What to do with employees during uncertain times?
Not everything we encounter can be changed, but nothing can be changed until we have encountered it.
— James Baldwin
I have received feedback and questions after publishing the previous blog (How to Act in Times of Uncertainty?). Some of them are from abroad. Therefore, I want to clarify that the situation described is based on the situation in Latvia (as of April 3), which is different from what is happening in other countries. For example, at this point, industrial enterprises and construction activities, as well as the functioning of stores and restaurants (maximizing remote work and adhering to sanitary and social distancing rules), are not prohibited here. At the same time, all entertainment, cultural, sports, training, and other activities that involve gatherings of people are prohibited.
I would like to share some thoughts, based on frequently asked questions.
Question: What should we do with employees in these times?
Answer: Take maximum care of them! Not only because people have humanity, and business leaders are people, too, usually wise and experienced in life (even if there are doubts about a particular case…). Not only because you – as a leader – may know about possible problems your employees are facing or family tragedies that your decision might cause. But also because your employees are one of your company’s most important resources. Losing them is easy, growing and training new ones is difficult and expensive. It sounds cliché, but let’s think a little deeper.
What does “expensive” mean? What do you lose by laying off your employees, and what will you have to pay to restore the previous situation after the crisis?
Already now, the company will have to pay money related to employee layoffs. Such actions automatically create a “black wave” within the company. Depending on the level of layoffs, this wave can turn into a tsunami, which will destroy the culture your company has built for a long time.
It will automatically make the remaining employees seriously think about their chances of continuing to work here and other possible options. Thoughts will shift from your company’s survival and the prospects for future growth to a distant future.
Some of you may offer employees the option to receive unemployment benefits and come back when the situation improves. This might work for some. However, judging by the experience of 2009, when you start gathering the team again, you may find that your best “experts” have already found other jobs!
The logic is simple. Whenever your employee receives another tempting offer, they compare the potential benefit with the potential risk of losing their current job. There is always a price for this. By “temporarily laying off” employees, you immediately remove this risk from the equation. They are already unemployed! Therefore, the risk for the employee in accepting a new offer is “0”. But even if you offer them to return after the crisis, you will have to offer something much more tempting and pay a much higher price to get them to risk and leave their new job!
After the crisis, surviving B and C type companies (see How to Act in Times of Uncertainty?) will face a new challenge. At this point, some of your competitors may no longer be active. However, there will be others who are much stronger and better prepared for the “low start” than you! The rating of all suppliers in the eyes of your clients will change rapidly. Will you be at the top of this ranking?
That depends on whether you can quickly offer your clients exactly the value-added services (VAS) they need! At this point, one of the main criteria for value-added services will be the ability to deliver the required quantity, but faster (and with longer payment terms)! Of course, quality, service levels, and other VAS criteria will also be important. But “faster” will be much more important than before.
How can you ensure faster delivery of increased volumes? Perhaps you have maintained all the equipment and technologies. However, you no longer have several specialists who can perform the necessary work and ensure the required production capacity.
Let’s assume that the crisis is coming to an end, some of your competitors sharply increase their offers, come up with new attractive deals, and start earning a lot of money.
Your business survived during the crisis, but now it could “die” during the growth phase! To prevent that from happening, you urgently need to restore your business’s “humanitarian capacity”.
This means – urgently searching for new employees.
The first problem is that while simpler workers may be found quickly, finding specialists will take longer. Will these employees prove to be good enough? You’ll find that out, perhaps during the probation period or later. It is clear that no employee will be ready to work exactly in your company, with your technologies, products, rules, and internal culture. Employee training and adaptation will take time.
I offer one theoretical thought chain (example):
Attracting mid-level specialists.
Time from decision-making to hiring – 1-3 months.
Training and adaptation time, when their productivity and contribution to the company is on average 50% (0-90%) – 1-3 months.
In addition, there is the possibility that the specialist will turn out to be unsuitable for the position – 10% (?).
Other employees’ time spent training the specialist, costs for organizing the workplace, work clothing, social packages, etc.
