HispanicBusiness

Falling consumer demand, tight credit, and problems with cash flow are forcing many small- and medium-sized businesses to operate proactively and tighten their belts. Firms are targeting labor costs and increasing employee productivity, but are layoffs the only answer? Certainly the loss of 524,000 jobs in December suggests many companies are saying "yes," but according to management expert Jason Zickerman, layoffs come with a big price tag. Besides, there are alternatives.

Mr. Zickerman is president and CEO of The Alternative Board (TAB), which uses peer groups composed of CEOs and owners from participating firms to give management advice to leaders of small and medium-size businesses. The company boasts of 170 offices in locations across the country and the past participation of more than 9,000 business leaders.

Mr. Zickerman's mantra is "Don't go it alone." Peer advisory groups, like those offered by TAB, allow executives to share what are the most strategic practices for addressing business challenges, especially in hard times."

The discussions among its participating members have generated some solid suggestions for avoiding layoffs, Mr. Zickerman said.

Two Critical Points

Two points are critical, however. Layoffs are indeed a crucial and sometimes necessary way to save on costs when one is facing cash flow shortages. But Mr. Zickerman said CEOs need to "consider alternatives because of the time effort, and expense" that went into "recruiting, hiring and training employees." Those are workers your firm will need when business does turn around. Those employees are a built-up resource, and layoffs injure the company's future capacity to perform. In addition, Mr. Zickerman noted, "Morale and productivity are sure to drop among the survivors."

The second critical point that Mr. Zickerman emphasized is communication. "This whole thing has to start with effective communication." Explaining clearly the problems a firm faces and the need for a solution can transform an economic catastrophe into a teambuilding effort.

"The workers watch the news. They know what's happening out there," Mr. Zickerman said. "If you are able to show them that you are refusing to just roll over and do layoffs, if you show your team that you are fighting for them, then you have a good chance of turning this into a morale boost for you, and your staff will fight for you."

Work Week Reductions

The first idea bandied around among executives participating in TAB peer advisory groups has been reducing the workweek. Shortening the week from five days to four would result in a 20-percent savings on wages if accomplished among a sizeable group of employees.

At the same time, Mr. Zickerman said, productivity does not decline by the same amount. The cuts in hours don't result in an equivalent loss in productivity. "People tend to fill their work week with the work they have assigned."

Similarly, Mr. Zickerman said companies can offer additional time off to the staff. Two-week paid vacations can be extended with unpaid time. For some workers, this will even be considered as a perk. In addition, with effective communication, employees will recognize this as an attempt to "avoid a much worse scenario."

Searching for Savings

Workers can be enlisted in the company's hunt for cost reductions, thus decreasing the need for layoffs. The company may offer an incentive of $200 reward for every innovation that results in at least $1,000 in saved expenses.

Besides reducing expenditures, Mr. Zickerman noted that the program has two beneficial side effects. It reassures the workers by giving them a feeling of control and input in uncertain times. Second, the workers are made participants in a program that may effectively reduce their own benefits.

One of the most innovative ideas coming out of the peer advisory boards, Mr. Zickerman said, is "job lending." An employee is lent to another company that temporarily needs help. Mr. Zickerman admits this is not a very common practice, but it would have the benefit of saving wages and retaining staff.

'Don't Go It Alone'

But underlying all these ideas, Mr. Zickerman said, is one central inspiration: peer advisory boards. He emphasized that now, during this recession, is not the time to rely on old business models or go it alone.

"Find yourself a group of business owners and talk about what they have done and why that worked for them or why it didn't," he said. "We can all use a group that will help us think strategically about our businesses and its operations."

That's the model for his company, TAB, which is a "peer advisory board and executive coaching organization." TAB puts together non-competing business owners on a monthly basis, where they discuss the challenges and opportunities of their respective businesses.

"The collective experience of the entrepreneurs at the table suggest ideas, experiences, and thoughts to help move the business forward in a strategic manner," Mr. Zickerman said. "Our facilitators, who lead these groups, are very seasoned business people. These facilitators meet with individual business owners monthly where they engage in a strategic planning process."

It's an innovative idea that itself is generating innovative ideas -- brainstorming strategies to combat the most pressing economic issues of our time.