Everyone is scrambling for ideas for cost cutting! Naturally the panic has increased phenomenally in the last few days and it is not without reason. Businesses are quoting ‘force majeure’ and contracts are being cancelled. Priority is to try and ensure there is cash flow to pay salaries and get more businesses.
Naturally HR folks are under the scanner to make things better. Other than laying off there are many options and here are a few things companies are doing:
1. Furloughs – these are leave without pay. Basically the organisation (i.e. HR) has to sweet talk the employees to accepting a few weeks to few months leave without pay. A rough calculation made is that where billing is not based on manhours, this can save a company anywhere between 5% to 25% of their salary costs alone. This may not be meaningful if the company bills on services.
2.Deferment of promotions, increments and bonus till a point in time one gets certainty around business
3. Firm partners and executive directors will take a pay cut from 10% to 50%
4. Freeze on all new hiring
5. Reviewing offers that are out – either defer joining by 90 days or rescind
6.Bonus payment deferred by two quarters
7.No encashment of leaves
8.Certain roles are made part-time with pay cuts
9.75pc pay for work from home days
10.Consultants and temporary staff discontinued
11.Review benefits – such as insurance premium payment, transport, company celebrations, outings.
12.Freeze travels even after the lockdown is over.
All of the above are related to HR costs or actions. There will of course be other cost saving measures such rationalising IT and infrastructure spend.
Before implementing any of these ideas blindly, what I strongly suggest to organisations is to ask their team to suggest options of cost optimisation and revenue generation. Recently, we did this in a small organisation and we received a total of 120 ideas from 48 people! Even if you discount 40% as similar ideas, we still have 48 ideas to work on. The key will be to prioritise, communicate and implement these. The prioritisation could be on the following basis:
1. Implementation timeline : Immediate/Later (5pts/3pts)
2. Impact on cost/revenue: High/Medium/Low (5pts/3pts/1pt)
3. Negative Impact on customer satisfaction: Low/Medium/High (5pts/3pts/1pt)
4. Negative Impact on employee morale: Low/Medium/High (5pts/3pts/1pt)
The idea that gets highest points must be implemented and communicated as soon as possible. It’s also vital to recognise the team’s contribution in providing ideas and making them feel empowered.
HR or the senior team then must engage the larger team on a continuous basis about the impact of the ideas and how things are getting better. It’s important to listen to the concerns and close the loop where required on these concerns. Last but not least, the team needs to start training for the upturn and preparing for frenetic activity then as well 🙂