Vital tips for cutting costs and handling staff expectations

OK, if some organisations ‘fessed-up’, the first tranche of redundancies have included people who: weren’t performing; didn’t fit culturally; were too challenging; were too demanding; due to retire; didn’t have a clearly defined brief/job; and so on. In fact, the process was designed to test the water, show willingness to address problems and to cut costs – often driven by finance demanding an instant alleviation of fixed overheads. And you managed to keep the number of lay-offs below the magic 20, or 100 – to avoid the legal requirement of a one- or three-month consultation period, but will this do the trick? How are your remaining staff feeling? Are they waiting for the next round of cuts? Was it really strategic enough?

What organisations seem to fail to grasp right now is that, no matter what any of our ministers, business gurus or the press may say, we will come up and out of this economic situation (I still refuse to use the emotive R-word); it is just a matter of when. The sooner we realise that we can get there, the better. However, we do need to make fundamental changes to the way we employ, manage and reward staff.

Here are some examples of how certain strategies have been applied successfully:

• JCB has agreed with directors and staff a £50-a-week across-the-board pay cut;
• Directors at one service company have all taken a 25% pay cut;
• Law and accountancy firms are seconding staff to their clients – on reduced pay;
• A number of executive boards are going to staff in ailing teams and allowing them to decide for themselves whether the firm should make X number of colleagues redundant – or the team takes a 20%-30% pay cut. So far they have all selected the pay cut.

Lessons learned?
These actions are quantum leaps in the right direction. My concern is that they may not be enough – they are not necessarily sufficient to go into 2010. These actions should be far more fundamental to have the best possible impact. For example:

• Agree pay reductions of 20%-50%, but keep everyone on five days a week: how else are you going to manage client relationships?
• Why not grade the pay cuts, with more from the most senior staff and less from the more junior/lower-paid staff?
• Can you relocate/assign staff to China or the Far East if your business is global?
• Why not include the whole firm, rather than just teams, and so have savings to reward staff who are delivering and can deliver more?

What do your staff want?
Through recent outplacement support projects, we would suggest that many redundant staff, having seen a reorganisation on the horizon, have been saving and reconfiguring their finances to prepare for living on less. Didn’t we see enormous hikes in salaries (especially in the legal, financial and other professional sectors), which became overheated in the ‘battle for talent’ over the last five or more years? What if we returned all salaries to a basic that is 25%–50% less and introduced strong performance-related pay and real flexible benefits? How would your staff respond? What would be their concerns? How will you ever know unless you ask them?

Re-educating Generation Y (and us)
Generation Y (those aged between 20-35) have never experienced failure, always passed their GCSEs, A levels, and/or got university degrees, and so on. They have been paid premiums for their jobs, and worse still, we have been telling them they are the ‘golden talent of the future’. It isn’t surprising they are a bit arrogant. But now we are talking about letting some of these staff go because neither they nor we, their managers, can work out how else to save costs. This seems an appalling missed opportunity.

It seems to me we need to re-educate these confident and buoyant people about how they save or spend their money. And we need to relearn the lessons of our parents during previous abstemious times. Maybe they don’t need to go off for stag weekends costing £5,000 per person, or have dinner out for £300 per couple (twice a week), or go on exotic holidays three times a year. Mind you, does that apply to we ‘SKI parents’ (spend the kids’ inheritance) too? We need to help them (and us) realise life can be good on less – you just need to be imaginative and creative.

It’s all about self-determination and choice. Now we are in an environment of survival of the fittest, of can-do attitudes, we can give back to staff a sense of self-determination and choice. However, they still have the choice about whether they wish to be employed by you or not, and need to realise you too have the choice about whether to keep them, and only if they give you the best of their efforts. Let’s work on having better-managed teams so that nothing falls through the cracks.

Patricia Wheatley Burt (FCIPD) is principal consultant for people management consultancy Trafalgar