never know what might be at play for your employees so engaging with them might just help solve some of your problems.
The Legal Obligations
Making significant change in the workplace such as restructuring, changing the pattern of work, hours of work etc or making employees redundant requires you to comply with legislation. Ensuring a thorough consultation process is followed is not negotiable and this process is detailed in the relevant award. Ensuring any action you take or changes you make complies with the Fairwork Act, the relevant award and the National Employment Standards is imperative. The last thing you want is to do is open the business up to an unfair dismissal claim or a redundancy that isn’t genuine. The legal requirements and required processes can seem complex and overwhelming however getting expert advice will help give you peace of mind and develop a detailed plan.
Restructuring and/or redundancy are never easy on those involved. I’ve seen many businesses execute these processes really poorly because of lack of planning, consultation and communication. They rush the process. How you lead your team through this kind of change can make or break the business brand and employee engagement. Sometimes the hard decisions have to be made however those hard decisions can always be made in a respectful way.
