How the world has changed in recent months! As we’ve transitioned to working from home and back again—all whilst struggling to balance the challenges of “the new normal” during a global health epidemic—I wanted to offer a few thoughts on the value of human capital.
As the owner of a closely held company or family business, the financial pressure to reduce staff in order to keep your organization in the black may feel overwhelming to you just now. But the old adage a bird in the hand is worth two in the bush is particularly apt when it comes to your employees. When we emerge from the COVID-19 crisis and begin to work towards a stabilized economy, the companies who tightened their operational belts in order to keep staff on the payroll may have a distinct advantage—and the ones who don’t will likely see me on the business turnaround keynote speaker circuit.
Here are just a few reasons to retain your top talent if at all possible—along with some basic crisis management strategies to cut operational costs in order to keep your team intact.
A-PLAYERS ARE ALWAYS A VALUABLE ASSET.
If you’ve already put in the work to find the A-players currently on your team, it will be incredibly frustrating to settle for B-leaguers down the road—especially during a recovery period. Over the years, both in my own work life and in my conversation on the business turnaround keynote speaker circuit, I’ve found that the most commonly shared trait of “essential employees” is usually a positive attitude. Having these upbeat, can-do people on your team will be crucial as you adapt to new economic conditions.
When I was in the middle of turning around my 100-year-old family business, we sadly had to close a loss-making dealership—and of course, that process involved making some necessary redundancies. As much as we could, though, we tried to take the long view, keeping as many of our productive employees as possible. We knew that once we’d successfully stopped our losses, we’d need these critical staff members to grow our business again. This is exactly why the UK government has just extended their package of financial support for businesses, including paying up to 80% of all employees’ salaries up to £2,500 a month (US$3,000).
NEW EMPLOYEES ARE EXPENSIVE. VERY EXPENSIVE.
According to studies conducted by the Work Institute, each departure costs your company approximately one-third the employee’s annual earnings—both in soft costs like reduced productivity and interview time, and hard costs like recruiting, background checks and temp workers. Particularly for smaller closely held companies or family businesses, it can be difficult to compete with larger corporations who can offer more robust health benefits or stock options. These perks will be paramount for incoming employees in a recovery economy, so you may be looking at additional expenditures. Bottom line: it’s cheaper to just keep them.
YOUR YOUNGER EMPLOYEES MAY SURPRISE YOU
We’ve talked about the intellectual capital of established employees, and as I’ve mentioned, I don’t deny their value. But there’s nothing like a remote global economy—one that basically had to be set up and deployed in a few days’ time, no less—to call your team’s technical shortfalls into sharp relief. As we adjust to the seemingly endless parade of Zoom meetings and staggering array of digital productivity and organizational tools, you may start to see some bright new leaders emerging…and they may NOT be who you’d expected.
The current situation is precisely the kind of environment in which the “digital native” workforce, including younger Millennials and even some Gen Z employees, can truly shine. When evaluating who’s critical to the success of your company, I encourage you to look beyond salary and seniority. The most nimble employees are often the youngest and most junior—and it will do your team well to have some members for whom remote working and technology tools are second nature. These kids just might teach you something new.
3 WAYS TO CUT COSTS + KEEP YOUR BEST PEOPLE
As a business owner, you have a wider social responsibility to support your local economy by keeping people employed and doing your part to keep the supply chain healthy. If you are in the fortunate position to have solid cash flow, with reserves to see you through the next three months as a minimum, I’d encourage you to try to maintain business as usual. Here are three basic strategies to help you “trim the fat” from your current operations.
1. CASH IN. What can you do NOW to generate the cash you need to sustain your business for the next 3–6 months, minimum? Here are a few ideas to think about.
- Sell off your older inventory—even if it’s at a loss
- Get serious about chasing debtors + accounts receivable
- Negotiate longer payment terms with your major suppliers
- Increase your lines of credit with banks + finance companies
- Offer larger customers a discount for early payment of invoices
2. TRIM FAT. As difficult as it will be, now is the time to eliminate anyone on your team who is not pulling his or her weight. As I mentioned above, this process should be age- and experience-agnostic—look at long-term potential as well as general ability to contribute to the recovery of your business. It’s also wise to be open-minded about skill sets, and ask your remaining team members to do the same; during a global recession, most people don’t mind being asked to assume new duties
3. WORK LEAN. Now’s also the time to prune back your operating expenses in any way you can. Don’t be afraid to get creative…and remember, it never hurts to ask.
- Renegotiate property leases or ask for temporary rent relief. Landlords don’t want empty properties, so they may be willing to work with you.
- Look at all subscriptions and memberships to see if they are essential
- Audit your company-owned or leased vehicles and ditch any you don’t need
- Eliminate marketing and advertising costs or reduce to the bare minimum
- Incentivize staff for collection of debt with a bonus. This can be very effective in generating a cash injection for the business. (By doing this,
we collected $600k of aged debt that the accountants wanted to write off!)
I wish you well during this difficult time, and hope that you are able to hang on to the staff that will be needed to grow your business once we get through this crisis. In the meantime, stay safe and healthy.
Here’s to Your Business Success!
Richard J. Bryan
Business Contingency Planning: What, Why + How