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In 2023, a reported one in three companies resorted to layoffs, from major tech corporations to smaller firms. Downsizing can be scary, not only for those affected but also for the morale and stability of the workplace. However, taking the right steps now can help mitigate the need for such drastic measures.
Here, Forbes Human Resources Council members share cost-saving tips that can serve as a lifeline for organizations facing financial challenges. Read on to discover thoughtful decision-making practices to weather the storm of uncertainties without resorting to layoffs.
1. Retrain Your Employees For More In-Demand Roles
Often, we see organizations lay off while they have job postings open. If a department is considering downsizing, what about taking the opportunity to reskill or retrain those workers to fill other more in-demand roles elsewhere in the organization? For example, everyone is recruiting cybersecurity specialists. The savings are significant, adding up on severance, recruiting and onboarding. - Gordon Pelosse, CompTIA, the Computing Technology Industry Association
2. Optimize Strategies Instead Of Replacing Employees
One practice we've followed is to optimize—not replace—those who depart over a period of time so the impact isn't as drastic. A second tip is to lean into other team members and use everyone you have onboard, even to perform different work tasks. This may require reprioritizing what they work on but employees appreciate knowing the company is doing everything possible to avoid a layoff. - Shay Hurst, OncoHealth
3. Conduct An In-Depth Analysis Of Business Costs
Layoffs should be a last resort. Leaders should explore several cost-saving strategies to protect their team and business. I would first conduct an in-depth analysis and restructuring of the business's costs, focusing on reducing non-essential expenses and increasing efficiency whilst minimizing the impact on employee morale, culture and core business functions. - Ben Keighley, Socially Recruited
4. Offer Voluntary, Unpaid Leave For Six Months
Think creatively about leave programs—instead of laying off, companies can offer voluntary, unpaid leave to employees for six months. That way burnt-out employees can get a break, and employers can shut down payroll for employees for a few months and reassess a few months later. This practice has been in use in certain large technology companies that have large workforces and has proven effective. - Amee Parekh, Stello Technologies
5. Map The Work Of Your Team
All leaders should clearly map the work of their team (and each team member) to 1. the functional business outcome, and 2. the revenue those functional business outcomes generate. To illustrate, an HR leader is responsible for a high-performing, cost-efficient workforce. Each HR team member is helping to either reduce labor costs or maximize workforce productivity. - Janine Yancey, emtrain
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6. Embrace Conscientious And Sustainable Hiring
Embrace conscientious and sustainable hiring. Carefully assess your workforce's flexibility—whether that means implementing a global recruitment strategy or reconsidering whether a role can be filled by an independent contractor rather than a full-time employee. This flexibility allows companies to better tailor hiring to address fluctuating demand and economic uncertainties. - Bjorn Reynolds, Safeguard Global
7. Understand What Your Employees Love Doing And Align Their Work Stream
Invest time in understanding what your employees love doing to ensure their work stream aligns. When employees are empowered to lean into their strengths, they will excel at delivering work products, and the team may even be able to do more. - Megan McCann, McCann Partners
8. Identify Areas Where You Can Optimize Costs
First and foremost, don't over-hire to begin with. However, if you find yourself in a situation where you have, conduct a thorough review of all expenses and identify areas where costs can be optimized. Look for inefficiencies, redundant processes or unnecessary expenditures and, most importantly, leverage technology to solve them. - JacLyn Pagnotta, Rose Associates Inc.
