In 2022, as many as 11,833 startup employees in India lost their jobs across industries, according to the data compiled by Layoffs.fyi— a website tracking tech layoff. In October this year, the US job report showed a reduction of 200,000 jobs, with unemployment at 3.7%.
As companies decide on retrenchment, it is important for founders to consider all options before workforce reduction.
Such actions include hiring freeze or hiring pause, and restricting any replacement of non-critical roles. However, what needs to be done is clearly defining a process to reallocate and share work equitably with the other roles.
Delaying or not making any increase in annual compensation is another way to manage such a difficult period. Communicating the rationale for these decisions and providing an opportunity for employees to hear their concerns with clarifications will help in making it a more inclusive process. Always be transparent with the employees on the impact of the economic situation on the organization and how a collective action will affect every stakeholder in the long run.
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Further down the path, the founders may have to consider a reduction in pay. Even as we discuss different quantum of reduction based on the level or grade of the employees, consider a pay threshold within a level or grade to make the impact more equitable. The threshold will ensure that employees earning relatively low don’t find it difficult to sustain.
Typically, pay for performance or incentives will not be paid or reduced drastically during these performance periods. Transparent communication to employees on the rationale for the reduction will align the expectations and bring about a consistent understanding of the reasons for the action. To make it inclusive, it is important to listen to what the employees want to say about the reduction and clarify any apprehensions.
Now, coming to the most challenging task—a reduction in the workforce. Prior to retrenching employees, organizations should evaluate a few other options in addition to the ones above. A few strategies which companies could consider are mandatory availing of accumulated leave, reduced work week, forced sabbatical or leave with reduced pay and continuing benefits, redesign of shifts etc.
If workforce reduction is inevitable, the approach towards identifying the roles has to be clearly defined with a logical construct. In roles where there are multiple incumbents, the process of identifying people for retrenchment needs to be free of biases by explicitly stating the criteria and sequence of decision-making. Defining both these will ensure that the process is free of discrimination and that the vulnerable segments are not targeted during retrenchment.
A consultative process and open discussion with the employees will make this process more inclusive and acceptable. While implementing these strategies, be in touch with the employees to understand their real challenges and with action to address their concerns. Make equitable decisions which will differentiate the needs of the employees. Empower your managers to take these discretionary decisions and make them accountable to explain to the team while enabling them with guidelines and skills.
While going through these challenging times, inclusive decisions are critical for sustained engagement and belongingness. It demonstrates the emotional resilience of an organization. Consider ‘collective’ actions as a whole before discretionary actions which impact a segment of the employees. Make the process ‘consultative’ by being transparent about the challenges and building solutions together with the employees. Be ‘considerate’ when developing actions. Focus on being equitable and not equal. ‘Communicate’ to employees with a clear rationale and be open to hearing their concerns, with actions to mitigate the impact.
Actions impacting the employees adversely are not easy to design and implement, but making them more inclusive will be better received, positively supporting employee engagement and sustained commitment.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)