Talent shortages, a recession and CFOs projecting business growth — all contribute to a hot mess for organizations trying to address current and ongoing staffing needs. Executive teams are gearing up to make difficult decisions to protect their business as they navigate a new set of circumstances. How do you secure critical talent while making any required reductions in headcount?
The current time poses unique challenges. Results from the most recent Grant Thornton CFO survey reveal that “while 58% expect continued challenges in attracting and retaining the right talent, 43% report their organization is looking at human capital cuts as a key area for cost reductions and 42% of CFOs believe growth will exceed 5%.” Organizations don’t generally cut talent while anticipating growth, and this exiting of talent overall poses yet another layer of difficulty.
It is important to recognize that we are in an entirely different marketplace where talent continues to be scarce, and workers are ‘highly’ differentiated in the type of work they want to do.”
“In such an environment, it’s important not to make rash decisions to eliminate people or have that be your ‘go-to’ strategy as you may never recover that talent. It is important to recognize that we are in an entirely different marketplace where talent continues to be scarce, and workers are ‘highly’ differentiated in the type of work they want to do,” said Margaret Belden, a director in Grant Thornton’s People and Organization practice.
Decisions about staff reduction are further complicated by the radically changed work environment. Layoffs are a potentially traumatic event that should be handled with sensitivity. What this means in an age of remote work, digital communications and social media requires fresh thinking.
Look for alternatives
Before we get into how to manage employees and potential layoffs, let’s consider other levers that organizations can consider to reduce costs and streamline operations.
- Strategic review: Reconsider and refine your business strategy and enterprise-wide initiatives. What are the critical business needs that must be met, and which ones can be eliminated or deprioritized? Partner with Global Sourcing to evaluate third—party vendor arrangements and business needs.
- Business optimization: Task each business line leader with determining where operational and staffing efficiencies can be gained. Is unnecessary work being performed and/or are there redundancies in how the work is being executed? Can certain projects be scaled back, delayed or cut?
- Compensation and benefit adjustments: Evaluate your total rewards to determine if there are cost—saving opportunities and tradeoffs related to freezing wage increases, modifying work schedules, or reducing less impactful benefits.
Proceed with caution
If layoffs are a chosen option, keep in mind that 48% of workers who leave an organization move to a different industry or pursue entrepreneurial options, so they may never be recruited back. Just a short time ago you were, and likely still are, scrambling to recruit and retain talent.
The following approach will help you comprehensively evaluate your options as you navigate short-term pressures while acknowledging long-term goals.
- Prioritize roles into categories of risk and criticality to your business. Consider the unique, hard-to-fill roles and scarce skill sets you must retain. Are there job functions that are not driving business performance or that can be automated or outsourced?
- Conduct a thoughtful review of talent against the roles needing to be reduced, establishing clear and objective criteria to identify individuals whose roles will be eliminated.
- Consider the business impact by performing a business continuity review to understand the impact of roles and talent you will eliminate on your ability to meet your business needs and the workload impact on those employees that remain.
Be kind, respectful and transparent
Layoffs and reductions are highly visible both internally and externally and are amplified by social media; current and prospective hires are watching how you treat people. No one likes to be laid off, but if you plan thoughtfully, communicate honestly and treat employees fairly, you will maintain your employees as future ambassadors of your organization.
“Change management and communication strategies should be deployed throughout the entire process and seen as a way to build trust and relieve anxiety,” said Grant Thornton People and Organization Manager Whitney Blanchard. “Be noticeably clear on the why, the scope, the timing, and what economic conditions and pressures could lead to additional reviews of organization’s priorities and its resources.”
Do not overlook those employees who stay and the impact on their morale and productivity. Their friends may have been laid off and their optimism shaken. Gather your teams quickly to manage the messaging and allow time to reflect, react and ask questions about the decisions that were made.
Grant Thornton People and Organization Director Kim Jacoby shared: “Those who remain will likely experience increased stress, additional workload and most prominently a loss of colleagues. These changes will impact their engagement, productivity and decision to pursue opportunities elsewhere.”
Thoughtfulness matters
Once all other avenues of cost reduction are pursued, there are many challenges when organizations are faced with the reality of reducing their workforce. Grant Thornton People & Organization Manager Jenn Shaw emphasized that reductions “can provide an opportunity for an organization to redesign its processes and procedures to improve operational efficiencies, restructure, cross-train and reduce costs.”
As you tackle needed cost reductions, take a comprehensive and thoughtful approach — re-evaluate business priorities and projects, determine critical roles/skills to retain, make considered decisions on people that will be eliminated, treat them fairly, acknowledge the new work environment, communicate transparently with your employees and ensure that those that remain are supported.
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