9. Avoid Over-Hiring
Avoid over-hiring. Companies believe that they must hire to grow, but that's not always the case, especially with AI allowing them to scale significantly without additional headcount. If companies start thinking more in terms of "what skills or capabilities do we need in order to grow" rather than "how many people do we need in order to grow," hiring will become leaner and more precise. - Shiran Danoch, Informed Decisions
10. Focus On Employee Skill Development
Leaders can save costs by focusing on employee skill development to address economic challenges like the UAW strike. This enhances efficiency and reduces external hiring. Cross-training in various roles adds flexibility in workload management without extra headcount, safeguarding teams and the organization and outsourcing non-critical functions is more cost-effective than maintaining them in-house - CJ Eason, JobFairGiant.com
11. Consider A Temporary Four-Day Workweek
Perhaps considered a more radical way to cut costs, exploring a reduced four-day workweek either temporarily or permanently may assist in avoiding layoffs. The reduction in hours is offset by a reduction in total compensation and requires evaluations of employee, client and organizational needs. This option could be offered as a collaborative, voluntary solution before moving to layoffs. - Jennifer Rozon, McLean & Company
12. Ask Leadership If You Are Delivering What The Customer Wants
Skip the layoffs, boost loyalty: Before cuts, ask leadership one question: Are we truly delivering what customers crave? A day on the frontlines and listening to clients and employees reveals the answer. Use it to reignite customer love and build a stronger team—a win-win for everyone. - Michael D. Brown, Global Recruiters of Buckhead
13. Evaluate Your Team's Roles On A Regular Basis
Making sure to evaluate that you have the most necessary roles on your team on an ongoing basis is critical. Business needs change, and as leaders, we don’t always reflect on the makeup of our team as proactively as we can. This also gives an opportunity to reskill and upskill our employees, investing in their career development while helping them make an even bigger impact on the business. - Sanja Licina, QuestionPro
14. Economize With Transparency
Economize with transparency. Cutting costs may be necessary, but when it’s done abruptly and without explanation, organizational jitters can set in. Rather than maintain radio silence, acknowledge the macro forces at work, lay out the rationale and invite people into the process. Reducing perks and resources is never easy, but doing it out in the open removes the mystery—and some of the sting. - Graham Glass, CYPHER Learning
15. Analyze Your Business's Future Needs
Instead of immediate layoffs, carefully analyze your organization's future needs. Pause hiring for non-critical positions or positions that can be temporarily put on hold. This allows the company to conserve resources without the immediate shock and morale impact of layoffs. In addition, temporary salary adjustments, especially at senior levels, can show solidarity and spread financial strain. - Raunak Bhandari, Google Asia Pacific
16. Stop Hiring And Optimize The Productivity Of Current Employees
Firstly, stop further hiring. Turn off the flowing tap before pouring water down. Secondly, measure and optimize the productivity of existing employees before blindly laying off the entire team. Lastly, go remote! Save on salaries, operational overhead costs, and commuting expenses. - Adithyan RK, Hyring
17. Keep Your Company's Core Values In Mind
When times get tough, it is critically important that organizations keep focus on their core values in making difficult trade-off decisions. In purported "people first" organizations, when layoffs are the go-to cost-cutting option, it is clear that "people" aren't actually valued above other resources. - Kathryn Medina, Federal Reserve Bank of Chicago
18. Optimize Inventory Levels
A less conventional yet effective cost-saving strategy to consider is to focus on optimizing inventory levels. Implementing just-in-time inventory practices and utilizing software for real-time tracking helps organizations minimize costs related to excess inventory, storage and obsolescence. This approach not only cuts down unnecessary expenses but also ensures that demand is consistently met. - Katrina Jones, Acacia Network
19. Implement Energy-Efficient Practices And Outsource Non-Core Functions
Implement a few cost-cutting practices, including reviewing all expenses, implementing energy-efficient practices, offering remote work options, streamlining processes, outsourcing non-core functions and investing in technology. These practices can help improve financial stability while maintaining the quality of products or services. - Reema Akhtar, Seer Solutions
20. Offer Early Retirement Packages To Senior Employees
Consider offering early retirement packages to more senior employees. In the long-term, these packages can save money because organizations no longer have to cover that employee's salary and benefits. A typical early retirement package will offer multiple benefits to employees, like a cash payment, extended health benefits and other perks like life insurance or financial wellness services. - Niki Jorgensen, Insperity
