Written By: Peony Wong @ Ooosh Coworking
Laying off staff is one of the most common ways that companies cut non-essential headcounts or operating costs during an economic downturn. It isn’t the best solution, but who can blame them?
Economic downturns don’t just come and go overnight - they are like a tough climb up the hill. Sometimes, companies have to take drastic measures to keep the business going. This is why lay-offs have become one of the default “go-to” methods of curbing operational costs. However, it doesn’t come without a price. Lay-offs can reduce the surface labour costs of the company, but they come with a number of business risks that some companies would rather steer clear of. Some of these risks include:
Increase in cost. You have probably heard that your staff are your biggest asset. You have invested a lot of time and resources to hire and train them, and they have built loyalty to you over time. Once you lay them off, you lose all you have invested in them, and you will have to re-invest when you hire again.
Drop-in morale. The more staff you let go, the more the workload increases for the rest of the team. This becomes a burden on your remaining staff who is already losing a great level of trust in the company, and morale will drop.
Bad company reputation. This speaks for itself. Lay-offs can often cause shock, sadness and even outrage, especially when handled poorly. They often don’t reflect well on a company’s reputation.
Losing skilled talents. Sometimes the skills of your staff are much more important than the economic situation of things. When the economy picks up again, hiring will be difficult as top performers and high potentials tend to prioritise employers who stick with their staff in tough times.
Considering all the risk factors mentioned above, the question is, do you really want to take the risk? Is the economic downturn really going to hit you if you keep your staff? If so, are you definitely ready to take this step? Have you considered other possible solutions on your plate?
Before making that lay-off decision, you may consider conducting a comprehensive audit to see if the economic downturn has any material impact on your business. In some cases, it may not even affect your company at all. The audit helps prevent unnecessary cuts and also identify any flaws or inefficiencies in your business model.
In this blog, we are going to look at some doable measures you can take after you have carried out an assessment and confirmed that you are in a crisis.
Stay lean: cut the costs
Regardless of the economic environment, there are a thousand and one reasons for a business to always stay lean in terms of its operating costs and expenditures. You need to regularly reassess these, as well as any office expenses, as they can get a little bit out of hand sometimes. With so many resources invested in offices and furniture for each of your staff across all levels, it can be a challenge to keep costs down.
There is a way out to this - coworking spaces. Sharing the workspaces between your staff will be an immediate reduction in your expenses on offices and office furniture. This gives you the assurance that your office costs are as flexible as they can be.
With Ooosh coworking spaces, you can maximise the flexibility on your office expenses with membership fees that are based on headcounts. Other creative ways involve using a combination of private rooms and hot desks for your staff who have different working arrangements. This keeps your office lean and always ready to change – more like a mobile office that is always ready to move. It’s no surprise that this approach saves you a lot on costs and effectively takes the hassle out of managing a fixed-contract office with spaces you may not even need. Coworking spaces can also save you other costs such as renovation and equipment - both of these can be a significant investment for smaller businesses. Once the total of these costs is reduced, you will start to see improvement in your financial levels.
Finally, you can try refocusing your staff on what matters the most - driving sales. By this, we mean that you can offload some of the administrative duties like cleaning, utilities, and reception. All these are just an unnecessary burden on your staff when you are going through an economic downturn. Let them focus on sales until things are back in order.
Keep learning: sharpen your skills
One of the wise things you can do in an economic downturn is to keep learning. The world keeps changing as new tech and approaches are used in businesses today. The last thing you want is to realise the major reason why you are at risk in an economic downturn is that you are not keeping up with the latest productivity trends. Consider attending the workshops hosted by Ooosh to find out what latest skills the market needs and boost your inspirations to do more and work more efficiently.
Make sure that your team keeps improving. This can be achieved through learning about new technologies and new skills to improve efficiency, or training your team to adapt to new developments. Use tools such as cloud-based CRM, social media management, and project management tools. They will save you the costs of hiring specialised personnel in performing the same functions. Some recommended tools include:
Asana: an easy-to-use yet versatile and powerful task management tool.
Pipedrive: an affordable all-in-one CRM tool, widely integrable with other tools.
Keep growing: never back down
Naturally, you want your business to keep growing and exploring new opportunities - there are tons of them out there, waiting to be harnessed. Try to keep the same level of marketing budget or even increase it to keep generating leads. The more leads you get and land, the better position you are in surviving the downturn.
Take advantage of the networking opportunities within the Ooosh community, which is made up of businesses and entrepreneurs from both the “old economy” and “new economy”. You can stay as active as you can in our regular events to expose yourself to the host of opportunities on offer. Our team is also happy to connect you with any member you would love to meet.
Another way to take advantage of what Ooosh offers is to seek advice - not just any advice but advice from experts only. By leveraging the growth support resources of Ooosh, you can seek business advice from vertical experts such as the Ooosh Digital Marketing Mentor from digital marketing agency, MWI. There is also a range of perks of being part of the Ooosh community, including free cloud-processing service credits on Google Cloud for Startups. This should go a long way in saving you from unnecessary and avoidable expenses.
Work as a team: share the news
Running a company is more of a team game than you can imagine. Try not to keep things only to yourself. Share the difficulties with your team, and you might receive a solution from whom or where you least expected.
While it is sometimes a safer option not to reveal highly-sensitive information to your staff, it wouldn’t be fair on them if you keep everything from them. Be transparent with your team, at least about the present state of the company and any upcoming policies that will have an impact on them. This saves you a lot of stress and will help you get a more engaged workforce. Why? Most people want to keep their job. There is nothing that screams urgency to a team than the thought of losing their job.
As the business owner, you need to keep your mind open and clear when handling an economic downturn. Consider all the possibilities and don’t let fear make the decision for you. Is there an option for you to approach cost-cutting in a different, better way? Is laying off your staff in the best interests of your stakeholders and have you come up with a plan to communicate the message? At times of challenge, keep a smart mind and allow yourself to make responsible decisions to all your stakeholders, including your staff.
Often, when businesses come into rough financial times, they consider lay-offs as an easy way to boost the bottom line. Cut some overheads and reap the benefits, right? Not always.
In the near term, not only will there be the costs of severance pay and benefits continuance, but other direct and indirect costs come into play too, which in fact makes lay-offs less appealing. In the long run, the cost savings pale in comparison to what you will spend on hiring and training once the economy picks up again. However, if you take the measures we mentioned in this blog, there’s a good chance that you will be able to sail through the downturn without letting go of your staff. It may even be your opportunity to thrive!