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[#Don’t cut salaries and layoffs#] #Notes on small and micro business operations# In Kazuo Inamori’s autobiography, there is this passage: “In early 1974, the oil crisis caused a sharp drop in orders, which dealt a severe blow to the company, leading to large-scale layoffs and layoffs in the industry, and Kyoto Ceramics also had to implement salary cuts. However, our company upholds the business philosophy of ‘pursuing both spiritual and material happiness’, and since its establishment, there has been a tradition of the whole company uniting as one and sharing weal and woe. Therefore, our declaration is that the entire company will share the same fate and will never lay off employees.”
I thought it was amazing at the time, but later I learned that Japanese companies in the 1970s basically implemented a lifetime employment system. In that era, almost all Japanese companies that encountered the oil crisis made the same choice as Kyoto Ceramics - no layoffs.
But after 2000, Japan's lifetime employment system finally came under attack, and companies that stick to this employment system have become rare. Moreover, in an era of rapid technological development and industrial iteration, it is not easy for companies to survive for 30 or 40 years.
In the past few years, due to the counter-cyclical situation, there have been constant news of layoffs, and everyone has gradually become accustomed to it. In the past, layoffs were always demonized. Once a company announced layoffs, people always thought that the company would definitely be finished. Now, the public's understanding has greatly improved. Layoffs are just like resignation, and are a common phenomenon in corporate management. If a company encounters operational difficulties and needs to increase revenue and reduce expenditure, salary cuts or layoffs are very common options.
Both salary cuts and layoffs will affect team morale, so what should managers choose?
The worst option is of course to lay off employees and cut salaries. Unless the company is in great trouble and has no other choice, try not to do this. I have seen a company do this, and the boss said that after cutting salaries and laying off employees, morale was very low, and the remaining employees chose to resign.
If you have to choose between the two, some managers may think, how about reducing the overall salary, not laying off employees, but only cutting salaries? It seems that cutting salaries is not as big a move as laying off employees. In fact, it may be "choosing the greater of two evils". The reason is that there are excellent members and ordinary members in the team. If you are afraid that layoffs will affect the team, it will be unfair to the excellent members if you cut salaries for everyone.
Moreover, if salaries are generally cut, the salaries of excellent employees may no longer be competitive in the market, and they may choose to leave. The ones who stay are those who are not competitive enough in the market.
Therefore, if there is a choice, it is better to lay off employees than to cut salaries. Generally speaking, there will always be redundant staff in the team. Employees of large companies like to say, "Our company can still run well if we cut half of the people, and maybe even better." Even if small and micro enterprises are short of staff, they can always find redundant personnel.
In order to boost morale, not only should salaries not be cut, but companies can also consider raising salaries for existing employees if they have the means. This is to boost morale, and on the other hand, a reduction in the number of employees means an increase in the workload for those who remain, so a salary increase is also justified.
Compared with salary cuts, are layoffs necessarily worse for the employees being laid off?
Not necessarily. In many cases, if laid-off employees cannot bring out their value in your company, it does not mean that they are not excellent. It may just be that the company environment causes them to fail to bring out their value. Forcing them to stay and implementing salary cuts will only further reduce their benefits and consume their comparative advantages. As long as layoffs are legal and the company provides employees with adequate protection, if they can successfully find a job in a short period of time, they will also have extra income.
When laying off employees, managers also need to pay attention to the need to take care of the employees' emotions as much as possible, and not to label them as "losers" intentionally or unintentionally. In fact, most of the time, the responsibility for layoffs does not lie with the laid-off employees, but with the company.
When I laid off employees for the first time, I specifically told them that it was not their fault, but the company's fault. After careful consideration, the company concluded that there was no hope or prospect for investment in this business line, and that it was necessary to immediately close the business line and lay off the employees in the business line, while promising to safeguard their legitimate rights and interests.
Layoffs are certainly a painful thing for a company, but they are not necessarily a bad thing.
When Netflix was still small, it experienced a layoff in 2001 when the bubble of the Internet economy burst. Netflix had to cut its staff from 120 to 80. Hastings, the founder of Netflix, was worried that the company's morale would plummet. He wrote in his book: "I dare to assert that after some employees leave, those who stay will question the company because of the departure of their friends and colleagues, and will think that the company does not care about its employees. This is bound to make everyone dissatisfied. What's worse is that those who stay must complete the work handed over by those who leave, and the increased workload will make them feel more painful. Now the funds are already very tight. If morale continues to be low, can we still hold on?"
However, in the following weeks, he was surprised to find that the atmosphere in the company had suddenly changed greatly. "Although our company survived by cutting costs and one-third of the employees had just been forced to leave, the remaining employees were full of passion and vitality, and had quite a lot of creativity and ideas."
“What I never expected was that these 80 employees were so excited that they completed all the work successfully. They worked longer hours, but everyone was full of enthusiasm. We all felt that the employees in the entire company were crazy about their work now.”
On the one hand, it is because those who stay have become more capable and more motivated. On the other hand, it also shows that more people do not necessarily mean more efficiency. If there are too many redundant staff and people are overworked, the company's efficiency will be reduced.
Finally, it is important to remind you that when layoffs occur, the costs that should be paid must be paid, and compensation must be given in accordance with the relevant provisions of the Labor Law.
Once, I met a small and micro business entrepreneur who asked me how to lay off employees without causing labor arbitration. I told him that as long as the Labor Law was followed, there would be no problem. He was surprised and asked, "Don't you give N+1?" I was also surprised, "Don't you give N+1?" As expected, they didn't give it, and it did lead to a labor dispute later.
Some layoffs occur when the company is on the verge of a capital chain break. In this case, the company may no longer have the money to compensate the laid-off employees, but the employees have their own legal rights and interests, and they also need to live, so they often choose to defend their rights.
My suggestion is that when the company is still in good condition, you must set aside a portion of reserve funds, which should not be used under any circumstances, to deal with unexpected situations and emergencies. Even if the company cannot continue to operate, it can still settle its employees and partners decently. (This article is excerpted from "Notes on Small and Micro Enterprise Operations")
"Notes on Small and Micro Enterprise Management", written by Ye Tieqiao, is a desk guide for small and micro enterprise managers. He Yifan, deputy editor-in-chief of "Chinese Entrepreneur" magazine, wrote the preface, and Fan Deng, Wu Xiaobo, Ouyang Hui, Wang Zhifang, and He Xueyou jointly recommended reading. The experience and mentality of veteran entrepreneurs are systematically sorted out, focusing precisely on small-scale organizations and teams, and 37 key issues to survive and survive in a complex environment.