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Managing Cutback Staff

Laura Colony's Profile

If you have cutback pay and cutback staff due to these economic and uncertain times, how are you managing/discussing adding more and more on to people?  What is the messaging?  Or if it's happening to you, do you just hold your peace and shut up and be thankful to have a job?  Would love to hear feedback on any others who have handled this or gone through it with themselves or with managing staff.


(Agent, JKS Solutions, Inc.) |

We had to do it last Winter. We had two meetings with employees about a month apart telling them our situation and advising them that we needed their help so that we wouldn't have to make cuts. We started by cutting the amount of mileage reimbursement and reducing cell phones and other small things, but by the third meeting, we told them we were giving a 10% temporary pay cut to everyone. If they couldn't accept that, we told them to talk to us individually after the meeting. All employees accepted even though it was difficult. A few months later we laid off 2 people. It was a very difficult time and we are still barely keeping our head above water.

Jeffrey Cattani
Title: Unemployed
Company: Unemployed
(Unemployed, Unemployed) |

I have worked for large and small companies. In all the times that we went through cutbacks in headcount I survived until the last one. This time it was more a political ball game and not my skills and experience. My last employer had the ability to manage our core business but they could not do the back office organizations correctly and that included making change. As example being that we upgrade our financial system for one mail reason and in the end that was a complete failure.

When it came to the cutbacks they were not completely thought out and done poorly. Elimination was done jobs but had no plan on how to get the work completed. In an area that was millions of dollars of expenses that was just starting to get cleaned up. Also, after my last employer completed a merger that actual added more head count that the two companies had together. They played shell games with who was considered a head count with our contractors and who was not. Just shows that games people play and the ability to really know and understand our business by management.

Topic Expert
John Kogan
Title: CEO/CFO
Company: Proformative, Inc.
(CEO/CFO, Proformative, Inc.) |

As a four time Silicon Valley CFO, working through two serious crash cycles (dot bomb and now) I have had to deal with this far too often. My lesson is, know who you really need to keep on board before you start saying anything, and create plans to keep them on board if they don't "play ball" with your cuts. Then, communicate, communicate, communicate. If your messaging is all behind closed doors it will get out in the open very quickly and you will have very unhappy employees and productivity will plummet as everyone searches for new jobs.

However, if you are as up front as possible and can paint a picture of how everyone can pull together, sacrifice and get the company and themselves through the tough times, then you have a much better shot at getting everyone to pull at the oars.

There are ways to try to keep people whole as your company is cutting back. a)defer pay until after the company is profitable, b)add a bonus plan based on company performance which, if the company hits the numbers, will pay out and make up some or all of the difference (this one really aligns interests with the company's ability to pay) and c)equity.

Hope that helps a bit. Keep your chin up. Tough being the finance leader during these times.

Craig Canter
Title: Controller
(Controller, ) |

My company's owners use a "nuts-to-you" approach. Their attitude always has been - even in good times - that the majority of employers are replaceable within a day or two. Now the attitude is we're lucky to have a job. There is not a "sharing of the pain" now nor a "sharing of the gain" when things turn around.

The best I can do is to make sure my staff know how much I value them, to give a much leeway as I can when they need a few hours to leave early/family/etc, and to try to keep the work load managable. We've gone from a department of 7 to 3 so the workload isn't always managable. I give them the freedom to shape the job as efficiently as they can to give a sense of ownership and pride.

But - at the end of the day - I don't expect any of us will stay once there are better opportunities.

Daniel Schmitt
Title: SVP/Cashier
Company: State Bank of De Kalb
(SVP/Cashier, State Bank of De Kalb) |

I've seen this time and again. Having been in banking for many years I've seen a lot of staff come and go. Unfortunately, I've never found an easy way to cutback. Once layoffs begin you're going to have a lot of bitter people and everyone will have a different reaction to those events. Some people can be easily counseled and can quickly move on while others just seem to want to hate you forever.

