Written by: Tracy Shroyer, PhD., Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
This article explores 12 thoughtful and pragmatic alternatives to layoffs, presenting empathetic strategies for organizations aiming to circumvent workforce reductions. It's important to note that, although some of the organizations mentioned below may have ultimately resorted to layoffs, they initially adopted one or more of these alternatives to avert them.
If you haven’t heard about layoffs in the news or impacting someone you know then you may just have your head in the sand (hello, little ostrich)! Over 305,000 people were laid off in 2023 in the United States, and in January of 2024 alone, 82,300 job cuts were announced.
Regrettably, executives and senior management within organizations do not consistently explore alternatives to layoffs. More often, their inclination is towards the most straightforward approach to cut significant costs. This mindset overlooks the broader impact of such decisions. Layoffs should be a last resort, not a first response.
Choosing layoffs, despite the existence of viable alternatives, demonstrates a failure to prioritize the well-being of employees. The fallout from such decisions extends beyond the immediate distress and anxiety experienced by those laid off and their families. It casts a shadow of uncertainty and concern across remaining employees, burdens managers with the difficult task of executing these decisions, and affects customers and shareholders alike. By exploring and implementing alternative strategies, organizations can show transparency in their decision-making, empathy toward their workforce, and courage in facing economic challenges, ultimately safeguarding morale, culture, and future success.
In this article, I’d like to share 12 strategic alternatives to layoffs. These alternatives are innovative solutions that may support organizational leaders to maintain a healthy and productive work environment during challenging times.
Resilience in the face of layoffs: A personal tale of organizational change
Hi, I'm Dr. Tracy Shroyer. My journey in organization and management is deeply rooted in both my personal and professional experiences, enriched by my academic pursuits and direct encounters with the challenges of organizational change. Between 2011 and 2012, I undertook significant research for my dissertation, focusing on how managers navigate the decision-making process, implementation, and aftermath of layoffs. This work set the foundation for my book published in 2017, which draws from these managers' experiences and offers 24 practical tips for downsizing with dignity.
My professional narrative took a poignant turn in October 2023 when, after 27 years of dedication, I found myself on the receiving end of a layoff. This experience not only contributed authenticity to my insights but also deepened my understanding of the layoff process from a very personal perspective. Alongside my academic and professional endeavors, I have been active in career coaching and resume writing for nearly two decades, offering valuable support to those navigating career transitions.
In December 2023, I decided to broaden my impact by launching the "Let's Talk About Layoffs" platform. This initiative includes a community, blog, and podcast, among other resources, aimed at providing support, guidance, and a space for dialogue for individuals facing layoffs. Through this platform, I continue to share my expertise and personal experiences, fostering a supportive environment for individuals and organizations alike as they navigate the complex terrain of layoffs and organizational change.
Let’s get started
This article explores 12 thoughtful and pragmatic alternatives to layoffs, presenting empathetic strategies for organizations aiming to circumvent workforce reductions. It's important to note that, although some of the organizations mentioned below may have ultimately resorted to layoffs, they initially adopted one or more of these alternatives to avert them.
1. Implementing Temporary Pay Cuts or Salary Freezes: Temporary pay cuts or salary freezes can be an equitable approach to cost reduction. By applying a uniform policy across the board, from executives to entry-level employees, organizations can share the financial burden while preserving jobs. This measure, although not ideal, is often preferable to layoffs and can be presented as a temporary solution until the company's financial situation stabilizes.
Examples of companies that have implemented temporary pay cuts or salary freezes include McDonald’s and Delta Airlines. During the COVID-19 pandemic, McDonald's introduced pay cuts rather than layoffs. They reduced executive salaries and implemented temporary pay reductions for employees. Also, in response to lower demand, Delta announced a hiring freeze and cut flight capacity by 15%.
2. Reducing Work Hours or Implementing Job Sharing: Reducing work hours or implementing job sharing schemes can help organizations lower labor costs while retaining their workforce. This approach involves employees working fewer hours or sharing the responsibilities of one full-time position, effectively spreading work among existing staff. It maintains employee engagement and loyalty while adapting to reduced operational needs.
