For a small business owner, having to let go of employees is never easy. When employees have become like friends or even family, it can be especially tough to make a decision to do what's right for your business. So how do you know when it's time to let people go, and how do you downsize in the most humane way possible? Here are some things you should consider before downsizing, and some tips for going through the process.
- Get the big picture: If your business has been slowing down for a while or you're just struggling to make ends meet, it might be time to sit down and take a hard look at your resources, workflow, and ultimately, your bottom line. You need to consider whether your current situation is temporary or long-term and identify whether the problem can really be solved by downsizing.
- Try other solutions: Before you make any drastic changes, explore other ways you might be able to cut your overhead without major, involuntary layoffs. Can you offer early retirement, sell some assets, or scale back hours? Would it make sense to furlough some of your employees for a short time? If your current challenges appear to be temporary, figuring out a way to get through them together might make more sense.
- Communicate early and often: If there's a decent likelihood that you're going to need to reduce your workforce, don't wait until the last minute to tell your employees. Be upfront about the challenges you are facing, your strategy for turning things around, and what would need to happen for you to avoid downsizing altogether.
- Be a leader: Take responsibility for what's happening and any mistakes you have made. Be honest, and don't be afraid to show vulnerability, but also try to express that the end goal is a healthy, thriving company and that you have confidence in the plan.
- Do your research: Find out whether your company is required to provide severance benefits, and what that entails. In some cases, employers give severance benefits even when they're not required by law or company policy.
- Lay out the facts: If you can't avoid layoffs, don't try to gloss over what's happening. With kindness and compassion, tell each employee the truth about why they are being let go and what's going to happen next.
- Offer help: Do what you can to help laid-off employees find leads on other positions, or offer to give a positive recommendation or help with a referral.
- Pick up the pieces: While downsizing can have the immediate effect of improving your company's cash flow, it's likely that your staff will be shaken by losing important team members and uncertain about the future. Pay attention to your remaining employees' fears, emotions and concerns, and take positive action to rebuild morale.
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