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By: Kyle Robertson on August 17th, 2020

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A Review of Employer Responses During COVID-19

With the uncertainty that COVID-19 brings, employers are reacting in a variety of ways. Some have an immediate response and cut staff, while other employers shift seamlessly to a telework model to save on operational costs. There are companies that implement a hiring freeze, and some use innovative ideas to create a “business as usual” environment. Current staff and future potential employees are watching and evaluating the decisions employers make today, and they base employment choices on what they see and hear. 

Are You a Progressive Company Vs. Prevention-Focused?

According to the Harvard Business Review, companies fall into several categories during a recession or financial crisis. Two of these categories are prevention-focused versus progressive companies:

  • Prevention-focused companies tend to cut expenses across the board, to include staff, along with implementing hiring freeze policies. When this happens “pessimism permeates the organization, and the constant threat of more cuts build a feeling of disempowerment. The focus becomes survival—both personal and organizational.”
  • Progressive companies cut costs mainly by “improving operational efficiency rather than by slashing the number of employees” or halting hiring completely.

Only 23% of progressive enterprises cut staff, but 56% of prevention-focused companies use this method to reduce costs. Companies that rely solely on cutting the workforce have only an 11% probability of achieving a strong recovery after a financial crisis. Research shows that post-recession profits for prevention-focused companies rose by only $600 million, but progressive companies’ profits increased by an average of $6.6 billion.

Data suggests that morale is usually better at companies that stress operational efficiency versus staff cuts and hiring freezes. Employees at these companies appreciate the commitment to them. They don’t worry about job security as do people at companies that rely on staff reductions.

The Impact of Employee Layoffs During a Pandemic

Although layoffs may reduce costs quickly, they make recovery more difficult. It is risky and can be difficult to scale up again, especially if hiring is more difficult than anticipated. Remember, it was only two months ago where finding top talent was extremely challenging, due to a significant talent shortage. People do not want to work for organizations that reduce head count in difficult times. Also, rehiring costs can be significant.

In a recent article by Forbes, the author suggests alternatives to reducing staff during the pandemic, including:

  1. Reducing pay and cutting hours. If this option is utilized company-wide, it may be possible to make slight changes versus significant salary decreases.
  2. Another possible option is to institute a work-share program. By doing so, employees may share a position and be eligible to collect partial unemployment.
  3. If all options are exhausted and further cuts are necessary, consider a temporary furlough, where employees can collect unemployment and eventually return to work, is preferred to a layoff. This way, the company is positioned to rebound quickly once normal operations resume.

As businesses “open up,” will your company be ready? What will employees and candidate pools be saying about you? Will they discover that you laid off someone that worked for the company for 10+ years or did you implement some creative solutions to retain employees? Unlike some competitors, will you be able to add to your company story that your business not only retained staff, but also grew during COVID-19? What do you want to communicate and how will it impact your business now and in the future?

For more than twenty years, I have recruited in staffing, corporate and consulting environments during financially prosperous and challenging times. Employers that have a flexible, progressive, long-term outlook, with an employee-focused mindset, retain current staff and attract future employees.