The grimness is inescapable. Whether we like it or not, we're inundated by constant headlines and news segments that lay out everything that's been happening in the United States since COVID-19 hit months ago – and that includes the constant news about layoffs.
Quarantined to our homes, many of us haven't hugged a family member or friend in months. Running essential errands or going on brief, socially-distanced walks are among the only reasons we have to get out of our homes anymore. As you can imagine, this begets an increased mental and emotional toll as people experience increased levels of anxiety, insomnia, irritability and depression.
Beyond the strain a pandemic can cause to our personal lives, businesses, employees, and the economy have been hit especially hard by COVID-19. Non-essential businesses have been forced to close, some temporarily and others for good. Businesses that are still lucky enough to be open are operating under entirely different protocols.
Layoffs are a quick fix, not a long-term answer
When the novel coronavirus pandemic first hit, business owners across the United States were already preparing for layoffs. This is understandable as CEOs looked around and watched as countless others went that route in an attempt to salvage profits and, ultimately, the entire business. But this monkey see, monkey do mentality can do more harm than good.
No business owner wants to watch his or her profits decline, not only for the sake of one’s own bank account, but because shrinking revenue usually comes with dire consequences. Under normal circumstances, this could mean upending your entire operations and refocusing your efforts to course-correct your growth. Or it could mean having to make the difficult decision of letting a small number of employees go if their roles no longer serve the long-term goals of the business.
But these aren't normal circumstances and, therefore, traditional solutions can't always be applied. To CEOs that feel pressured to make layoffs, I ask: Is it worth it? If you're making a little less money than you have been, I question whether these layoffs are the correct decision for the long term. The Harvard Business Review, back in 2002, pointed out that companies that found solutions around laying their employees off during a rough financial period actually outperformed other companies.
If your organization is under a significant amount of financial stress, don't immediately look to layoffs. Firing people isn’t the easy solution it’s wrongly perceived to be, and if you do them for the wrong reasons, it seldom actually helps a company achieve its goals. Instead, consider these steps to navigate tough financial times.
Include your employees in the decision-making process
Do you consider your employees part of your family? Well, your employees should be like family, but that sentiment means nothing unless upheld in the most trying times.
The vitality of your business will be tested on occasion, especially during unpredicted catastrophes. During the 2008 financial crisis, this is what happened to Barry-Wehmiller, a manufacturing technology company in St. Louis. Its CEO, Bob Chapman, was forced to decide between layoffs or letting his company go under. He did neither. Instead, he was transparent with his employees about the state of the company and they all agreed to make sacrifices like taking temporary salary cuts, suspending the company’s 401(k) matching program, and each employee taking four weeks of unpaid leave at a time of their choosing. Not only did the company survive, but no employees lost their jobs.
You'd be surprised to find that your employees are willing to make sacrifices in light of difficult times to help the company and, at the same time, protect themselves.
If you consider your employees to be family, this should be evident in how you choose to protect them when your back is up against the wall. It's easy to measure how someone's salary could contribute to your profitability, but what cannot be measured is the impact letting go of your top talent will have on your organization now and in the future.
Work to find more creative strategic solutions
Creativity is a weapon against unpredictability and uncertainty. No business could have ever prepared for the onslaught of COVID-19, but it's possible to use these circumstances to your advantage. If your current products or services don't benefit consumers in this time, it's time to reinvent yourself, if only for the time being.
Take the Australia-based company Cheeky Food Events. Its entire business model revolved around corporate team-building events that were centered around cooking — an impossibility today because of the coronavirus. Instead of throwing in the towel, it adapted its operations to deliver catering options to remote workforces. Another example of this is a micro-distillery in Oregon. Shine Distillery & Grill couldn't serve its usual customer base because of the pandemic, so it switched gears and became a temporary private-label hand sanitizer manufacturer. It reported that its business doubled in sales overnight.
These businesses aren't lucky; they simply saw an opportunity in the current space and adjusted their businesses to avoid loss of profits.
Take advantage of financial relief programs
The coronavirus pandemic has upended the entire economy, leaving business owners forced to make some of the most challenging decisions they'll ever have to make. While budgets need to be reallocated and sacrifices need to be made, there are incentives put in place that will give businesses some relief during these tough times.
One of these incentives includes the Paycheck Protection Program (PPP), a federal loan that is helping small to medium-sized businesses continue to pay their employees. It was signed into law in March and ran out shockingly fast, which prompted another $310 billion to be added to the funds. The stakes for this loan are high, with many businesses having yet to receive their money, but this next round will hopefully bring more luck. And once you do receive the money, it's important to use the loan correctly so you don't pay the price when it comes time to account for your funds.
These are uncertain times for business owners. They are feeling the weight of the world on their shoulders. Like with any erratic situation, there is no one right or wrong way to handle things. But before you make any rash decisions that could have an impact on your employees and the future of your business, it's essential to think through your options. What works for one company may not be the right choice for your own.
Image credit: Jose Fontano/Unsplash
Paige Soya is Managing Director at Everest Capital Group, which provides corporate financial consulting and investment analysis to companies across the globe. Paige holds over 15 years of financial experience and over 4 years in C-suite level and executive management roles.