Avoid Staff Layoffs: 13 Steps

Arizona company celebrates 20 years with no layoffs.

July 20, 2011

By Howard Stewart

Despite the lagging economy and Arizona’s stagnant unemployment rate, AGM Container Controls in Tucson, Ariz., has not only avoided layoffs for 20 years, it has significantly increased its workforce.

Too often, companies look at layoffs as the first line of defense. But there are other options companies can implement. Layoffs should be the option of last resort.

Faced with the very real challenges of the recent recession, as well as previous downturns, we developed a 13-step plan to avoid layoffs. We review and implement this plan as needed whenever sales begin to slow.

The 13-step layoff-avoidance plan is as follows:

1. Hire employees only when management can see a long-term demand for their services. Otherwise, use voluntary or compulsory overtime to avoid hiring new employees that might need to be laid off in the event of a downturn.

2. Cross-train employees so if a specific product line or department is slow, you can move employees to another product line or department for as long as necessary.

3. Communicate continuously with employees about the projected downturn so they can better prepare themselves, both psychologically and financially.

4. Implement a hiring freeze on all nonessential positions whenever management forecasts a significant downturn.

5. Consider hiring from within for essential positions.

6. Keep a backlog of low-priority, long-term projects to keep employees busy during downturns.

7. Increase inventories of standard product components during downturns so hourly employees can stay busy even when there are no orders.

8. Perform comprehensive inventory counts.

9. Use current employees to take over contracted services, such as janitorial and grounds-keeping duties.

10. Use employees to do nonroutine tasks, such as painting, roof-coating, paving, and deep cleaning.

11. Consider implementing a wage freeze until better times resume.

12. Encourage employees to take vacation days during downturns. Consider paying employees bonuses to use up their vacation days.

13. Implement voluntary or involuntary unpaid leaves of absence to temporarily reduce fixed labor costs, especially among highly compensated, nonessential salaried employees. These employees are more likely than others to have savings, and the company gets a bigger bang for the buck.

This plan off handsomely for AGM in the first quarter of 2010, when our backlog declined by more than 30% from the fourth quarter of 2009. At that time, management implemented most aspects of this 13-step plan, which enabled us to avoid laying off any employees.

More importantly, we had the requisite manpower to meet the strong sales demand that followed when the backlog amazingly climbed by more than 65% from the first quarter to the second quarter of 2010.

Not one of our employees quit due to the implementation of this plan. And when good times resumed, AGM employees were compensated retroactively for all wage and salary freezes.

Howard Stewart is president/CEO of AGM Container Controls, Tucson, Ariz.