Cut back carefully to avoid long-term trouble

Cutting back too far on staffing during the recession could leave businesses lagging behind when the upturn arrives, says Andrew Hardaker

During these difficult economic times, many businesses are looking at ways of saving money – and with employees often being the most expensive overhead, staff cutbacks may be inevitable.

Indeed, the evidence is that many firms are shrinking in an attempt to weather the storm. The most recent quarterly CBI Industrial Trends Survey for the manufacturing sector showed that in the last quarter 47% of firms reduced their headcount. Just 6% increased their employee levels. In the UK since December 2007 4.4 million jobs have been lost, and the unemployment rate is currently 7.6%.

But employers need to be careful – cutting too deep could prove to be a false economy. Getting rid of too many members of staff, and in particular, making key employees redundant, could prove to hinder companies when the market improves, making growth difficult and slow.

As hard as it may be to envisage now, the economy will recover, and business will pick up. If you slash your workforce too much this year, inevitably you will have to invest more money in recruitment later when the upswing finally arrives.  Competitors, who make less swingeing cuts during the recession, will therefore develop a competitive advantage during the market upturn, since they will not experience the lag between recruitment and return on investment.  For companies that go too far, not only will extra recruitment costs dent their bottom lines but they should consider the extra time it will take for new employees to bed down and reach full productivity. 

So the winners when the market does become more buoyant will be those companies that are able to balance between making cuts that enable them to survive the downturn and maintaining their talent pool at a level that will enable them to capitalise on the inevitable, eventual upturn.

The trick is to manage employees effectively now. Businesses ought to ensure that if they need to lose people, they lose those who are less able to help them meet their long-term strategic goals.

When managing a workforce through the recession, employers must not only attempt to trim away those staff who are less able to help them achieve their long-term strategy, but must ensure that they retain their key staff. Businesses therefore need to have a consistent approach to employee retention. The vision for the business should be clear and well-communicated to employees, and they should be reassured about their part in contributing to this future. Employees need to see how they fit into the business, and at all times be sure that their own career development aspirations are recognised. Development training should not be overlooked, and incentives provided to make employees feel valued. On top of ensuring that key employees’ heads are not turned by other jobs, this will breed loyalty and maintain productivity.

In addition, companies need to have effective strategies for recruiting when the time comes so that they can make the most of the opportunities that will arise once the economy turns the corner.

This sounds simple, and finding candidates as the economy recovers will not be difficult. The problem will be finding the right candidates for the job; sourcing the people that fit the organisation, share its values and will be at home in its culture.

Finding candidates who are best suited to a business is a laborious job. The candidate’s CV and experience, personality and career aspirations all have to be considered. Fail to do this properly and a business may well end up with a disgruntled employee whose productivity is poor, who undermines team morale, and who soon seeks another job. So businesses should seek expert help sifting talent, using specialist recruitment companies to sort the wheat from the chaff. By doing this, money invested in recruitment will be money spent wisely: employers get a happy, productive employee who will stay with them for the long term.

While conditions are difficult for all companies, by having a long-term vision, and planning cuts, future recruitment and staff development carefully, businesses can use this downturn as a springboard for capturing market share.

Andrew Hardaker is managing director of ATA Selection, one of the UK’s leading recruitment companies specialising in the manufacturing, engineering, rail, technical sales, energy and construction sectors. The company has more than 46 years’ experience, 10 branches throughout the UK and handles more than 300 new vacancies every week.