Even though a small company's business may be down and its revenue stream more tentative, it may be quite possible for an owner to avoid laying off employees.
The solutions can be obvious, as in reducing expenses. But they can also be found in creativity and cooperation -- asking workers for help in avoiding job cuts.
At the manufacturing company where Jim Brady was chief operating officer, things looked bleak. The Detroit area was depressed, sales were down and management was faced with the need to cut labor costs.
"We were in a situation where we did not want to be," Brady recalled. The company needed to cut hours, but also keep itself staffed to serve customers. So management proposed to employees a 32-hour week, with shorter work days for everyone.
The workers didn't like the idea, but they also said, let us figure out a solution. And they did: a four-day week, structured so everyone had a four-day weekend every other week.
"I got what I wanted -- I got the reduced payroll," Brady said, estimating that the company saved about 20 percent on labor costs. And the employees got a dream schedule.
"I can only take credit for giving the guidelines and urging them to think," said Brady, who now has his own management consulting business.
Human resources consultant Diane Arthur said owners should consider a number of options before laying workers off.
"Maybe see if there's another way to utilize their services, perhaps on a consulting basis, or maybe even part time," said Arthur, who owns Arthur Associates Management Consultants Ltd. in Northport, N.Y. "See if everyone might be willing to take one week's unpaid leave. ... Look at the senior-most tier and see if they might give up a certain percentage of their salary."
Showing staffers you're trying to help everyone keep their jobs "goes a long way toward boosting morale, and that of course boosts productivity," Arthur said. Moreover, owners should try to avoid doing anything that will create hard feelings.
"When the economy picks up, these employees are going to remember and you really don't want that," she said.
Brady agreed, noting that his workers felt a sense of control over what was happening to them.
"They didn't feel like they were getting anything jammed down their throats," he said.
Most owners will try to cut all kinds of other costs before they start looking to reduce their payrolls. The owners of very small businesses often cut their personal expenses as well.
Traci Bisson, who owns Bisson Barcelona LLC, a Barrington, N.H.-based publicity firm, was forced to start chopping expenses early this year when several clients suddenly stopped paying.
"It was always in my mind that a layoff is the very last thing," said Bisson, who has two employees.
"I have a lot of respect for the people who have dedicated themselves and stayed with me through hard times," she said. "I would do everything to make their sure jobs were secure."
So, one of the first things she did was take her son out of daycare. Bisson, who runs the business out of her house, managed to get her work done and still look after him.
She also canceled important business trips and decided against engaging a consultant's services. Bisson said that as a result of her austerity budgeting, the company's position is stronger in the second quarter.
Manny Avramidis, senior vice president of global human resources with the American Management Association, said owners should bring employees into the overall cost-cutting process -- and not just when the company is looking for givebacks or salary freezes.
"Engage the employees and have them become part of the solution," he said. "They'll feel part of the process and have a better understanding of your actions."
They may also have ideas about making the operation more efficient -- ideas that you might not think of. After all, they're the ones actually doing the work or using the equipment.
If you do take steps like freezing salaries or cutting retirement plan contributions, management experts suggest telling staffers you plan on making up for those deficits when the economy improves -- and keep your word when it does.
Avramidis said cutbacks are easier for employees to deal with if they're already working in a company that has a culture that's worker-friendly and that's also honest about what's going on. And, he said, the owner has to take on his or her share of the pain.
"Make sure a stretch limo doesn't pick you up at the end of the day," he said.