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Published on December 17, 2001

Cost-cutting alternatives to downsizing do exist

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Editor's Note: Mary Miles has 22 years of experience as a human resource professional, including 16 years at Tire Centers L.L.C. If you have personnel questions you'd like her to address in future columns, you can contact her by e-mailing tirebusiness@crain.com or using this issue's “Speak up!” card.




RICHFIELD, Ohio (Dec. 17, 2001)—The tire industry is experiencing the same financial pain as the rest of the U.S. economy. Even the talking heads are predicting the economy will remain soft for another six months.



As a result, management teams throughout the tire industry are reviewing their costs with angst. And many are concluding their company's salary expenses must decrease because there is slim hope in the immediate future of increasing gross profits.



For most businesses, downsizing personnel is the programmed response to the need for salary expense reductions. Maybe it's time to consider some unique alternatives to downsizing.



Here are 12 creative alternatives to forced elimination of staff that can help a company achieve its goal of reducing salary expense. Although each alternative has its pros and cons, they communicate the overall message that management is trying to cut costs in a manner that considers the best interests of the employees and the company.



1) Equally reduce all employee hours to the level that still qualifies them for company benefits. This is a “share the pain” approach that works best in a work environment where everyone feels like “we're all in this together.” Management should set the tone by taking the same pay reduction for the good of the company.



2) Ask two employees to job share. This alternative preferably would be implemented with two employees who don't need company benefits. Personalities and work habits should be considered with this approach. If you have an employee whose desk is extremely neat, they shouldn't be partnered with someone who measures progress by eliminating paper stacks from the floor. Likewise, if you have two employees who could replace the host of the TV show “The Weakest Link,” having them share a workspace may not be ideal.



3) Talk with each employee to determine the level of benefits they truly need. Your inquiries must be specific because the hours-worked requirement for medical benefits is often greater than that for the 401(k) program. Given this knowledge, their hours could be adjusted to meet their true needs.



4) Inquire about employees who have a need and qualify for the Family Leave Act. This program provides a 12-week leave without pay, while keeping benefits and seniority. Employees on Family Leave also may qualify for unemployment.



5) Develop and use a company furlough program. If you don't have a formalized furlough program you should seriously consider one. A furlough program is an extended-leave program that allows an employee to be on a leave without pay, qualify for unemployment and maintain their benefits and seniority. The leave can be for as short as a few weeks and as long as three months. Used properly, this alternative is great for people wanting to take an extended winter vacation and return when your business dictates.



6) Creatively use your long- or short-term disability program with an employee who may be fighting to stay at work but would recover better at home. Many disability programs have partial disability benefits that will assist an employee if they are able to return to work only on a part-time basis. It has been my experience that this partial benefit works well with a person who is undergoing cancer treatments and trying to work to maintain benefits etc. The person within the organization who most cares about the potentially disabled employee should initiate this discussion. Once the topic has been broached, an expert regarding the disability programs should be consulted.



7) Require each employee to take one additional day off per week. This day would be taken without pay or by using vacation pay. It also solves the additional problem of employees taking too much vacation time during the company's busy season.



8) Eliminate all scheduled overtime. This easy alternative is often overlooked. Overtime during difficult times should be allowed only if it is directly billed back to a customer. Overtime can be eliminated or reduced by staggering employees' start times and workdays.



9) Take the desired salary reduction percent as a company-wide reduction in pay. This alternative is only effective if the company's executives take the desired salary reduction before rolling it out to the rest of the employees. Do not attempt to implement this alternative unless your management has a tremendous relationship with your employees. Management must be brutally honest with itself in assessing whether it has enough of a following within the organization for this to be effective.



10) Review your list of employees on worker's compensation. Consider if there is an experienced employee who could return to work on a part-time or full-time schedule to assist the company in some capacity. This would reduce overall costs by minimizing the employee's worker's compensation expense and potentially eliminate the employee who was hired to take the injured worker's place.



11) Develop a severance program and then ask for volunteers. It's critical to place restrictions on key areas of the business where a reduction through severance may not be necessary or prudent. Remember to think this program through carefully or the company could lose its best and brightest employees.



12) Tell your employees the truth about the company's need for salary reductions. Then ask them for their own creative solutions.



After reviewing these options, your management may want to begin with alternative 12. Talk to your employees. Today's employees are amazingly cognizant of the profitability of the business and have cost saving suggestions. They are just waiting for someone to ask them the questions and then genuinely listen to their answers.



Ms. Miles is president of Miles Consulting in Richfield, Ohio

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