By Joseph Venturelli

To get right into the heart of the matter………

What happens when you lay people off?

Each person that you lay off typically gets a severance package, weeks maybe months of pay. Outplacement services, legal expenses may rear their ugly head. In essence an employee laid off today may have a financial impact on the organization for up to six months. Then perhaps you start saving money. If you were looking to have an immediate impact on a current fiscal year, you may experience some benefit in a month or two, but most likely next quarter or the quarter after that.

Then after the layoff how soon do you start rehiring people? Usually 9 months to a year later in earnest, but usually in the next few weeks after the layoffs.

Layoffs are extremely disruptive to organizations, people become instantly distracted. They worry whether there are more coming, whether they are next, they start to examine their options. Morale takes a nose dive. People are consumed for well over a year and with more bad news the cycles starts anew.

Sharing the pain with a furlough system

A furlough system is a way to spread the pain among all staff. Each staff would be required to take a finite number of days off without pay. Once the organization has determined the target savings, a furlough system can be activated that can work one of two ways (or a hybrid of each).

Let’s assume each staff member has to take 2 weeks furlough (10 business days)

The first way you can deploy the plan is that you have to take a week at a time, and a maximum of two weeks by the end of the fiscal year. Let’s call that the “tearing off the band aid method”.

The second way is a furlough currency system. With an online system each employee is allocated 10 furlough chits/script/certificates (1 per day) and they can spend them one at a time, one day at a time, when they have the freedom and flexibility to use them. In an organization with bi-weekly paychecks, there is always two months where staff receive three paychecks. These months would likely be leveraged more often. The value of the furlough chits/script/certificates is that they can also be traded. For example a highly compensated employee who can perhaps survive taking more days a year without pay, can take a furlough day from someone who can’t nearly afford to take the time off. Thus easing some pain and building some esprit de corps.

The Challenge

The system can present its own challenges, unions may not be onboard, the time off may have to be quantified as Leave of Absence so you may have to cut off access. As time goes on, some may be resentful that they can’t live on an abbreviated salary or some may think they wouldn’t be among those who would have been laid off and then begin to resent the sacrifice. What is important to understand however is while this system is in place, staff can make their own choices, if they decide to leave they do so on their own terms and then that attrition (by way of a hiring freeze) can help the bottom line. Everyone feels empowered to make the choices that suit them best, the folks not driven by money alone can render assistance to those that have more pressing financial needs.

Everyone understands the challenge, everyone contributes to the solution, morale may take a small dip vs a nose dive. The press will likely be positive as an innovative way to save jobs and maintain service levels and the organization remains strong and staff won’t be mentally paralyzed.

The key is clear transparent communication with an end game clearly outlined.