Remember that if you are an employee that it's just a job. That is, you can be replaced in a heartbeat and, on the flip side, you can leave and anytime to greener pastures.

Mark Von Der Linn
Title: Principal
(Principal, |

As a consultant, and even as an employee in the past, I hate to see firms cutting people when they haven't really done all they can to cut costs first. Many think they have, but don't know what they don't know. I wish more execs were humble enough to admit they (and their people) might be missing something and make a small investment in bringing in expertise to look for savings opportunities.

Laura Colony
Title: Controller/HR Director
Company: BioTech Company
(Controller/HR Director, BioTech Company) |

I agree with all. Craig, we are going through the same thing here. I can only do so much and fortunately, my direct reports do understand and are really sticking in there and helping eachother and me out. I have been through this a couple of times too, but what's surprising is that I agree that letting people know what's going on to a certain extent (communication) is important, my lips are sealed by uppers and that's making it challenging.
And, Mark, I agree too. The sad part is that the boss did hire a consultant, and everyone is wondering why their pay is still cut, yet we are paying this consultant a "gazillion" bucks and they haven't seen any changes. Well, I have to agree. Of course, this is the consultant I would not have recommended and wasn't the one I recommended, but sometimes the big kahuna wants a buddy up there with him.
I think these are all difficult times for many people; but, it's during these times when we most need to think strategically and treat our co-workers and staff with the utmost respect in order to have it returned. Otherwise, when the economy does get up and go, people will move on to better pastures -- or even just other pastures.

Doug Hutchison
Title: CFO/Treasurer
Company: Construction industry
(CFO/Treasurer, Construction industry) |

We got creative with cutting costs 18 months ago. Since then, it's been layoffs here and there. I have been through this more than once, and at the end of the day, "overhead" walks in your front door everyday. For most businesses, the largest portion of "non-fixed" G&A expenses are salaries and salary-related expenses (benefits, T&E, etc).

Office supplies and employee benefits are the first things that get attacked in the "war on shrinking revenues/margins." Rent, utilities, and maintenance costs are largely fixed and are rarely adjustable in the short-term. Salary rollbacks rarely work. They only serve to alienate the good people and keep around the ones that probably need to go anyway.

Headcount is bound to get cut eventually regardless of the methods you employ. There's no "silver bullet" just plenty of targets.

Mark Von Der Linn
Title: Principal
(Principal, |

Doug H, Yes, the overhead costs you mentioned are somewhat fixed, but not as much as people might think. I think this is why these areas tend to get overlooked, thus my comment. Power usage, for example, can be decreased through lighting replacement initiatives (sometimes even subsidized) and telecom has big potential for savings... Managers tend to think,"we're in a contract with our carrier so we can't do anything", but there ARE things you can do to generate big savings. Many of the experts out there who can help with these types of initiatives work on contingency, so there isn't even any financial risk.

Doug Hutchison
Title: CFO/Treasurer
Company: Construction industry
(CFO/Treasurer, Construction industry) |

Agreed, Mark. I guess I was assuming that these steps had previously been taken. A CFO's responsibility is to leave no stone unturned before reducing headcount. Everything's negotiable in a poor economy whether "under contract" or not.

Mark Von Der Linn
Title: Principal
(Principal, |

Yes, agreed... contracts are negotiable and also sometimes have flexibility to them that people are unaware of.

Nate Cammack
Title: CFO
(CFO, ) |

No one touched on this one yet - so I will. If you grow systems and procedures without any human slack built in, then you can easily "overbuilt" when tough times arrive. If your systems/procedures run excellently on full staff, but adequately on 80% staff, then you might be able to absorb the effects of downside without losing control. If you overbuild, then you can't flex when you have to - the more complex your systems are, the more they chain you to a certain resource level.
On the human side, truth, always. As long as people have visibility and understand the situation, I have found that they can be and usually are, exceptionally professional and courageous as well. They'll share the risk or the downside with you as long as you've been truthful.