As a result, in this example, without the layoff money, you would need to pay 3-4 months’ salary to return to the previous humanitarian capacity level. But the worst part is that there will be several months when you will still lack capacity, and the company will not be able to make a breakthrough and will lose real orders and money.
This also means that you may lose some clients who will go to “faster” competitors!
Conclusion: In this example, with a crisis duration of 5-6 months, it would be more cost-effective for the company to keep such specialists than to lay them off.
Of course, this is possible if the company has reserves or a more or less regular cash flow. How to control, measure, and how important it is to maintain it was discussed earlier (see How to Act in Times of Uncertainty?).
You need to search for and use all possible assistance mechanisms available during this time (state unemployment benefits, possible credit instruments, etc.).
Question: Does this mean the company should pay employees for doing nothing?
Answer: No! This reduced activity time is perfect for doing what you didn’t have time for in previous years! I remind you that this is for B and C type companies, which are still working in some form, better or worse. A type companies are closed, they don’t operate, and there’s no other option but to reduce all possible maintenance costs, including laying off employees…
Moreover, this needs to be done quickly. “The worst thing is to cut a dog’s tail into small pieces”.
In my course, I created 3 tools to be used when there’s a shortage of labor (and at the time it seemed the most important!) and 6 tools for when the company lacks work. These can be revisited today.
Five tools for utilizing workforce in a "soft situation":
- Use time to improve processes, reduce lead-time.
- Use time to increase technological reserve capacity (RC).
- Use time to create the necessary VHRK (Virtual Humanitarian Reserve Capacity).
- Convert HRK into increased throughput (T).
- Use time to create △Reserves.
In this article, I will explain only the third – creating VHRK. Many companies’ policies focus on deep specialization of employees, dividing them into departments, sections, and shifts. Employees with deep specialization are valued and do not “interfere with others’ tasks”. A frequently heard conversation in manufacturing companies: “We are short of 3-4 welders (assemblers, painters, etc.), yet the company employs 100-150 workers.” This means that at any given time, this company is short of some welders, but always has excess workers! By definition, no company can have a perfectly balanced specialist composition at any given moment. There are always changes in the order structure, product specifics, people get sick, take vacations, etc.
The principle of creating VHRK is to abandon deep specialization and move towards employee skills universalization. This means that there are 100 employees in the company, but at the same time, there are 200 or 300 different (and varying levels of) specialists! And the company’s culture is such that each of them is ready to switch to a different task and understands the benefits for both themselves and the company.
This time is great for dedicating time to employee training, building VHRK within the company. This will allow, once activities are revived, to quickly increase product volumes for products that will be in high demand at that time!
And another technique already used among entrepreneurs is “employee lending”.
There are companies working in different industries. Some have spare workers, while others are short on them. It’s possible, by making the appropriate agreement, to lend employee capacity to the company that currently needs it. Replacing the “every man for himself” strategy with a win-win situation, solving both companies’ problems and giving people an opportunity to earn.
Usually, this applies to simpler workers. But it is possible that many of them might have other qualifications that are currently underutilized.
I think a new option might appear for higher-level specialists as well.
Let me explain. There are several companies that have stopped operating. These companies have highly qualified specialists who are hoping for a potential business revival after the crisis. Perhaps these companies’ leaders don’t want to lay off their best specialists, but at the same time cannot pay them the previous amount of money.
On the other hand, there are many companies that are successfully operating during this time, and demand for their products is rising sharply. However, they are making many mistakes and showing unprofessionalism, such as in quality, service, customer service, etc. Could it be possible to start “lending” specialists from one company to another? For example, the specialist would work 2 days a week for one company and 3 days a week for the second. Companies should make their deals so that everyone would benefit and receive their slice of profit. In such situations, when specialists are absolutely “necessary” for both companies, the use of talent can lead to mutual advantages.
Dear colleagues, HR company leaders, isn’t it true that the one who can organize this type of business information and specialist exchange will gain new opportunities for their own business as well?
Take care of people, and they will take care of your business.
― John Maxwell