What do you do when times get tough? Whether it’s because of forces outside your control – the global economy, geopolitical events that affect supply chain, pandemics – or ordinary business choices that turn out not to be for the best after all, a downturn can trigger knee-jerk reactions.
On the surface, these reflexive actions can seem to make sense, particularly in the short term. Each of them, though, brings long-term consequences with it. They take the oxygen out of the company, so that it has to travel through challenging times gasping for breath, empty.
By slowing down and looking at your company in a holistic, 360-degree way, you can consider its unique needs and goals, and potentially find more creative solutions or alternatives to quick-fix expense slashing. Time spent walking through the costs and benefits, long- and short-term, can help not just keep the doors open now, but also allow the company to come out of its crisis healthy and strong.
Let’s look, first, at decreasing staff as a cost-cutting measure.
Until you own a company, paydays can seem like the best days of the month, even if the deductions on your paystub rankle a little. Once you move to the other side of the transaction, though, payroll can feel like a heavy burden. Each employee’s salary, plus an added 22-25% in payroll taxes, plus the costs of benefits, can make dread well up inside even the most generous employer.
Eliminating a couple of salaries plus the associated costs can transform a budget report faster than nearly anything else. Whether it’s a big-company culture that includes a “purge” every October to hit a number, or an unprecedented emergency that forces a small business owner to make heart-wrenching decisions, letting people go can quickly make things look better, at least on paper.
There are two sides to every coin, though, and the costs of cutting staff can be steep. Letting sales staff go can remove much of the history and experience in the company and endanger relationships with customers. Who will take care of those customers, after all, when your seasoned staff has gone? A newer, less experienced, cheaper sales team may cost less, but add less to the top line. In that case, all the numbers are smaller, but none of the problems have really been solved.
Cutting staff doesn’t eliminate tasks, either inside or outside of your sales team, and so the work previously done by one worker has to shift to someone else. Regaining equilibrium might require shifting responsibilities from one person to another, eliminating or changing positions, and even re-evaluating clients. You hired that head of sales because there was work for her to do, after all, and you’ll likely feel her absence when she’s gone.
Finally, what are the implications for your company on the other side of the crisis – because there’s always an other side. How long will it take you to recruit, hire and train replacement staff, and what will it cost? You may lose time, money and expertise in the long term, in exchange for the short-term reduction in costs. When you make it to the other side and the industry rebounds, who will help make sure your company rebounds, too?
We’ve managed our own headcount and workload, and helped our clients do it, too.
In the spring of 2020, we had honest, open conversations with our staff about the possibilities of temporary pay cuts and furloughs. We made sure all of the bureaucratic Ts had been crossed to ensure we could get Payroll Protection Program funds, and that our employees could collect any assistance available to them. We looked hard at our clients and our margins and let go of some clients and shifted services for others. Internally, we outsourced some services and pulled others back in-house. We took care of ourselves and our team.
We also helped clients take care of their teams. For example, we helped one choose focused, efficient and cost-effective marketing from Elohi Strategic Advisors (ESA), rather than higher-cost, less industry-specific marketing from an outside firm. On the other hand, we helped another client save the cost of a dedicated sales team by getting them the right agreement with the right foodservice broker. We provided drop-in fractional heads of sales and even CEOs for companies that needed leadership and direction, but at much lower cost than full-time positions.
What will you do next?
As we move into these next uncertain months, your executive team may scramble to find answers to these new challenges we’re all facing. Maybe your company has a close, open team and great top and bottom lines, and you just need ESA to walk through your plan with you, to find resources and systems to make things run as smoothly as possible.
Maybe, like most companies, some departments work better together than others; maybe as CEO you realize that some department heads communicate with you better than others. Maybe you suspect office politics and allegiances or inefficient ways of doing things could keep you from going into this with the strong team you’ll need to survive. Our experience as a third party can help you create a more efficient, smoothly-running team.
Maybe you’ve only started to get your feet under you again from COVID and need help with a strategy.
Maybe you’re a company that tends to thrive in these times – COVID hurt K-12 foodservice, for instance, but ghost kitchens have had a moment – and you need to talk through ways to pivot and capitalize as fully as possible on whatever comes next.
Maybe you need to diversify your product offerings or expand into additional channels, but don’t know exactly what that would be or how to do it.
The ESA logo looks like a maze because foodservice can seem like exactly that, particularly when you’re first getting started, and certainly when things start to go sideways. It can be difficult to see anything other than the leaves on the hedge in front of your face, that wall of immediate concerns that seem to take up the entire field of vision.
At ESA, we have decades of experience of good times and bad, across roles and departments, and can help you see how every aspect of your business needs to work together. Perhaps more importantly, we also have a different perspective – we can see the whole maze. Not only have we been through the maze before ourselves, but we can help you gain that 360-degree view, so that whatever the future brings, you can find your way to success.