The New Approach: 6 Fresh Ways To Mitigate The Employee Impact Of Cost-Cutting Measures During A Recession
We’ve been through recessions and economic downturns before, but this time is different.
It’s more personal in many ways – yet also more universal. Almost all businesses across the globe have been affected, and the crisis will probably have far-reaching consequences for many years to come.
Most forward-thinking organisations understand that people ARE their business, and have recently increased their investments in employee wellbeing and welfare accordingly. The recession hasn’t changed the need to attract and retain top talent. If anything, the importance of your people has only multiplied.
So while cost-cutting measures are essential to weather this storm, mitigating the effects of those measures on your most important resource – your people – is also vital.
Getting it right is critical. This will require some innovative thinking, because the tried and tested paths are no longer the answer.
Now is the time for new perspectives on old solutions. It’s time to balance short-term cost-cutting survival with organisational stability and long-term change.
Below are our top six recommendations for fresh ways to approach traditional measures.
01 Cost restructuring and reduction
Cost-cutting measures are as old as downturns themselves. In this new climate, though, these measures need to look considerably different to the redundancy programs of the past.
They need to strike a balance between the numbers on the spreadsheet and the people-dynamics of your business. There needs to be a recognition that some savings and gains can’t be measured in absolute terms, and that the future of your business can’t just focus on one quarter’s balance sheet.
The modern approach to retrenchment must be to decide which team members to keep based on who’s most invested in your company’s future. You need to look for business allies and those who create cohesion within the team to reduce future liabilities for poor performance or disputes. While this may not result in the fastest cost-savings, it does provide a much more solid path to business recovery.
02 Employee share plans
Cost-cutting measures are incongruous with bonuses and pay rises.
However, it’s likely that your team has never worked harder and, especially in such a challenging climate, you are keen to show your appreciation for all that they’ve done.
Employee share plans are an effective solution that have positive long-term consequences for both you and your team.
This is for two crucial reasons:
- You can reward your key staff for their hard work, fostering team loyalty, without incurring extra costs.
- You can balance the need to cut short-term costs with incentivising continued employee performance through longer-term reward options.
In other words, rather than creating a disgruntled team that feels unrewarded, you create a motivated team that’s committed to your organisation’s success. In doing so, you position your business for future long-term growth.
Plus, when your business succeeds, your employees know they’ll also reap the benefits. It’s a win/win solution.
03 Government financial support
Staying afloat during a downturn isn’t always about pulling internal levers to reduce costs. In the current crisis, there’s a wealth of support available from government sources.
However, navigating this support can be complex. The last thing you want to do is accept government stimulus support that provides short-term help while impinging on the viability of your long-term plans.
This is an area where an outsourced service provider may be able to offer extra value. Their existing relationships and compliance knowledge can help you to understand your eligibility, along with any implications and complications of each type of support.
This means you can get the assistance you need now, alleviating your immediate challenges, while also knowing an expert is there to help guide you on the longer-term perspective.
04 Working capital management
In an economic downturn, particularly the prolonged one we’re currently experiencing, making the most of what you have is just good business sense.
Managing your working capital helps you to maintain sufficient cash flow to meet your short-term obligations by using your business assets and liabilities to their best effect.
Again, this isn’t a new idea. What’s new is taking an approach of layering long-term business continuity with short-term asset analysis and pressing challenges. This enables you to not only plan for now, but also to establish solid groundwork from which you can continue to build.
This means maintaining a healthy working capital ratio as well as a healthy supply chain.
05 Effective tax planning
As the old saying goes, there are only two certainties in life: death and taxes. Effectively planning for one of those certainties (tax) through an economic downturn can help you to avoid the other (death for your business).
The difference between traditional and modern tax planning is in the balance you strike between cost and minimising tax, and future forecasting and planning.
While the end of this recession is still not in sight, the end will come. Effective tax planning now will help you to avoid reactivity and steer you towards being strategic. In particular, avoid tax planning outcomes that lock you into untenable situations and bode poorly for your future business viability. Instead, bring together your brightest strategic and financial minds, both internally and externally, to identify opportunities for tax planning that meets both your short- and long-term goals.
06 Outsourcing back-end services
Outsourcing isn’t a new concept. There are, however, different ways to approach it. Some of the modern approaches to outsourcing can be the difference between success and failure for your business.
Yes, there’s always an up-front cost to outsourcing. That said, there’s also an opportunity cost to keeping work in-house: it means losing out on all the value you’d get from outsourcing back-end services.
For example, rather than having a single payroll employee struggling under the demands of the role, outsourcing gives you access to a dedicated team of skilled professionals. This team will not only be experts in everything relating to your compliance and regulatory framework, but also in broad industry trends. This wider experience and remit can reveal potential cost savings you may not have thought of before. It can also give your business access to wider industry data that you are able to strategically tap into.
In other words, you’re investing in expertise, efficiency and a streamlined service that you just can’t achieve in-house.
In the context of a recession, where you might be considering redundancies and layoffs, outsourcing can also reduce the pressure on your remaining employees. Rather than leaving your smaller in-house team to struggle with the same workload, outsourcing to an external team can help them manage the balance.
Now isn’t the time to let your employee welfare fall by the wayside. Pairing outsourcing with a focus on team wellbeing will create a by-product of business continuity. Your remaining team will feel supported while, at the same time, you’ll be building external relationships to keep core business functions running.
It’s not just about surviving a downturn
Surviving and then thriving after an economic downturn requires big-picture thinking. The here and now is important, but so too is long-term business viability. Many businesses who focus on the short-term may make it through the downturn. However, without adapting to a long-term vision, they then find themselves in new, uncharted industry landscapes once the downturn has passed. This makes surviving into the future a significant challenge.
Where traditional cost-cutting measures focus heavily on keeping the business above water, that’s not enough for long-term, post-COVID survival.
Now is not the time to focus on costs above all else. The hard work you’ve done to foster a positive employee culture and plan strategically for the future will be key drivers of your company’s success.
In fact, in the new world order, they’ll be your competitive advantage. Balance isn’t easy, but when you achieve it, it will pay dividends for years to come.
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