William Tennison
Title: CFO
Company: Tennison Associates, Inc
(CFO, Tennison Associates, Inc) |

Many companies facing cashflow issues begin softly with minor reductions (supplies, travel, entertainment, etc.) If a company sees they are in a temporary crunch that will last less than one year, there is often a salary reduction accross the board. Most employees are savy enough to either accept this as a temporary situation, or make a decision to change environmments as soon as possible to regain lost income.

Once the decision is made to reduce headcount, all too often the mistake is made to cut the lower level personnel, rather than upper and middle management. From an operational standpoint, this may put a severe strain on the individuals left with the company to produce at "the same level" management expects.

If productivity levels are not taken into account when making reductions, the remaining staff can burn out within a short time frame. Management will then be faced with trying to manage the remaining staff and not hire anyone due to the hiring freeze in place. Based on prior experience, you will lose staff as soon as another opportunity will avail itself. Often this will come at the most inopportune time.

In many cases, when cutbacks occur, new staff is rehired within a one year time frame. With this, there is normally a large training curve to get the new staff up to the level of the staff previously let go.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

In many cases, staff reductions are short sighted attempts to hit short term goals. In my view, if senior management has allowed a company to be "over staffed" the senior managers should be out the door first. But it seldom works that way.

In the end, it is the staff that feels the pain, not the senior managers. That needs to change. Here are the people who should be first out the door if a company is over staffed:

HR Director

Find someone for these positions that know how to staff correctly.

PS - I am willing to bet I can find significant money on the balance sheet to keep people employed. A/R aging is the first place to look. Start getting the deadbeats to pay.

Laura Colony
Title: Controller/HR Director
Company: BioTech Company
(Controller/HR Director, BioTech Company) |

I agree Scott. Top should be looked at first. However, I also think one has to look at the size of the company. Here's why.

I have seen the management team get together on the first round of layoffs and "cull" the ones that weren't putting in their share. Then the second round comes up. I'm fortunate that I didn't have to let anyone on my team go -- we were already running mean and lean. But because other departments didn't run well, it got thrown into my department (small company) and that has overwhelmed my staff. And me. Because I have had to get the workload analyzed and made more efficient so my team would not feel as overwhelmed. I have provisioning, customer service, accounting, and front desk and HR. That's alot on anyone's plate.
I think the cuts are going to have to go deeper. Why? Because of being poorly run. When you have a small business owner that is too stubborn to listen, there's not a lot anyone can do. He's got a great management team and he's just not listening. I can't say that for other places I have worked at. Having worked at large, SEC companies, I have seen where upper management kept on laying off the lowest ones. Then when it got down to just the highest paid ones (Managers and directors) that were not hands on, the company (this particular office) couldn't figure out why they couldn't get the work done. One of the directors couldn't even run the computer system!
Maybe I have to play the devil and not just the devil's advocate here, but as managers and business owners, one has to take responsibility -- personal responsibility -- for the management of the organization. Period. No ands, ifs or buts.
And bless those of you stuck with stubborn, mule-headed bosses that treat people so poorly.

David Cole
Company: Haines, Isenbarger & Skiba LLC
(CPA, CVA, CRFAC, CGMA, Haines, Isenbarger & Skiba LLC) |

Raw materials in my opinion. What is the largest expense that a manufacturing business has? Labor? No way. It's the raw materials. You can make a greater and longer lasting impact by going here first. It takes longer and is harder, but you can save more jobs by doing that. Next up is overhead...smaller scale but still can be better than labor/wages. By hitting those two areas hard two things happen. One is you'll be surprised what you can find and act on. Second is that if you still don't have enough cut, it makes the people aspect easier for everyone to deal with because those being let go will understand that you've looked at everything else first instead of copping out and going straight to people costs. Key here is to start early and not procrastinate because if you do, then you'll be forced to take the people route.


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