Managing Through a Recession: Part 1 – Maintaining Staff Levels

by Tony Burge – President, Tony Burge Consulting

From the outset, I acknowledge that in many cases it is not possible to maintain staff levels and the hardest decision a business owner can make-reducing staff-is often required. Every business owner I have met feels responsible, to some degree, for the well-being of his employees. Even at corporate levels, managers of business units make every effort to manage through a recession without reducing head count (even though profitability is the goal of Wall Street, the business is run by real people having real interaction with other people). What can business owners and managers of large business units do to potentially weather the storm of a recession without reducing staff?

Communicate Reality to Employees and Suppliers.
Employees must be made aware of the seriousness of the situation-and not through an email or Memo, please! A one hour presentation focused on the financial situation of the enterprise (not all the details, just a high level review), steps that must be taken to secure solvency, and a request for all to recommit to the success of the business is an effective approach in which I have participated. The majority of the employees take such honesty for what it is, respect the trust shared, and are willing to modify habits and behavior to help the business survive during tough economic conditions. There will always be a small percentage of employees who feel that the owner or business unit manager is out to get them and will not be satisfied regardless of what information is shared-these are the employees that would be first on my cut list, if a cut becomes necessary. They not only impede your ability to maintain staffing levels, they spread negativity to other employees who are struggling to stay positive.

Communicating to employees is probably obvious, but why suppliers? Because part of the process requires negotiating the best terms possible. Terms such as reducing volume levels for discounts, making more favorable payment terms (from Net 30 to Net 45 or Net 60), and flexibility with accommodating spurious order patterns are required.

Diligent Cost Reduction.
During times of surplus, it is nearly universal that costs rise at a faster pace than income. In short, waste is tolerated as we toast one another for a successful deal closed and treat customers to nice dinners and evenings out. With revenues diminishing and operation margins narrowing, it becomes necessary to conduct an exhaustive analysis of all expenses. This is not popular with suppliers and employees, which is why they must understand the seriousness of the situation.

I have been part of organizations that have had very liberal Travel & Living (T&L) Expense policies, use of office supplies, and liberal time off policies (e.g., two-hour lunches, taking half days undocumented, etc.). During a recession, it is essential that cost is minimized and productivity maximized. This is not popular. I know from experience, and I have been on both sides (as a manager and the affected employee). I admit I was not happy about the additional scrutiny given to my expense reports, the lack of pens and sticky notes in the supply closet, and increased responsibility with more pressure to produce and be held accountable for results. However, I appreciated the honesty of the CEO who presented the facts to us in advance. Diligent cost control is absolutely the single-most important activity a business owner or business unit manager can undertake to manage through a recession while minimizing impact to staffing levels.

Increased Diligence in Accounts Receivable.
If we hesitate to ask more prudence from our employees, we really hesitate to add pressure to our customer base to pay as agreed. But this is essential to the health of your business. Your priority is to maintain the health of your business and the concomitant benefits of maintaining staff levels. Part of this responsibility entails diligence in collecting on accounts. The squeaky wheel gets the grease comes in to play. We all dread phone calls (and making them) regarding collecting on receivables, but there is a way to do it without alienating the client base. A small investment in a monthly invoice accompanied by a small promotional brochure takes some of the sting out of the process while keeping your rightful request for payment forefront in their minds. A monthly phone call (or more often as required) can be softened by discussing promotions as well-this instills confidence in the customer that, although late payment is not acceptable, you value their continued patronage.

In the next installment, I will discuss specific cost-cutting and productivity measures that can be taken to improve operation margin when sales are low. Until then, I welcome your comments and stories.

About the Author:
Tony Burge is the President of Tony Burge Consulting — a senior-level strategic management and marketing professional with nearly 20 years of versatile, proven commercial business experience with an advanced industrial wireless and software development background. For more information, please visit http://www.tonyburgeco.com.

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