Finding Alternatives to Layoffs
During the periodic downturns in the Oil and Gas business, layoffs are often part of the predictable response.
The first article in this series ‘Coping with the crude oil price crunch’ highlighted some layoff related risks and costs that may be ignored or underestimated.
Under-appreciated costs of layoffs included:
- diverted management time and attention
- loss of expertise
- reduced productivity and loyalty
- increased expense when hiring and training new employees as the business recovers
The viability and long term health of most organizations clearly requires adjustments in staffing during extended downturns.
However, many businesses have found alternatives to layoffs that reduce the related risks, costs and long term negative effects.
Some alternatives to layoffs include:
1. Cut contractors and part-time employees.
In their place, bring back retirees temporarily.
Even on a part-time basis their experience will often allow them to be more productive than temporary employees.
2. Institute a hiring freeze.
Put off filling vacancies until a recovery is in sight.
3. Reduce work hours.
Initiate reduced work weeks or hours or consider job sharing in lieu of layoffs.
4. Offer unpaid sabbaticals.
Hundreds of companies including Boston Consulting, eBay and Blue Cross Blue Shield offer both paid and unpaid sabbaticals.
A surprising number of employees may welcome some time off until the business improves.
5. Offer incentives to leave.
Shell, GM, Delta Airlines and many other companies have used financial incentives to encourage employees to retire early or leave the company.
These programs normally have fewer adverse side effects than involuntary programs.
6. Lend employees to other departments or divisions.
“Inplacement” can help retain experience and expertise that will be critical during a recovery, even when their skills are not an exact fit.
Offer cross-training to smooth the transition.
7. Delay raises and bonuses.
Obviously these actions are unpopular so start at the top to show that the sacrifice will be shared by all.
8. Expand telecommuting and virtual teams.
Going virtual can reduce commuting time and expense and partially offset deferred salary increases or reduced work weeks.
More to come…
These options focus on labor costs. Obviously there are many other approaches to cost reduction that take aim at materials, inventories, equipment, transportation, energy, capital, etc.
Part 3 of this series will describe ways to involve employees and build ownership in a broad range of cost-reduction initiatives.
About the Author
Alec Schrader is a Senior Associate with EKT Interactive in Houston, TX.
He conducts leadership training and facilitates workshops that help improve team and organizational performance.
He retired from Shell Oil Company after 35 years in the Oil and Gas business. He holds a PhD in Industrial and Organizational Psychology.