As a founder or leader, keeping business afloat is your focus. In these difficult times, as companies reel from the pandemic’s economic consequences, the normal instinct is to slash operating costs.
For one, lay-offs reduce morale of the dominant workforce, impacting their potential commitment and loyalty. This can also be short-sighted. Any turnaround of sales and lack of experienced employees would leave the company unable to capitalize on potential opportunities.
Here are some very doable unorthodox lay-off measures:
Increasing stocks, less wages
Several Indian start-ups reportedly gave their employees ESOPs (Employee Stock-Options), while also cutting their salaries. ESOPs require workers to commit to their employer’s equity at a price below its fair value. It establishes pride and belonging within the employer firm and serves as a strong lever to maintain talent.
Extend your trip
When current cash runs for a year, extend it. Besides streamlining expenses, consider raising venture capital. Although this may mean diluting equity and issuing stock at a bargain these days, it can also be a game-changer. For example, maintaining an skilled workforce with good institutional expertise will more than cover their expense when the tide turns, and you decide to ramp up.
When you have significant assets or sales, consider raising capital through debt / convertible issuance by securing potential cash flows.
Large companies will share employees among their classes. Small companies can seek with partners or vendors. This triggers ability cross-pollination, employee retention, and immediate wage relief. For example, some marketing or research expertise can be shared with host firms who may need to support their company. Note that online education, digital content, e-commerce, FMCG and medical firms are all doing brisk business.
Case by case
When all steps fail, take the largest pay cut as a dictator. Function on a decelerating scale (from top to bottom) of wage reduction – whereby top management takes the largest cut, whereas those in the lower wage range are generally covered.
Operating for reduced hours is another way to cut costs. However, encouraging workers to moonlight will blow their all. Voluntary unpaid or sabbatical leave is another choice for workers. Implement temporary furloughs in worse conditions that help retain fringes talent.