Examples of organizations that have reduced work hours or implemented job sharing include Kickstarter and Adobe. Kickstarter experimented with a four-day workweek, reducing employees' hours while maintaining productivity levels and pay. Adobe offers up to 4 weeks of sabbatical to employees who have been employed for more than 5 years and 5 weeks after 10 years.
3. Offering Voluntary Leave or Sabbaticals: Offering voluntary leave or sabbaticals provides employees with the option of taking unpaid time off. This strategy can appeal to employees seeking more personal time or those with other commitments, reducing the organization's payroll expenses without enforcing mandatory layoffs. It also allows employees to return to their positions when the situation improves.
Examples of companies that have offered voluntary leave or sabbaticals include AARP and Autodesk. After 7 years, AARP offers a four-week paid sabbatical with no restrictions on how employees spend that time. Autodesk provides six-week sabbaticals to employees every four years.
4. Restructuring Work Processes: Streamlining operations through restructuring work processes can enhance efficiency and cut costs. This might involve automating certain tasks, consolidating roles, or reorganizing teams to optimize productivity. While it requires upfront planning and possibly investment, the long-term benefits include a leaner, more efficient operation.
Examples of organizations that have restructured work processes include Amazon and American Express. Amazon started as an online bookstore but diversified into e-commerce, cloud computing, and more. They restructured their operations significantly over time. American Express adapted from express mail services to financial services, evolving its core business.
5. Offering Early Retirement Packages: Early retirement packages can be an attractive option for both the organization and employees nearing retirement. These packages typically offer additional benefits to incentivize voluntary departure, helping to reduce the workforce in a dignified manner while providing employees with a beneficial exit route.
Examples of companies that have offered early retirement packages to their employees are Pfizer, General Motors (GM), and Adobe. Both Pfizer and GM recently announced buyout offers for long-time employees, providing early retirement options. Adobe offers early retirement packages to employees close to retirement age.
6. Freezing or Slowing Down Hiring: A hiring freeze is a straightforward approach to cost control. By halting the recruitment of new staff, organizations can manage their payroll budget more effectively. This strategy is particularly useful when turnover is sufficient to gradually reduce the workforce or when current employees can absorb essential tasks of vacant positions.
Examples of companies that have frozen or slowed down hiring are IBM and General Electric (GE). During economic downturns, IBM has implemented hiring freezes to control costs and maintain financial stability. GE has used hiring freezes as a short-term measure to manage expenses during challenging times.
7. Reducing or Eliminating Non-Essential Expenses: Cutting back on non-essential expenses, such as travel, events, and discretionary projects, can result in significant savings. By scrutinizing every aspect of expenditure and prioritizing only essential spending, companies can free up resources that may be allocated to retaining employees.
Examples of companies that have reduced or eliminated non-essential expenses include Google and Ford. Google cut back on non-essential expenses during the pandemic, including travel, marketing events, and discretionary projects. Ford reduced non-essential spending to conserve resources during economic downturns.
8. Exploring Government Assistance and Relief Programs: Many governments offer assistance programs, subsidies, or loans designed to help businesses maintain their workforce during economic downturns. Companies should explore these options to take advantage of any available financial support that could help them avoid layoffs.
Examples where organizations have explored government assistance and relief programs include numerous small businesses in the United States, as well as in the airline industry. During the pandemic, many small businesses accessed the Paycheck Protection Program (PPP) loans to retain employees. In addition, airlines received government assistance to prevent layoffs during travel restrictions.
9. Engaging in Cross-Training: Cross-training employees to handle multiple roles can increase operational flexibility and reduce the need for a larger staff. This approach not only helps in cost-cutting but also enhances employee skills and prepares the organization for more agile and adaptable operations in the future.
Examples of where companies have engaged in cross-training their employees can be seen at Zappos and Costco. Zappos cross-trains employees across different roles, allowing them to adapt to changing demands without layoffs. Costco's cross-training approach ensures employees can handle multiple tasks, maintaining operational efficiency.
