Business

5 actions to avoid massive staff cuts in your company

According to the Association of s of Mexico (ASEM) in the next 2 months 77% of SMEs will be entering a liquidity crisis and possible bankruptcy.

11 min read

The opinions expressed by collaborators are personal.

5 actions to avoid massive staff cuts in your company
5 actions to avoid massive staff cuts in your company

It is 6:03 am on March 31 at the time I am starting to write this article, yesterday night Marcelo Ebrard announced at a press conference the declaration of emergency and suspension of work due to force majeure. Mexico is being forced to carry out a forced national strike with economic consequences as a result of a viral pandemic with also unsuspected health consequences and which has spread to every country in the world.

As I write this article, I think of my first meeting of the day, an extraordinary video conference meeting with all the leaders and partners of our companies to inform them about the actions and strategies we will be taking to avoid the spread and spread of a virus. ! and thus minimize the impact on our construction and service companies. I never imagined that a topic like this would be on the agenda of one of our meetings. Just a few weeks ago, all of this would have seemed like something out of a post-apocalyptic science fiction story.

We are facing an unprecedented situation in the world and in the business world. And although I had already read about the VUCA environment and conditions (volatility, uncertainty, complexity and ambiguity) that prevail today in our business environment, this is out of all parameters since I never imagined that I was implementing strategies against a virus in my companies .

But focusing on our country, the strategies that our government is currently taking, such as isolation and quarantine, are focused on reducing the contagion curve and preventing our health system from being overwhelmed with thousands of infected and sick people who end up collapsing. hospitals and generating thousands of deaths, as is currently the case in Italy, Spain and the US.

However, apart from this health crisis, an probably even greater economic crisis is looming, due to the negative impact that these isolation strategies and measures will have on our economy and productive sectors.

The Government of Mexico announced an emergency declaration and with it a national stoppage of all Non-Essential Activities for a month, from March 30 to April 30. This will cause a liquidity crisis in many of the SMEs in Mexico since productivity will not only fall as everyone is safe at home, but also demand and consumption, which will cause many companies to be forced to carry out partial or total closings. , affecting the income of thousands of Mexicans.

This will invariably put us in a vicious circle or what economists call a negative spiral: less consumption, lack of liquidity, crisis in companies, less investment, unemployment and again less consumption, etc.

This will lead to an economic recession, which most analysts now estimate to last anywhere from six months to 1 year.

For example, the consulting firm McKinsey, in its report COVID-19: Implications for Business updated to March 16, establishes in its base scenario the recovery for the third quarter of this year, while in its pessimistic scenario, they see the recovery from the aviation, tourism and government sectors until the fourth quarter of 2020.

While UBS, in its Latin American Economic Perspectives Mexico report dated March 11, 2020, establishes that due to the impact of COVID-19 and the oil trade war, the recovery and stabilization of the Mexican economy will be between the first quarter from 2021 until the summer of next year.

In addition to this, if we take into account that, according to a study carried out by the Association of s of Mexico (ASEM), 77% of SMEs in our country only have 2 months or less of liquidity, we can begin to glimpse the size of the problem that we will soon be facing, since it must be remembered that SMEs in Mexico represent 52% of GDP.

Now, in terms of economic crisis, saying six months to saying a year is a lot of difference. What will it depend on? of unemployment.

The more unemployment that is generated, the greater the economic crisis in our country and the greater the time it will take us to get out of it.

In our country, the unemployment rate between 2017 and 2019 has historically been one of the lowest in the last 15 years, ranging from 3.3% to 3.6% respectively. However, given current conditions, Juan Carlos Calderón, expert economist and CEO of ARVO Capital, predicts in his base scenario that unemployment will rise up to 5% and in his pessimistic scenario up to 8%.

For this reason, and for the economic and emotional well-being of all our employees and collaborators, businessman and entrepreneur friend, to the best of your ability and those of your company, CUT-OFF STAFF MUST BE AVOIDED .

The Harvard Business Review in its recent article The Coronavirus Crisis Doesn't Have to Lead to Layoffs , recommends taking 5 actions to avoid massive staff cuts:

1. Communicate openly with everyone and explain the situation your company is going through. Everyone knows that these are difficult times so no one will be taken by surprise. It is better that the information come directly from you the CEO or leader of the organization that they are guessing based on the amount of news and rumors that are generated daily.

