The instinct to cut costs right now is understandable – but reacting too quickly with salary cuts or lay-offs could be counter-productive for your organisation’s long term business continuity. Reassuring your people by giving them some certainty is vital if you want to retain your best talent – and manage the upturn in demand when we all eventually emerge from this crisis.
The idea is simple. If you want your best people to stay committed to your business, you need to show commitment to them – and continue to reward their hard work. Even more so when they are under pressure to adapt quickly to new ways of working.
This is obviously easier said than done when leaders are also responsible for keeping their companies afloat. Here are five things we are seeing organisations do now to manage this challenge.
1. Be transparent and open
Everyone is aware of the pandemic, and everyone is anxious about what it might mean for their livelihoods. So the first step is to be completely clear about your plans to protect the financial security of the organisation. Now is the time to use plain, concrete language to share the goals that will be prioritised.
Value statements like ‘we put people first’ are meaningless unless you demonstrate that through your actions. For example, Indonesia’s super-app Gojek is the first on-demand company in the region to offer a support scheme for its delivery partners. Any driver diagnosed with COVID-19 will receive income for 14 days and won’t be charged insurance, vehicle payments or other installments until they are able to work again. Their accounts are also temporarily deactivated until they’ve been cleared through government health tests, protecting the health of customers.
2. Share the pain
Any salary cost-cutting needs to be fair – and that means leading by example. Your lowest paid staff are more vulnerable to the smallest reductions in pay, so many organisations are starting at the top and working down incrementally.
In India, multinational manufacturer Apollo Tyres recently announced its chairman and managing directors would take a 25% reduction in pay, while senior management volunteered for a 15% reduction. This willingness to make sacrifices for the greater good shows compassion and empathy.
3. Look at all options
Trevor Warden, Korn Ferry’s Co-Lead APAC Rewards & Benefits, suggests other ways to curb costs before making widespread redundancies in Korn Ferry’s new playbook for leaders. “Look at options like reduced hours, or taking paid or unpaid leave. Ask for volunteers for these initiatives first – leaders will be surprised to find just how supportive and accommodating staff can be,” he says.
With the aviation industry grounded, many airlines are standing down significant proportions of their workforce – including Qantas in Australia. The 20,000 employees affected so far are able to access long service leave early and take up to four weeks annual leave in advance, while its CEO is currently taking no pay.
For teams with stalled projects or reduced demand, reducing hours to a four-day work week can effectively cut salary costs by almost 20% (assuming some overhead and benefit costs stay the same). If you make it clear this measure is to avoid redundancies, your employees are more likely to respond positively when you ask for volunteers. And of course, this flexibility can also ease the pressure on working parents who are now also trying to juggle productive work with home schooling.
4. Redeploy, rather than reduce
Qantas is also discussing options to redeploy staff to supermarket giant Woolworths, as an alternative to making widespread redundancies. Having stood down 90% of its workforce, Scandinavian airline SAS is fast-tracking some staff through healthcare training so they can support doctors and nurses at the frontline. Air New Zealand is also having similar discussions with the Ministry of Health.
This measure may not suit all employees, but where there are options to move people to high-demand roles they may appreciate the ability to learn new skills and feel a renewed sense of purpose.
5. Be flexible, and focus on the future
Gartner conducted an online poll of Asian organisations on March 17, 2020, and found their experience was far from bleak after managing the impact of this virus for many months. While 49% have imposed a hiring freeze, only 2% had cut pay within teams whose work had been paused. 32% empowered leaders to extend leave beyond central policies.
In Singapore, state-owned investment firm Temasek Holdings Pte has introduced an organisation-wide wage freeze starting from April in a bid to raise funds for those affected by the coronavirus. This includes partial cuts to senior management bonuses, who can volunteer for pay cuts of up to 5%. Temasek plans to use part of the savings to staff volunteer initiatives and supporting the community as needed.
This sense of collective purpose can go a long way to strengthening your employee experience long after the crisis passes. “As much as economically possible, I would suggest riding out the storm,” says Trevor Warden. “Supporting staff now will win hearts and minds for a long time.”