I can’t seem to read any news outlet now without seeing multiple stories about cutting costs, especially managing employee costs. It seems companies are trying anything to avoid layoffs – furloughs, pay freezes, even pay cuts (which, according to this New Yorker article, just results in adverse selection where your best workers start looking for another job while your least productive hunker down and settle in.)

In this recent Forbes article, Dr. John Sullivan, a workforce planner, discussed why layoffs and their alternatives are nearly always done incorrectly. Three key points from the article leapt out at me:

1) These Actions Encourage Top Performers to Leave.

Quotation

“If you go for voluntary early retirements or buyouts, you're letting your workers decide who stays and who leaves. Top performers will always feel confident they can find a job elsewhere, while poor employees won't. So the good employees will be the ones to exit. You're paying them to walk out the door. … And don't forget how layoffs can feed talent to the competition, especially if the competition is creative and aggressive about it. …”

Your best people will always have options. If you do not offer them a culture they want to be a part of - a culture of appreciation that shows how individual efforts support company objectives - they will leave. If not now, then when the economy turns.

2) Be Careful to Not Devalue Corporate Culture.

Quotation

“The corporate culture should be a major consideration in workforce planning, according to Steve Miranda. He's the strategic planning officer for the Society for Human Resource Management. Companies that have a history of weathering tough times should stick to their own track records. Consistency matters. …”

Most of your top talent understand the need for some cutbacks and even layoffs due to the recession. It is how you treat your employees before, during and after those actions that will have the most impact on their attitudes now and in the future. They may forgive you for necessary layoffs, but they may not forgive lack of appreciation for their extra effort after such actions. Make sure they know you value them and their efforts and the company culture itself is solid, positive, and appreciative - even during this recession.

3) Across-the-Board Actions Indiscriminately Punish Your Best.

Quotation

“Whatever you choose to do, layoffs or their alternatives, you need to do it more carefully than is common. Across-the-board anything is a bad idea. It shuts down innovative and reliable producers, indiscriminately punishes top performers and cuts back in areas that could help keep the company profitable.”

The same is true for indiscriminate cutting of recognition efforts. Perks, which have no intrinsic value and no proof of lasting value, can be cut with no consequence, at least to your top performers. But strategic recognition that encourages repetition of actions and behaviors that help achieve company objectives and reflect company values cannot be so indiscriminately cut. You need your performers (at all levels) delivering the right results at a high level of productivity. Encouraging them in those efforts and praising them for success is necessary for all employees.

What actions have you taken? What are the lessons learned? Are you holding on at all costs?