Cutting Payroll Costs Smarter, not Harder

Cutting Payroll Costs Smarter, not Harder



So, it’s been a tough year in Oklahoma.  One of my favorite Warren Buffet quotes is “Only when the tide goes out do you discover who’s been swimming naked” and for many local companies, it’s low tide.

So, when cutting costs is key to survival, often companies think about hiring.  Ending it, that is.  And while on that hiring freeze, many companies will let the natural attrition of employees and failure to backfill those now open positions do their cost cutting for them.  This is a passive way to save money, but there’s a way that has a lot more “bang for your buck”.

Every year, Gallup conducts a survey on employee engagement.  The 2015 survey was based on Gallup Daily tracking interviews conducted with 80,844 employees.  Year after year, the numbers are roughly the same, with about one third of US workers engaged in their jobs and about half not.  But the most stunning number is that year after year, between 15-20% of employees are actively disengaged.

What is this nebulous “engagement”?  “An “engaged employee” is defined by Wikipedia as one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization’s reputation and interests.  So that means one third of all workers are taking positive action, while 15-20% are actively NOT.

The challenge in tough times is to cut cost without cutting your revenue options.  Many times when a company allows natural attrition, the employees that are really delivering values are the ones that leave.  Not always, but it happens.  So rather than risk losing the most engaged employees when times are tough, there is a way to be strategic.

Often, the jobs within our companies are not clearly defined. Yes, there is a job description, but there is rarely the “metrics of success”.  When a company or a manager is able to clearly define what outcomes have to happen for the person in that job to be considered an “A” player, it provides relief for both management and employees.  There is a clear objective, whether that be increasing production by 7% this quarter or in-taking 60 phone calls today or even coming up with a brand new product in the next 90 days.  There’s clarity.

Now, this could sound like I am advocating for employers to fire their employees, willy nilly.  I am not.  What I am encouraging is that companies and managers know clearly who is doing a “A” job and who is doing a “B” or “C” job for the same pay.  Because I have seen many times an “A” player lost over the failure to address a “C” player’s substandard performance and the subsequent drain on their team.  I have also seen strategic managers eliminate three “C” players and hire one “A” player, getting the exact same outcome for a much lower cost. Anthony Robbins’ says “It’s not the person you hire but the person you fail to fire who ruins your business.”  And I’ve seen businesses dropped to their knees by “C” player management.

Not all “C” players are true “C”s.  That person could be highly talented in some areas and is simply in the wrong role within their company.  When outcomes are super clear, managers can see when employees are struggling.  Then those managers offer coaching, training or even a transfer to a new position before the situation becomes dire.  We don’t have to wait for employees to quit, risk our high performers through inaction or have people in jobs that don’t match their strengths.  We can instead have our company’s greatest assets (our people) be in roles where they can be successful and have a positive impact on our company’s bottom line.