10. Negotiating with Suppliers or Creditors: Renegotiating terms with suppliers or creditors can ease financial pressures. This might include extending payment terms, reducing order quantities, or negotiating lower prices. Such measures can improve cash flow and potentially free up funds that can be used to retain staff.
Examples of where organizations have negotiated with suppliers and creditors include Walmart and Boeing. Walmart renegotiates terms with suppliers to optimize costs and allocate resources effectively. Boeing engages in negotiations with creditors to manage financial pressures during industry downturns.
11. Encouraging Employee Innovation: Inviting employees to contribute cost-saving or efficiency-enhancing ideas can lead to significant operational improvements. This participatory approach not only uncovers potential savings but also fosters a culture of innovation and team spirit, crucial during challenging times.
Examples of companies encouraging employee innovation include 3M encouraging employees to submit innovative cost-saving ideas through their "15% Culture" program. In addition, Procter & Gamble (P&G) fosters innovation by involving employees in identifying efficiency improvements.
12. Utilizing Contract or Part-Time Workers: Adjusting the workforce composition to include more part-time or contract workers can provide flexibility. This allows the company to scale labor costs in line with demand while retaining the core full-time workforce that is essential for the company's operations.
Examples include Uber and Upwork. Uber’s gig economy model relies on contract drivers who work flexibly based on their availability. Upwork connects businesses with freelance professionals across various domains, allowing companies to access specialized skills when needed.
The Importance of Analyzing Alternatives to Find the Best Option(s) for Your Organization
I invite organizational leaders to compare and contrast the presented alternatives to layoffs and encourage a custom evaluation of which strategies might work best for your specific circumstances and industry. It is important to consider the unique challenges and opportunities within each organization, alongside the broader economic environment, to identify the most effective approach. By engaging in this type of comparative review, organizations can tailor these alternatives to their needs, ensuring a strategic and thoughtful avoidance of layoffs.
Conclusion
This article provides 12 strategic alternatives to layoffs, offering key insights that underscore the potential for organizations to navigate economic challenges without resorting to workforce reductions. By implementing innovative solutions such as temporary pay cuts, job sharing, voluntary leave, and leveraging contract work, companies can maintain operational health and employee morale during tough times. I recommend leaders consider these alternatives with strategic planning and a focus on engaging employees in the process, ensuring decisions are made with transparency and empathy. Additionally, there's a pressing need for further research, particularly longitudinal studies, to understand the long-term effects of these strategies on organizational health. Such investigations could provide invaluable data, helping leaders make informed decisions that protect both their workforce and their bottom line, fostering a resilient and adaptable organizational culture.
Want to join the discussion about layoffs and career development? Visit here and join us in the “Let’s Talk About Layoffs – Navigating Careers & More” FaceBook community.
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Read more from Tracy!
Tracy Shroyer, PhD., Executive Contributor Brainz Magazine
Behind the pink slips, human stories. Dr. Tracy Shroyer empowers individuals and organizations navigating layoffs and career transitions with empathy, actionable tools, and unwavering support. From resume revamps to LinkedIn mastery, she helps turn uncertainty into opportunity. Join her blog, podcast, and free community, "Let's Talk About Layoffs," for resources, real talk, and a path forward.
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10 Hugely Successful Companies that Reinvented Their Business
5 Flexible Work Strategies and The Companies Using Them - Buffer
A Guide to Implementing the 4-Day Workweek - Harvard Business Review
Dell confirms freezing employee salaries, contributions and hiring
Here's what to consider if your company offers an early-retirement package
Hiring freezes most common cost control amid COVID-19 pandemic
Layoffs? Hiring freezes? Pay cuts? Furloughs? Employers weigh options
Leveraging Operational Restructuring To Reduce Costs - Forbes
Need a longer holiday? In a tight labour market some companies offer ...
Over 305,000 laid off in major US cuts this year here are the biggest
The job market is strong. So why did layoffs double in January?
This Is the Only Time You Should Accept an Early Retirement Offer
Wave of early retirement hits workforce. How to negotiate best deal - CNBC
What Is Sabbatical Leave? A Comprehensive Guide (With Examples ...
What is sabbatical leave? It's the best kept secret in HR - BetterUp
