SALARY CUTS and LAY-OFFS-Is there a better solution?

We have seen in the recent past that salary cuts and lay offs have been implemented in the media and entertainment industry.But is there a better solution?While there are no easy answers ,I thought of sharing my thoughts because as a head of a recruitment consultancy,I have the privilege of dealing with a cross section of clients which includes few, where there have been no salary cuts or lay-offs.And it also includes some who have used other measures to cut costs. Let me present my observations which would serve as pointers for organizations to reflect upon.

There are few unique traits of such organizations which did not find the need of resorting to measures like salary cut and lay-offs ? Let us have a look at some of these traits :

A]Work culture:Whether good times or bad ,these organizations have always “put people first”.This culture in the company has evolved over a period of time and provides a major sense of security to it’s employees.

B]Not overambitious- These organizations have not expanded into areas which fundamentally did not match their core business objectives. The growth of such companies has been gradual.

C]Reasonable Salaries:Not paid disproportionately high salaries for CEO’s and other senior management positions. They don’t believe in following the herd mentality.Their scales and grades are benchmarked against industry standards within the respective media vertical.


D]Lean Teams:Also, these organizations have always had a flatter organization structure and work with lean teams.They keep themselves right sized and don’t over hire.

E]Transparent :As a corporate culture,these companies believe in total transparency.Hence their employees have a better sense of belonging.


Best employers are organizations who know that this slowdown is only a correction and it is a reality check that is taking place ,hence they do not exhibit any knee-jerk reactions. Some of our clients have resorted to cost cutting measures other than salary cuts and layoffs .Let us see what they did.

1]Redeployment- The HR department did a mapping of potential openings of all job roles across all departments and work locations in the company. Then moved people from one city to another and offer them roles in a different business units.So people who’s jobs would have been lost were redeployed in similar roles.

2]Give employees targets to reduce cost:Employees will feel that they are a part of the solution finding process.Some innovative ideas can save crores for the companies.


3]Inventory management-Instead of maintaining an inventory for say 8 to 9 months,reduce it to 6 months –bringing down your storage cost,wastage,insurance bills and transportation costs.

4]Forced leaves or unpaid vacation-In some companies,employees have been asked to avail of their leaves so the company does not have to bear the expense of encashment.Since the market is currently not buoyant ,companies can afford to consider this option.

5]Deferring Annual Bonus: To be paid in equal amounts over a period of 2 to 3 years[mostly done for top and senior management levels].

6]Reduced benefits.Cut down on frills like travel by business class or entertainment expenses.

I am sure no organization likes to implement measures like salary cuts and lay offs but in case there is a need to resort to such a measure ,then the best employers use it only as the last option.And because they understand that it is a very sensitive issue and must be handled with kid-gloves, the implementation has to be done in a very methodical manner.
Let me share with you an example of HSBC which has featured as among the top 25 employers in the latest Outlook Business –Hewitt Associates Study.

While there are a whole lot of positive aspects of the bank for it to be featuring as one of the best employers,I am sharing only one part which is in context of our current topic.After successfully implementing all other measures of reducing cost,200 employees out of a total of 6,427, had to be laid off by HSBC. But the process followed by the bank to execute this difficult task was very carefully designed and implemented.The bank offered counselling to those retrenched and their family members, and also put in place a preferential return policy.Under this policy, they were promised priority treatment for any new openings that come up.And the report mentions that about 10 executives have already been reinstated under this scheme. So by systematically handling the situation as a whole, the company did not lose good and skilled talent who will always remain a valuable resource for the organization in the long term. Such organizations with a “people first” ethos develop loyalty amongst the employees, and inspite of some layoffs ,HSBC is rated among the top 25 employers in the best employers study-Outlook Business-Hewitt Associates 2009.

So let me end by quoting from a magazine - “Best employers are like marathon runners who see this crisis as a blip in the long-term success of their organization”.