Story of a Layoff that didn’t happen

01 10-2020
Story of a Layoff that didn’t happen

Some days back a client called me.

It was towards the end of the third phase of the lockdown. It was likely that he would be able to resume his business but he was a worried man. With reduced revenues for some months now, he felt his first move should be to slash costs. Employee salaries were his largest expense head and naturally, he concluded that he had no other alternative but to let go many of his staff.

Like all of us, my client is basically a decent human being. He doesn’t want anyone to lose their jobs. He knows they need the money. He is aware that it will be impossible for them to get another job in these tough times. Yet, he felt he had no choice. He thought he couldn’t afford to keep them any longer. But, here’s the thing, he was so troubled in his mind that he decided to call me to talk it out before making any announcement. Just to see if there was any way out.

I hear him out fully. Then I asked him just two questions.

How much cash does your company have at this time?
How long will the cash last if there is zero sales?
After checking with his accountant he told me that they had cash for 2 months with zero revenue; But, and here’s the good news, they were doing around 30% of their normal revenue already. I then asked him how long it would take them to double that number. He said that he needed time to figure that out.

So a couple of days later, he called me again. He said that he had gone into a huddle with some his senior staff and they discovered that the changed environment had thrown up new opportunities. Nothing earth shattering, but enough to get the cash flow going again.

Now, here’s the thing, He said that by tweaking their strategies a little, they could get back to 70% of their pre Covid revenue in just 3 months! He could see a light at the end of the tunnel.I now sat with him and together we examined the impact that employees would have on his business given this ‘new normal’. We realised that instead of retrenching people in bulk, we could work out a ‘win win’ solution by implementing graded pay cuts.

People would still have their jobs.

Revenues would return.

And expenses would be manageable.

His firm has 50 employees – 30 of them in Accounts/admin/operations and 20 in sales or other client facing activities.

We first segregated the employees into the following buckets

Bucket 1

Employees who are absolutely critical for the business

4 in Accounts,

6 in Operations

10 in Telesales

Bucket 2

Employees who cannot do any work because of the Covid 19 situation

4 in Sales

5 in Logistics

3 in Operations

Bucket 3

Employees who can do at least 40-50% of their work

3 in Accounts

4 n Admin

5 in Sales

8 in Operations

We went into each role and employee deeply, especially in Bucket 1 – what is expected of them, what constraints they will face and their competence/ability.

The next step was to segregate employees salary wise

Group A

CTC less than 25000 per month

Group B

CTC of 25000 to 50000 per month

Group C

CTC of 50,000+ per month.

Note: This grouping was based on the average payroll of this particular company. It may vary from company to company.

Now we had a clear idea about where we stood with respect to the employees.

With this in hand, we laid out the following grid with percentage cuts in salary based on both criticality of work and salaries.

No alt text provided for this image
We realised that we would need to let go of only 3 employees because of lack of performance or because their roles were not relevant for the new plan.

The next step was to communicate this decision to the employees, which was the most critical aspect of the whole exercise. My friend held a townhall with all the employees though video conferencing and discussed the situation frankly and transparently:

In brief, he spoke about

1. The current business scenario

2. The need to make changes

3. The method he had adopted

4. The timelines for its implementation

5. Expectations from employees and what can be expected of the management.

6. And finally, this is the most important point

He also stressed that this was a temporary measure. That things would revert to the previous levels once revenues normalized in a sustained manner. He also put a timeline for this. He patiently listened to all queries and addressed them. He was in full control of the conversation.

Net result: Most of the employees were relieved that their jobs are still intact and were enthused with new business plan. They went to work with a will.

There were three key reasons for my client’s success

1. Thinking solution and not problem

2. Realising that your people are your partners – that you share a symbiotic relationship with them; both need each other.

3. And, finally, recognizing that you have a problem and getting help to solve it

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