Tips for placing workers during a crisis

Is redundancy necessary?

The public is led to believe that laying off a worker in these difficult times might be the right decision and not a knee-jerk reaction to the COVID19 crisis. Hundreds of workers are laid off following the recent outbreak of the coronavirus and many are at home tending to the victims of the “necessary” but critical decision.

However, one observer questioned the rationale behind the move by some wealthy establishments, especially when some were reporting high profits and taking money out of their gross profits to pay hefty monthly insurance premiums for disaster contingencies.

It is suggested that before throwing in the towel, we recalibrate our thoughts and take a look at our overall overheads, workloads, capital budgets, and last but not least our insurance and contingency plans or lack thereof. Here are some factors we might consider before laying off workers during a pandemic or natural disaster:

Reduction of overheads

A widely used cliché is: “it’s never too late for a rain” and many businesses could be putting away their umbrellas during the “rainy season” and finding profitable ways to operate their business efficiently. Reducing overhead and restructuring our budgets could be one way to mitigate further losses during a crisis. In fact, more often than not, we experience losses due to overuse or underuse of company facilities and resources. An example of cost reduction is using energy efficient appliances during the day and planning a well-defined and structured workload.

Workload reduction

Reducing or managing workloads could be a smart way to cut further business losses. In some establishments we have too many workers duplicating and repeating similar tasks without the need for specialization. If we have one or two experts in a field, we could reduce the number of people doing similar work, thereby reducing trial, error, and workflow interruptions.

Having more staff does not necessarily improve efficiency, but having more expert knowledge of the operation improves the quality of the result. By having trained and knowledgeable staff, we minimize overtime and labor hours to get the job done. This productive movement also affects the general working capital of the business.

Restructure working capital budgets

When we spend too much money on unnecessary resources, we may overshoot our working capital budget. This important aspect of business finance provides the basic framework for everything to work cohesively in your business. It stimulates cash flow and provides the materials to do good efficiently. However, when the compensation packages for some senior managers and staff members are exorbitant, it will significantly affect the company’s profit and loss, especially when there is a crisis.

This is a critical area to consider before we get to the bottom of the org chart to get rid of essential workers. An example of such adjustments might be a reduction in motor vehicle expenses and other compensation packages for senior staff members and corporate executives, as there are plans to reduce working hours. In addition to adjusting working capital expenses, we might also adjust our insurance premiums for the business or review affordable insurance packages.

Review insurance premiums

Reducing expenses for probable events may not be a good idea for the future, but it is certainly a way to invest in the productivity and longevity of the business. Here’s an example: If we pay insurance premiums of $100,000 a month in the event business is delayed by a disaster, we’re actually substituting for those hefty numbers with additional salary increases for staff members that could triple our income from that figure in the same month. This is called the opportunity cost or cost-benefit factor of the business.

While it’s a wise decision to plan for contingencies, a pragmatic approach is to consider the cost-benefit factor of paying high insurance premiums versus increasing payroll to employ efficient staff members. On the contrary, there could be a devastating adverse effect on the business if there is no insurance or disaster contingency plans for the business.

However, from a financial point of view, laying off staff could preserve the company’s long-term goals. If the country is facing a global crisis and that causes potential customers to lose interest, then it would not make sense to operate as usual at full capacity and therefore having fewer staff could save the company from closure. However, if we put in place a proper plan to reduce waste, plan for contingencies, and allocate adequate resources to departments, we could retain staff members who have contributed significantly to the organization’s productivity.

When we act impulsively in situations that affect the workforce and the majority, we not only disrupt the socioeconomic stability of the country, but we create more devastating economic and emotional instability in the home when normality is restored. Many times the damage is irreparable. Acting impulsively by laying off workers in an unforeseen crisis might not be the right way to run a dynamic business. On the contrary, such immediate action questions the strength and dynamism of that business.