Managing a company’s finances can be very challenging and companies that find it difficult to conquer this challenge, experience a downturn, a decline in business, and when this occurs the need to find solutions to alleviate their financial issues becomes crucial. One solution that companies seem to implement and re-visit is layoffs but employers that are sensitive to the employees needs try to avoid this option by exploring other alternatives such as furloughs or transferring employees into new positions within the company. Furloughs
The difference between layoffs and furloughs is furloughs always has a return date. Workers who have been commissioned to furlough do not get paid while they are off of work. However, they will still receive their work benefits, like health insurance but managers typically overestimate the savings they will achieve and fail to understand that even bad recessions usually end more quickly than people expect and as David Cote shows with the statement that follows, “We wanted to be ready for recovery as soon as it came, whether it was soft or V-shaped, and furloughs were one way of positioning us for any outcome”. (David Cote, 2013). This statement proves that furloughs prepares a company for serious downturn or whatever may occur as a result of their poor financial health. Transferring
A company that must cut hours can also consider moving employees to other positions that are more needed or that are vacant. The transferring of employees would be a better solution than layoffs for both parties. Employees would gain knowledge within their new role and the company will still be able to hold on to employees that will become essentially more valuable to the company. Most companies prefer to have people that can be flexible and learn all aspects of the departments in the business so exercising the option of transferring employees to new departments is a win-win that alleviates the need for layoffs. The Middle Income Customer
Avoiding layoffs will benefit the employee and the middle income customer, who are one in the same. It is a known fact that consumer spending accounts for 70 percent of economic activity (New York Times, 2013) and when an employee is laid off and forced to depend on unemployment benefits, spending decreases significantly. Statistics show that the disparity between the rich and the middle class has increased significantly and is being attributed to the wave of layoffs in the economic downturn that have devastated household budgets (“Layoffs, economy widen U.S. income gap,” 2009).
When people are unemployed in large numbers, the economy suffers, so keeping the middle income customer employed with only a fraction of their earnings being affected will allow them to continue spending versus depending on unemployment benefits that cut their earnings by a third and causes spending to grind to a halt. When people have less money to spend it triggers a domino effect where other companies that suffer because of lost revenue, may in turn be forced to lay off employees and cause a larger dip in spending (Ryan, 2015). So utilizing the alternatives of furloughs and transfers will help the middle income customer stay in the game. Decisions
Furloughs or transfers requires a plan on how to implement and decisions need to be made. The first decision a company should make is to present this information to the employees or their unions by collecting the necessary data on why furloughs or transfers are necessary and how many furlough days would be necessary for recovery or stabilization.
Implementation: Resources and Oppostion
The resources a business would need are good solid reporting from their internal auditing source that would provide them with the data needed to present to the employee that would explain the situation in detail to support the decision to utilize furloughs or transfers. The factors that may affect the implementation of the business decision aforementioned are the employee’s themselves or their unions if they are not convinced that the action taken is necessary but if facts are presented truthfully and
respectfully, the decision should be met with little or no opposition.
(2013, January 31). Jobless Aid Claims Rise, but Raise Little Concern. The New York Times. Retrieved from http://www.nytimes.com/2013/02/01/business/growth-in-consumer-spending-slows.html
How Furlough Works (2014) AZCentral http://yourbusiness.azcentral.com/furloughs-work-8414.html Level 5 Alternatives to Layoffs (2011)
http://www.level5advantage.com/html/layoff_alternatives.html#.VM_GrbIXjCI.gmail Layoffs, economy widen U.S. income gap. (2009, September). The Arizona Republic, Retrieved from http://archive.azcentral.com/arizonarepublic/business/articles/2009/09/30/20090930biz-incomegap0930.html
Ryan, T. (2015). Chron. Retrieved from http://smallbusiness.chron.com/overall-effects-unemployment-37104.html
The High Cost of Furloughs. (2009, October). UC Berkley Center For Labor Research and Education. Retrieved from http://laborcenter.berkeley.edu/pdf/2009/furloughs09.pdf