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Managing the downturn: A 13-step plan to avoid layoffs

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in HR Management,Human Resources

by Howard Stewart

We were lucky enough at AGM Container Controls to have a good period of growth during the most recent recession, so we didn’t have to lay off any employees. In fact, we haven’t laid off anyone for 20 years.

It hasn’t been easy. We’ve gone through times when we were tempted to lay people off, and we had to come up with reasons not to do it. That has helped us in the long run.

Now, I’ve made it official policy to follow a 13-step plan to avoid layoffs in the future. Here they are:

1. Hire a new employee only when we can see a long-term demand for the person’s service. Otherwise, we’ll make do with the people we have by using compulsory and voluntary overtime to avoid hiring.

2. Cross-train employees, so if a specific product line or department is slow, we can move employees to a more productive area of the company.

3. Continually communicate with employees about projected downturns in business so they can prepare psychologically and financially. Example: In 2009, we saw a significant drop-off in backlog, i.e, the number of orders received but hasn’t yet shipped. That’s an indication that work will slow down. So I warned employees about what was coming, and that I would be asking for volunteers for furloughs. I encouraged the staff to hang onto their Christmas bonuses in case they needed the money to tide them over if we had to implement furloughs. As it turned out, we did furlough about a third of our employees a few months later—but we were able to stagger them so nobody was gone for more than a week unless he or she requested the longer break.

4. Freeze hiring on significant positions whenever back­log drops. In fact, we’ve frozen hiring on four open positions.

5. Consider hiring from within to fill essential positions. When times are trying, we look for internal candidates who aren’t so busy that they can’t step up to a promotion. That way, you can keep your head count low without firing anyone.

6. Keep a backlog of thousands of hours of low-priority projects to keep employees busy during downturns.

7. Increase the inventory of standard product components during downturns. This builds up inventory so it will be on hand when good times resume—and gives employees productive work to do when orders are slow.

8. Take inventory during slow periods. Regular production employees can help with inventory when they’re not busy with their regular jobs.

9. Reassign jobs from outside contractors to current em­­­­­­ployees. Instead of laying off employees from departments that are slow, assign them to janitorial or housekeeping duties.

10. Save nonroutine tasks like roof repairs, painting, paving and landscaping for employees to do when their regular jobs are slow. Sure, someone who usually assembles wheelchair lifts might object to spending the day painting, but only until he realizes he’d be laid off if he weren’t painting.

11. Freeze wages and salaries until better times resume. During the recession, I was able to avoid that for hourly employees, but salaried workers had to wait for their raises. During a post-recession surge, we were lucky enough to be able to grant raises retroactively to the date employees would have received their increases had we not implemented the freeze.

12. Encourage employees to use vacation days during downturns. We even paid a small bonus—$20 per day—to workers who agreed to do it.  That way, I had them here when I needed them as the workload ramped back up.

13. Ask employees to take voluntary leaves of absence during slow periods; you’ll be surprised how many will be glad to do it. Target highly compensated, nonessential employees, as they likely have more savings. Plus, the company saves more money that way. If no volunteers come forward, make those leaves compulsory.

AGM’s 13-step plan paid off in the first quarter of 2010, when our backlog decreased again. Instead of laying off employees, we had them around when the backlog spiked during the second quarter.

And not one employee quit.


Author: Howard Stewart is president and CEO of employee-owned AGM Container Controls, which makes wheelchair lifts and control devices for containers that hold missiles and engines. Contact him through Jeremy Belitsos at jeremy@mcfaddengavender.com.

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