May 28 2009|11.41 PM UTC

Stan Reybern

11 Ways Businesses are Cutting Costs Without Firing Employees

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To hear the media tell it, the entire business world is in flux. But not every company is succumbing to economic despair. While many are laying off employees, closing offices, and slashing budgets, others are preserving employee morale and staying afloat without such painful sacrifices. Following, are twelve ways that these praiseworthy businesses are avoiding layoffs and staying the course.

Reducing hours worked per week

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While reducing the hours each employee works per week is not the most popular tactic, it is infinitely preferable to losing one’s job. Even scaling back from forty hours a week to 35 can go a long way toward keeping the workforce intact without bankrupting the company. And for those employees who aren’t living paycheck to paycheck, the extra time off can even be a welcome change. The New York Times writes about a few maverick managers who have experimented – successfully – with a 24 hour work week.

Offering flexible scheduling

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One way to soften the blow of reduced hourly workloads is to let employees choose their own schedule. By requiring employees to be present for “peak” hours but letting them choose their remaining schedule, businesses can counteract the unhappy  necessity of cutting hours by giving employees a small sense of control over how it gets implemented.

Auditing office supply expenses

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Trivial as it may seem, runaway office expenses can add up to serious waste. Smart businesses are striving to audit these expenses and cut them to the bone before conducting any layoffs. As EffortlessHR.com correctly remarks:

“Employees need the tools to get the job done, but do you need twelve different colors of Post-Its and six different kinds of pens?”

The bigger the company, the bigger impact these kinds of unexamined office expenses can have on the employment budget.

Eliminating or reducing executive-level bonuses

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When a company’s economic forecast worsens to the point of pay cuts becoming necessary, these often begin at the executive level. Motorola has set a terrific example in 2009 by announcing that it would be cutting the salaries of its co-CEO’s by 25%. Starting pay cuts at the executive level achieves two goals:

1) Greater cost savings, as executive salaries are higher than rank-and-file; and,

2) A sense of shared sacrifice that gives employees less reason to protest their own pay cuts (if they become necessary).

Percentage reductions in pay

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The most unpopular cost-cutting measure short of an outright layoff is reducing an employee’s pay. Nevertheless, when times are tough, there is often no other way to keep everyone on board than to temporarily institute a percentage reduction in pay. Common reductions are 5% but these can be as high as 10% or more.

Offering employees unpaid vacations/imposing mandatory holidays

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Not every employee at every company is living paycheck to paycheck. For these fortunate folks, the unpaid vacations being instituted by a growing number of businesses are a most welcome perk. Others may not be as supportive of this tactic – described by MSNBC as “the vacation no one wants” – but by scheduling unpaid vacations around the same time, businesses can limit employee suffering and save money without layoffs. Another way companies are saving some money  is to schedule occasional mandatory, unpaid holidays. While this is heavily criticized under normal circumstances, it is more palatable during recessions, when the alternative could be total loss of income.

Substituting telecommuting for in-person work

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One of the most painless ways to cut costs without cutting jobs is to substitute telecommuting for in-person work. This is especially attractive for support and IT positions, whose duties can be carried out remotely without the overhead of keeping someone fed, heated, or cooled in an office (or insured, et al). And unlike many of the job-saving measures we’ve discussed, few employees complain about working from their homes.

Eliminating unnecessary traveling and meetings

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For many of the same reasons telecommuting makes sense, companies that eliminate unnecessary traveling and meetings may find it easier to retain more of their employees. Instead of shelling out big bucks for airfare and hotel stays, cost-conscious companies like Bayer Corp. are conducting meetings virtually using technology that allows people to “chat in real time and watch each other’s life-size images on screens that created the effect of being at the same conference table down to the bottled water, coffee cups and laptops.”

Hiring freezes

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A company struggling to retain its existing workforce has no business hiring new employees. As a result, many businesses have implemented temporary hiring freezes that limit the workforce to those employees already on the payroll. State and municipal governments have frequently utilized this retention strategy as well.

Salary/raise freezes

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Going hand-in-hand with hiring freezes are salary and raise freezes. As the name implies, this is simply a company-wide policy of holding everyone’s salary to its current level and agreeing to forgo pay raises while the company gets back on solid footing. As with so many other measures discussed, this policy is never celebrated, but still preferred to layoffs.

Eliminating or scaling back corporate parties, luncheons, and events

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In the same vein as cutting wasteful office supply spending, eliminating or scaling back corporate events can provide a much-needed boost to a company’s budget. In recessionary times, luncheons and parties are luxuries when it comes down to choosing between them or keeping people employed, and this is one obvious place to save a few bucks when the opportunity arises.

