Mitigating Layoff Risk

Lately I’ve heard growing talk of company layoffs from friends. An idea struck me the other day as one was telling me that the big “L” word just came down from management. First reaction is always panic, understandably. But what if, rather than sit and wait to react to whatever the news turns out to be, employees became proactive, organized and came up with an alternative plan to layoffs? My first idea is outlined below. It is an insurance of sorts, which is really just a form of risk management. I believe it not only could work, but also makes a lot of sense.

Idea: all employees organize and agree to temporary, across the board salary reductions (if additional perq’s or benefits might apply this can be discussed internally). Caveat – every employee must agree, including management. If a team effort is to succeed, all members must play on the team. This immediately reduces the burden on the company bottom line and buys time for 1. the economy to turn around, 2. business to pick back up and/or 3. an alternate solution to be generated.

If you work for an affected company and estimate your risk of layoff to be 30%, then your chance of retaining your current position at your current salary is 70%. Your risk of ending up with no job and no salary/benefits is still 30%. Your risk of increased stress during this time is 100%. If however, everyone agrees to a temporary pay reduction (and it is approved), then every employee has reduced their risk of job loss to zero. Every employee shares some of the cut but enjoys 100% job security in the interim. Stress levels reduce immediately and immensely. Management is relieved of the terrible and most unwanted job of cutting employees but are better able to continue operations without taking a bigger hit to the bottom line.

(Side benefit here is the reduction of burden to society of having to absorb additional unemployment and welfare costs, and helps maintain the local and federal tax base and keeps spending levels at a more steady pace.)

This may be another example of how life works in my Utopian mind, but if you work for a company that is abuzz with layoff talk, wouldn’t a proactive approach at least make employees “feel” more empowered and, even if not successful in the long run, doing something always improves outlook. Besides, an even better solution may emerge from the discussion. Getting motivated people together to work for a solution, rather than sit around and complain about the existing scenario is 100% more likely to result in improved morale and a better outcome.