A creative way to avoid layoffs

Nation's Business, August, 1997 by Ted Castle

This past March, for the first time m my company's 12-year history, we had layoffs. This is not to say that there haven't been times when Rhino Foods, Inc., my specialty dessert and ice-cream company, hasn't had more workers than work. But in the past we were able to address this through a creative solution that enabled us to adjust for the seasonal nature of our business and eliminated the expense and trouble of having to let workers go and then rehire them when business picked up.

Layoffs such as we experienced--which reduced our staff from about 80 to 60--are inevitable during times when you can't foresee a rebound. But some slowdowns are as much a part of a normal business cycle as growth is, and if you recognize this you can take steps to care for workers and to retain the investments of time, effort, and money you made in hiring them.

We took such a step five years ago when we created an employee-exchange program (EEP), in which workers are placed in temporary jobs with other companies for a set period--usually not longer than six weeks--during slowdowns. The program, which my company has used three times, allows us to provide improved job stability and to reduce our payroll when necessary--but to still have trained workers available when needed.

Several components are essential to the success of such a program:

Find the right partners. Look for like-minded companies with similar business philosophies, policies, and practices--but not companies in the same business. The best partners can easily train workers to fit their business's needs; they experience seasonal fluctuations in staffing; they are located close to your firm; and they have similar pay rates.

Once potential partners have been identified, discuss and put in writing the specifics of the program, including the duration of the temporary jobs, the rate of pay, the workweek, and training.

Establish guidelines. All our EEP participants leave their overstaffed departments voluntarily, but they must meet certain criteria. Employees must have been with Rhino for more than 90 days and be in good standing; they must be available to work the entire temporary assignment; they must have transportation; and they must agree to abide by the principles of our company and those of the partner.

Before beginning an assignment, qualified employees are interviewed by the other company, giving the partner a say in whom it will hire and allowing our employees to see where they would be working. This also helps the companies gauge the other firm's commitment to making the program work.

Take care of business. Our premise for creating the EEP was that well-trained, reliable employees are valuable and that managing them effectively helps our company To that end, we continue many of our employee responsibilities during the exchange period.

That means making up any difference in pay; handling payroll payments (partner firms are billed); maintaining unemployment, worker's compensation, and health insurance; reviewing employee evaluations; and consulting supervisors before any disciplinary action.

Instill a climate of trust. In an environment of open, effective communication, workers know the company's business situation and are assured of their value. In our case, they also know their jobs will be waiting for them after an outplacement.

When creative solutions like an EEP aren't enough, employees must know why layoffs are needed and how the remaining workers will be affected. Likewise, their suggestions on how to turn this negative into a positive must be heard and, if possible, acted upon.

Ted Castle is CEO of Rhino Foods, Inc., in Burlington, Vt. He prepared this account with Contributing Editor Susan Biddle Jaffe. Readers with insights on starting or running a business are invited to contribute to this column Write to: Entrepreneur's Notebook, Nation's Business, 1615 H Street, N.W., Washington, D.C. 20062-2000.