2. Share the sacrifice. That is, if you are going to adjust wages, as a leader you must set an example and be the first to adjust your wages. It would be incongruous for the entire organization to start cutting wages while the CEO and management team remain the same. A great example of this is what is happening in the aviation industry that in the face of the coronavirus crisis, the CEOs of United Airlines, Jet Blue Airways and Delta Airlines have voluntarily accepted cuts of 10%, 20% and 100%! respectively.

3. Open yourself to new ideas. Often times your very collaborators, who are directly in the trench, are the ones with more information about how to improve things, but most CEOs think that asking their people for help is losing control and accepting that they don't know. Don't be afraid to ask your employees, not only will you earn their trust but you will empower them and you will have access to many more options to make better decisions.

4. Review all options (even the least conventional). Before making staff cuts, review the less conventional options that could help you reduce costs. For example, implementing part-time jobs, reducing workweeks to 3 or 4 days, granting sabbaticals, staggered salary adjustments, etc. You will be surprised to see that some employees will react positively by volunteering to see that everything possible is being done within the company to avoid layoffs.

5. Stay calm. These moments are of high volatility and uncertainty and as a leader you will be subjected to great stress loads. If you act too fast you can overreact and make decisions in a rush. If you act too slowly, your company will suffer the consequences. Try to be fair and always stay calm so you can make the best decisions in critical situations. Avoid the yellow news and focus only on objective indicators and how these affect your company.

At the global level, the International Labor Organization (ILO) has declared that due to the impact of COVID-19 on the decrease in the GDP of countries, up to 25 million jobs could be lost worldwide. In Mexico the economic impact is already inevitable, but unemployment and massive cuts if we can avoid or minimize them.

If we can get companies to implement strategies to avoid staff cuts and the unemployment rate does not skyrocket, we will be able to get out of the crisis much faster and reach levels of stability before the end of 2020, in addition to also avoiding a possible social crisis and rising violence.

If the liquidity crisis reaches your company and you start having problems paying your salary, these are the strategies and the strict order that I recommend:

  1. Suspend all non-essential costs in your company.
  2. Adjusts salaries of partners and directors.
  3. Negotiates liabilities and payments to suppliers
  4. Adjust employee salaries
  5. Promote voluntary resignations
  6. Cut personal.

We must avoid reaching point 6 at all costs. If all of us make an effort, I sincerely believe that it will not be necessary to go beyond point 2, and this will allow our economy to recover much sooner.

However, and unfortunately, it will still not be easy for many and in any case there will be people who are strongly impacted by this crisis, all those workers or independent professionals, teachers of private classes, musicians, artists and many others will be affected. and his income will practically disappear in the following weeks.

This gives us great responsibility to those of us who can continue to have a source of income and forces us to show solidarity and see how we can support all the people who are about to remain or have already lost their income.

For this reason, I invite you not to suspend classes or services that you are already paying and that you can continue to do, and coordinate with the service provider that schedules the service for you later or buy the service in the form of a “gift certificate” To use it on another date, shop at restaurants with home delivery or use the video conference mode for scheduled appointments with specialists or independent professionals. We must remember that in times of crisis we can all help in some way.

Difficult times are coming, but remember that this is temporary and temporary, in a year or less everything will be the same or better and on whom does it depend? from us and together we can be part of the solution.

The less unemployment there is and the less people are left without income, the less they will suffer and the easier it will be for consumption, spending, demand and investment to rise again to return to the path of growth.

Take care and follow the recommendations of the authorities, it is extremely important to see for our health and that of ours, however, we cannot leave everything in the hands of the government, we must get down to work and take action, and from the trenches that we have to be, we have to see how to be supportive and help others.

Finally, the human being always tends to mentally perpetuate his situations and emotional states, that is, when we do well, we think that we will always do well and when we do poorly, we think that we will always do badly. Don't let this happen to you! Remember that this situation is temporary and that after a few months everything will return to normal. Cheer up.

Remember that we cannot control circumstances, but we can control the way we react to them.
#Noaldesempleo

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