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{ 10 comments… read them below or add one }

Andy Englund May 29, 2009 at 2:36 pm

Also, many companies are implementing power saving strategies, such as by turning off any unused electronics and lights at night, and by fine tuning their HVAC (Heating Ventilation Air Conditioning) systems to cool or heat less when people aren’t in the building(s). These things may sound obvious, but many companies (especially large ones) leave lights and computers on all of the time, and never bother optimizing their heating and cooling systems.

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last standing May 29, 2009 at 3:56 pm

How about a company that does all of the above and more.
Pay freeze, no hiring, tell staff compulsory 5 per cent salary cut, then hit them with a special extra 10 per cent as well. Give staff four weeks to move states or counted as “voluntary redundancy”. Move jobs overseas. Cut staff by 20 per cent. Monitor everyone with meaningless metrics. Not telling the customers that service no longer matters, only expenditure matters (not revenue)
Give the CEO 42 MILLION as a bonus. six board members take 142 MILLION. Company makes 2 BILLION profit a quarter, but is burning up clients. Just remember that when Mark Hurd leaves HP and comes to your industry.
We used to invent. Now we just sell ink from a third world country to grab as much cash as we can from your pocket.
I still love my job and making a difference for our customers, but I hate the company.

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Dudleyjenn May 29, 2009 at 6:46 pm

Outsource as much as possible – especially whatever a non-core area is — i,e print buying.

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green May 30, 2009 at 2:07 am

Company can sell its IT equipment and rent it back.

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Sherry June 1, 2009 at 2:19 pm

Outsourcing for our company means lost jobs. My company isn’t perfect, but they’ve done just about everything on this list in order to avoid losing anymore personnel, even to outsourcing. Everyone in the company, CEO down took pay cuts, salary freezes and bonuses are suspended until further notice. We’ve gone so far as to have a “garage sale” to sell equipment/furniture/etc that the company had in storage or no longer had need of due employee cutbacks we endured last year. But still- the morale loss is just as bad as the cuts to everyone’s purses. For all my company has done to shave dollars where able, they’ve done little to bolster confidence.

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Hannah June 4, 2009 at 5:52 am

There are many good ways to reduce costs without layoffs, including those mentioned above. Good ways to preserve all employees’ fate at the expense of each individual feeling the pinch without anyone receiving the ultimate blow. everyone’s future But it all only works when the commitment starts at the top; when top executives make the first and deepest sacrifices.

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Free Energy Tips June 22, 2009 at 10:54 am

My company turns off the A/C after 6 pm, and has all the lights (except the lobby ones) on motion sensors. After everyone leaves, they go off.

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Charlie July 8, 2009 at 2:24 pm

Another great way to cut costs is to focus on your requisition process. Even if you insitute a
salary and/or hiring freeze, your existing staff will still need things. With estimates for
the cost of processing a single requisition running somewhere between $70 and $150, implementing
an e-procurement solution can cut the amoutn of time spent on this by 70%. This in turn frees up
the procurement department to do what it does best: Negotiate better pricing and save your company
even more money. Better yet, use a Software as a Service solution so you don’t need to spend more
on IT to maintain it. Coupa’s E-procurement Software is a great
tool to accomplish all of these goals, saving you money and saving your employees’ jobs.

Reply

Harold Hills July 22, 2009 at 2:05 pm

Another GREAT idea is to develop a LEAN strategy that includes education on how to eliminate waste at every position. There are eight known wastes – Defects (making things that must be repaired or thrown out due to poor quality production, Overproduction (making a thousand parts when only one hundred are needed), Waiting (Operators having to wait for up-stream operations to finish the above mentioned thousand parts is one great source of wait time), Non-utilized people (having a welder just sit at his work station while up-stream operations finish a batch of parts is an example of non-utilized people – having the welder move parts from one end of a plant to the next is another example), transportation (moving parts long distances because the plant isn’t properly laid out is one example of transportation waste), Inventory (excessive inventory is one of the worst forms of waste due to a number of issues including cash being tied up in idle parts, space taken up to house those idled parts, and search time to find needed parts), Motion (usually found at individual work stations due to poor design of the work area and flow), and Extra Processing (extra work done to a product even though the customer doesn’t care if that work gets done or not – a chrome finish when a dull finish would have sufficed is one example).
These eight wastes are inherent in every operation – from farming to brain surgery and can be easily removed with little to no cost. Education and awareness are the key to getting this done.
Peace,
Harry

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Sarah Hill September 15, 2011 at 2:40 pm

I love the ideas of unpaid vacations and telecommuting! Depending on the type or size of your business, fleet (gas) cards can save a lot of money too. We started using http://www.fleetcardsusa.com/ and saved over $2,000 last year.

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