Lay Off Layoffs
Pink slips aren’t the only option.
By Cecily O’Connor
The national unemployment rate hit 9.5 percent in June, and is expected to climb even further before we see any improvement. “This is the toughest time since the Great Depression,” says Barry Chiswick, distinguished professor at the University of Illinois at Chicago. “Employers are now compelled to give more serious thought to rationalizing the way they produce goods and services.”
Even as the US unemployment rate climbs to historic levels, accounting firms have several options open to them to dodge that most dreaded of words: “Layoff.”
Unpaid leave, equipment upgrade delays and work-from-home arrangements are among the steps being taken to trim the fat from their budgets. And while these measures aren’t exactly revolutionary, they are effective. They’re also long- rather than short-sighted. You don’t want to forfeit the investment you’ve made in developing your staff over the years, especially since you’re going to need those talented professionals when the economy turns around, says Paul Gladen, president of market research firm Muzeview, and a former Arthur Andersen partner.
An employer’s “decision is complicated by uncertainty over how long and how deep the recession will be,” says Gladen. “If the recession is going to be long, they need to act now; if the market begins to turn soon, they don't want to get caught short of resources.”
While there is no one-size-fits-all solution, employers across all industries are clinging to the cost-conscious zone in a bid to maximize profits in recessionary times.
“HR folks tend to stick with what they know, and the willingness to consider options other than staff reductions is noteworthy,” says David Van De Voort, consulting principal in human capital at Mercer, Chicago.
Here are five strategies that could save your employees from the chopping block.
1. Cut the Fun Stuff
Business travel is frequently the first cost to be cut, according to a January Challenger, Gray & Christmas survey of HR executives representing various industries. Hiring freezes and reductions, which are being used by 58 percent of employers, follow in popularity. In comparison, permanent workforce reductions are being made by 56 percent of companies.
Other cost-cutting measures include holiday party cancellations, bonus reductions and cutbacks in employee perks. Not surprisingly, entertainment-related expenses also are being heavily scrutinized.
“We are getting the message out about being more mindful of spending, and expecting that if our employees take a prospective client out to lunch that there’s an outcome,” says Suzanne Dodge, VP of HR at Perry-Smith LLP in Sacramento, Calif.
2. Take a Break
While once totally alien in concept, today it’s not unheard of to ask employees to take unpaid leaves or vacations during slow periods in the business cycle. For workers who can afford it, an extended vacation might be especially enticing during the summer or holiday season. This time off also may provide an opportunity to pursue personal interests or higher education while continuing to work.
“Things like sabbaticals and secondments, or opportunities to work in a not-forprofit where the firm pays you at 80 percent of your salary, are good because they are great development opportunities,” says Francine McKenna, author of the blog re: The Auditors?, and founder and president of McKenna Partners, a Chicago consulting firm.
“Furloughs are effective in discouraging workers from looking elsewhere for a job,” Chiswick adds. “In bad economic times, it’s hard to find a job, but if you’re laid off and collecting unemployment, you do have an incentive.”
3. Rethink “Work”
Restructure the work day to help manage talent in an environment where you’re forced to do more with less. Some BDO Siedman professionals will work more hours between January and April, and then reduce their work time between May and December, for example. Others may spend most of their time at client sites and then work from home when necessary, which essentially reduces the company’s overhead. Telemeeting and telecommuting tools are gaining in popularity as part of this trend.
4. Save Upgrades for Later
Delaying computer equipment upgrades is another cost-cutting approach. Some firms may choose to replace equipment every four years instead of every three. Policies concerning personal digital assistants and cell phones also are shifting, with firms making staff responsible for those purchases, Van De Voort explains.
5. Watch Benefits Costs
Employee benefits is an area in which firms have to tread carefully. That said, these days many workers would rather forego some benefits or contribute to them themselves rather than having to give up their jobs altogether. About 10 percent of HR professionals surveyed by the Society for Human Resource Management in October 2008 said they were cutting back on benefits to reduce staffing costs.
Additionally, some employers can choose to make 401(k) matches dependent upon company performance, or to cut the match altogether, says Van De Voort.
Layoffs in Accounting
The downturn has had a mixed effect in the accounting industry, says Geremy Cepin, director of PDI Global Executive Search in Chicago. Larger firms, especially those involved in the financial services industry, have scaled back operations, laying off staff at all levels, including professionals with lower, chargeable hours and smaller books of business.
Some smaller firms, on the other hand, are in the fortunate position of making strategic hires right now. “Many have been able to build their businesses by providing service on par with larger firms, but for less money. This means that smaller firms are getting more challenging engagements and need people with large firm experience more than ever,” says Cepin. “As a result, many accountants laid off by big firms are being absorbed right away by smaller firms, which are gaining talent that was previously difficult to attract.”
Perry-Smith LLP is among the firms hiring opportunistically right now, with sights on filling several senior positions in its San Francisco office. While not under the same financial constraints as other firms, Perry-Smith LLP's emphasis on staffing smartly offers an important reminder about not going overboard.
“We are regional and can’t afford the luxury of hiring outside our needs,” says Dodge. “We make it clear that when we hire we keep each team member fully utilized. Where there is a downturn, we see it as an opportunity to strengthen our team.”
“Laying off that excess can result in some short-term cost benefits, but it also can stir up long-term harm,” Gladen warns. “In some instances, the pressure to sustain partner earnings in the short term has outweighed...longer-term perspectives. Some firms may be damaging their long-term prospects, and badly handled situations may become magnified in the age of blogs, Facebook and Twitter.”