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Six possible alternatives to lay-offs, if you are a business owner

Here are some of the unconventional measures to lay-offs that might have a better pay off in the long run.

As a founder or leader, your priority is to keep the business afloat. In these challenging times, when businesses are reeling from the economic effects of the pandemic, the natural reflex is to cut operational costs. 

And lay-offs are a popular and immediate cost-saving measure. However, a recent Harvard Business Review (HBR) article highlights that those who manage the economic effects of this crisis in a clear and compassionate way create more value for their companies.

For one, lay-offs lower morale of the prevailing workforce, affecting their future engagement and sense of loyalty. Moreover, it might prove short-sighted. Any bounce back in business and the loss of seasoned staff will make the business ill-prepared to capitalize on forthcoming opportunities.

Here are some of the unconventional measures to lay-offs that are really doable:

1. Create a time bank

Singapore’s National Wages Council recently suggested this measure to companies in the wake of the job losses. Here, you pay employees in full despite working for lesser hours now, in agreement that they will utilize these unutilized hours for work in the future. Entrepreneurs can also reduce the blow from a salary cut by juxtaposing it with the creation of a time bank. 

Similarly, one can explore using employee’s downtime productively by developing a training plan that meets current and future requirements. 

2. More stock, less salary

Many Indian start-ups have reportedly issued ESOPs (Employee Stock-Options) to their employees while also cutting their salaries. ESOPs allow employees to subscribe to the equity capital of their employer at a reduced price from its fair value. It builds a sense of ownership and belonging in the employer firm and acts as a good lever to retain talent.

Moreover, be open about the firm’s financial health and your plans. By making employees part of the strategic decision-making process, there is a better buy-in for the initiatives you prioritize. 

3. Crowdsource ideas 

Best survival ideas might not necessarily come from the top. So keep the floor open for employees to suggest ideas. To begin the crowdsourcing process, leaders should offer a structure by articulating that they intend to prioritize initiatives with lower capital requirements, lower risk profiles, proven positive impact on cash flow, higher chances of saving jobs and so on, mentions the HBR article. 

Moreover, be open about the firm’s financial health and your plans. By making employees part of the strategic decision-making process, there is a better buy-in for the initiatives you prioritize. 

4. Extend your runaway

If existing cash will run its course for a year, stretch it. In addition to streamlining costs, consider raising capital from venture capitalists. While it could mean diluting equity and issuing shares at a bargain in these times, it can also be a game-changer. For instance, retaining an adept workforce with strong institutional knowledge can more than compensate for their cost when the tide turns and you want to ramp up.

Alternatively, if you have sizeable assets or revenues, consider raising money through a debt/convertible issuance by securing future cash flows. 

5. Exchange workers

Large firms can exchange employees among their group entities. Small firms can try it with partner firms or vendors. It leads to cross-pollination of skills, retention of employees and temporary wage relief. For instance, some marketing or research talent can be shared with host firms that might need them to bolster their business. Remember some firms in the area of online education, digital content, e-commerce, FMCG and medical are still doing brisk business. 

6. Lead by example

If all measures fail, as a leader, take the biggest salary cut. Work on a decelerating scale (from top to bottom) of reducing salaries – whereby the top management takes the biggest cut while those in the lower salary range are largely protected. 

Working for reduced hours is another way of cutting costs. However, one can reduce its blow by allowing employees to moonlight. Voluntary unpaid leave or sabbatical is another option that could be given to employees. Under worse circumstances, implement temporary furloughs that help retain talent on the fringes. 

Takeaway

Coronavirus pandemic might be an opportunity to stand out by demonstrating ingenuity and compassion. Offering compensating equity can strengthen solidarity while crowdsourcing ideas result in better buy-ins for the initiatives you prioritize.

 

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