TO RETAIN or to retrench - that is the question many companies ask themselves as they consider their cost-cutting options during difficult times. Many often face this dilemma: maintaining staff strength poses a heavy financial burden but retrenching employees can seriously erode staff morale.
However, there are several alternatives companies can consider before giving employees the axe, which is a drastic, cost-saving measure that ought to be the very last resort.
Train to retain
During hard times, companies are under pressure to curb costs and stretch every dollar. However, they tend to concentrate primarily on the business at hand and put human capital issues on the back burner.
Human capital is a precious resource. In good times or bad, investing in employee training and development is a critical factor in attracting and retaining a superior labour force. A well-organised training programme can help companies identify skill gaps.
With enhanced skills and knowledge, employees are able to carry out existing tasks more efficiently. Additionally, staff training and development can be entwined with succession plans that prepare top talent to take on a different or new role in the organisation.
Therefore, companies should take advantage of slow growth periods to upgrade the skills of their staff. Employee training and development also double as a retention tool. It conveys to staff that employers value them.
Taking measures to retain valued employees ultimately saves cost, preserves profit margins and leads to better business opportunities. It will also ensure that the workforce is nimble and ready when market conditions improve.
Adopting flexible working arrangements can help defray operating costs and does not do permanent damage to employer branding. Retrenchment, on the other hand, can be harmful to the company's image.
To solve manpower issues without incurring too much cost, companies can consider enforcing a shorter work week or implementing forced leave.
With work compacted into four days or fewer, companies need not pay full wages while maintaining full staff strength. A shorter work week would also encourage companies to manage by results rather than the "face-time" of their employees.
An added benefit is that such working arrangements promote a work-life balance that enhances employer branding. Busy executives thus profit as it gives them the opportunity to manage their work and personal lives better.
The immediate returns of implementing such human resource management practices include lower operating costs. Long-term benefits include staff loyalty, improved productivity, increased retention and a healthier bottom line.
Small steps, big savings
Companies can also explore alternative ways of cost-cutting. This includes implementing temporary salary cuts and scaling back bonuses. Companies can also make adjustments to the monthly variable component in employees' salaries or even freeze wage increments until the economy recovers. Reflecting on the current global financial crisis, many people would more than welcome pay cuts to stave off retrenchment.
Going green is an effective way of containing costs as well. While exercising prudence on electricity consumption and paper wastage may result in marginal savings, these measures are no less crucial to a company's overall cost-containment plans.
If all else fails...
However, if employers have to resort to retrenchment, it is important to be sympathetic and sensitive to those being laid off. As retrenchment can be an emotionally and psychologically difficult period, employers should consider providing counselling for laid-off staff and engage outplacement services to help them explore other job opportunities.
Providing such support shows that the company has a heart and will leave a lasting good impression, even if the circumstances are unpleasant.
Ultimately, employers should consider all other avenues of slashing costs rather than letting staff go.
Tightening the corporate belt is a better alternative to cutting headcount.
It imbues in staff a deeper sense of loyalty and enhances employer branding - when good times come around again, companies will find it easier to retain and attract quality talent.