I think we all intuitively know that employees, especially good ones, are valuable assets for the business. So why then, when a business is in a lull or a downturn, do they immediately let go of staff? Doesn’t it seem counter-intuitive?
I’m sure there is a better way to get around this and, if I would have you believe, you already have the mechanisms to do it.
One of the most common reasons for businesses making staff redundant is to reduce their wage bills. Cutting this cost is the quickest way to free up cash and extend the runway of the business.
However, I believe this is incredibly short-sighted. It’s like saying – “I need to lose weight fast, so I’ll cut off one of my legs.” Sure, you have lost weight, but now you are also missing a leg! This is exactly what it is like when you let go of employees for financial reasons, it just makes everything you do from here on out that much harder.
When you let go of employees, you lose corporate knowledge, you lose people who know your business, your market and your networks and these knowledge take time and money to generate.
So instead of saving money, you gain new costs including:
- Opportunity Cost – as you have lost all future opportunities to earn revenue from the employee’s skills and efforts.
- Turnover Cost – you have invested so much in recruiting, training and mentoring the employee to be effective but you are going to throw all that investment in the bin only to repeat the cost when you need the next employee.
- Redundancy Cost – this seems all too common these days.
- Reputation damage – from the market seeing you slash jobs, and
- Cultural damage – how motivated are your current employees after they have just survived the second round of layoffs in the last six months? I guarantee you that they are already looking for a new job just in case they are next.
This is your typical lose/lose situation. Nobody wins. So how can we turn this situation around?
Well let’s look at lessons from the sharing economy. Nowadays, if you are saving for a new holiday, you don’t need to cut your spending anymore. You can just earn extra money on the side using your under-utilised assets. For example, your under-utilised car in the driveway can be used to drive for Uber and your unoccupied bedroom can be put on AirBnB.
So why can’t businesses earn extra money when they need it, by getting a return on their valuable, under-utilised assets – their employees?
You already have the mechanisms to do it – contracting, sub-contracting and secondments. These methods have historically been limited to consulting or professional services firms, but as Bob Dylan once said, “the times they are a changin’”.
Most industries these days are becoming contract-based. Companies don’t want to hold the risk and most tasks are completed in a project format, so there is a massive nation-wide shift to managing staff contractually and huge demand for short-term external support.
This presents the opportunity for businesses to hold on to their valuable staff during lull periods by contracting them out to other companies that need the support. Think of it as the agility of the gig economy coupled with the stability of a full-time team.
Start paying attention to what your networks and preferred partners are looking for in terms of short-term Talent and link this up with the work tempo in your operations departments. You never know, you may just find the perfect contract to fill that lull in work.
This shows your employee and their peers that you value them as a team member and will think outside the square in an effort to keep them as part of the team. Then watch this compound in your business culture, productivity and ultimately – your revenue.
Cover photo by Peter Conlan on Unsplash
This article is contributed by BenchOn.
Want to learn more about how you can manage your Contingent Workforce better? Join Tim at the Contingent Workforce Workshops 2018 in Melbourne or Sydney to find out more!
