Taking the Easy Way Out – Cutting Hours to Reduce Costs Is Not the Answer…

Ok, I admit it… I read the April 2009 edition of HR Magazine – well at least one article, and a look in the back to see what companies still use their HR Jobs section (which can't be a good use of recruitment dollars). The article that caught my attention was Cutting Hours Without Raising Hackles by Senior HR Mag Writer, Rita Zeidner.  I'm always concerned when HR folks start talking about cutting expenses by cutting hours, primarily because it demonstrates very short term thinking without really understanding the cultural ramifications.  Zeidner shows in her article that some of the benefits of cutting hours vs. layoffs are: smaller unemployment tax hit, spreads the pain amongst all staff, cuts your risk of discriminating against protected classes, could head off certain charges from the EEOC, etc.

I'm still trying to figure how cutting hours reduces costs and helps the bottom-line.Punch in  

I do see one positive, in that keeping your talent employed would have huge advantages when your business turns around.  But in the words of Ricky Bobby "that's it, Chip"!   To be an HR Pro who is also a Business Partner, we must recognize the bigger picture for our operations partners.  So, let's look at what we miss when we make the decision to cut hours vs. layoffs:

1. For salaried workers, cutting hours now gives them an hourly working mentality. Think about it – you tell them you're going to cut 10% of their hours and 10% of their wages, and they instantly will know that is a half day a week.  They then begin counting hours – where prior they probably worked more then 40 hours and never gave it a thought – You can now plan on no extra discretionary effort.

2. "Spreading the Pain" – I love that quote, basically because I'm a high performer and guess what I'm going to do while you spread pain. That's right – I will be working for your competition to kick your butt.  Within HR, you need to have courage not to spread pain – but to reduce your staff by letting go of your lowest performers.  Your high performers will respect you for it (and probably give more discretionary effort) and your middle performers will make sure they don't become low performers.

3. In terms of reducing risk, it is our job to help our organizations mitigate risk to the appropriate level – any time you leave someone on because you are attempting to reduce risk – you're making a poor business decision – especially if that person is not performing to standards.

4. Lastly, as savvy HR Pros, we need to build the ROI Value equation for our organizations and our workforce.  Yes, we get some wage expense savings by cutting hours – but is it equal to the value output that person provided to the organization? If it is, you need to question why that person was on to begin with – for the most part every person in the organization should have a bottom-line impact that is greater than their salary and benefits (do you know what yours is as an HR Pro? – You should).

It is time to Raise some Hackles and as HR Pros demonstrate how to add value back to your organizations, and it is not by showing them you can manage and cut expenses better than every other department.

FOT Background Check

Tim Sackett
Tim Sackett SPHR, is the ultimate Mama’s Boy!  After 15+ years of successfully leading HR and Talent Acquisition departments for Fortune 500s and smaller technical firms, Tim took over running the contingent staffing firm HRU Technical Resources in Lansing, MI. Serving as the Executive Vice President, Tim runs the company his mother started over 30 years ago, and don’t tell Mom, but he thinks he does a better job at it than she did!  Check out his blog at www.timsackett.com. Because he's got A LOT to say, and FOT just isn't enough for him.

2 Comments

  1. Bob Hart says:

    What do you suggest if we have already had 4 rounds of layoffs and weeded out all of our low performers? What next expense reduction step do we have? I don’t want to layoff an allstar performer (which is all we have left). Isn’t the only alternative to reduce hours/pay across the board?

    Reply
  2. I completely agree with #1 and #4 though, at least in startup world, I would never want HR make decisions on capacity and/or cuts. That is expertise of heads of operations, who have much bigger picture in their view.
    I have been doing operations for a while now and I look for HRs to be the sales for talent, so they catch us some great value-add people. Also look for them to keep me worrying less about some regulatory issues. I can have technology deal with paper pushing.
    On the subject, I believe hybrid solution is the best. Everyone must take cuts and bottom dwellers need to go. If top performer will go somewhere else… well he or she would have done it anyway. If you are not loyal to my company, I don’t want you here. Period.
    I’ve written two articles on related subjects:
    1. Ideas for startups to implement in order to avoid laying off (good) people http://leanstartups.com/2009/01/ideas-for-startupsto-implement-in-order-to-avoid-laying-off-good-people.html
    2. Can’t retain talent at your company? Preventing “free-agency” mentality. http://leanstartups.com/2009/02/best-practices-retaining-talent-preventing-freeagency.html

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