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The following article was written by Tuck Aikin several decades ago about how large and small businesses play different games on the same field of play and how playing by your rules and not the others is how you survive. Some of the facts contained in the original article have become stale with time, but the message remains as true today as it was when Tuck penned them. To ensure the message continues to resonate with readers today, I took the liberty to update some of his original examples but kept the intended message intact. I hope you enjoy it.
Unfortunately, it’s been impossible to miss the announcements: “Twitter to Lay Off 25% of Workforce in First Round of Job Cuts”, “Meta Laying Off More Than 11,000 Employees”, and “Amazon Set to Lay Off Thousands of Corporate Workers.” We, small business operators, commiserate with those employees caught up in such economic swings, but fortunately, the issue’s a big-guy problem we reason, doesn’t affect us. So, we exhale sadly, square our shoulders, then resolutely forge ahead with the challenges of business as usual. Or do we?
It doesn’t take long for us to discover that all those out-of-work people dramatically reduce their spending for all sorts of things, like dining out, buying jewelry and clothes, picking up the latest pop recordings, renting videos, going to movies, and financing new cars and houses. Now we’re faced with the same problem as corporate America – a cost structure that’s suddenly bloated relative to declining sales. And just like our bigger brethren, we’re faced with the core fear of every business enterprise – survival!
Clearly, something has to be done – we must either increase sales, reduce expenses, or both. As far as cost reduction is concerned, we already know what will produce the most immediate and meaningful effect: cutting salaries and wages. Since most small businesses are services, the largest operating expense by far is payroll, and we know it. So, like our larger business counterparts, in an almost knee-jerk fashion, we assess our situation to see whose work we can spare and then carry out the infamous “pink slip” ceremony. And again, just like the big companies, we make the same mistake.
“But that’s the brutal reality of free enterprise,” you might say. “There’s no choice, we have to cut labor costs.” No doubt that’s correct, but in the long run, are layoffs the only way to accomplish this unpleasant task? When economic conditions improve, as they always do, what about the future costs of recruiting new help, training, and waiting for the learning curve to bring our new hires up to the competence level of those we discharged? Just re-hire the ones we laid off? No way, they have to eat, they’re long gone. So what’s the alternative? Consider reducing the work week to 32 hours – a 20% wage savings. It’s not an easy maneuver, but several years ago our company did just that, and it worked out much better than we expected. Here’s how we did it:
First, we explained the problem to our three key supervisors and asked if they could coordinate the logistics (our office hours would have to remain at 8:00 – 5:00 M-F). We further asked what they thought the psychological impact would be. Minor, they thought and believed it would be far less distressful than the demoralizing effect of employees watching fellow employees cleaning out their desks (who would be next?). Turns out they were right.
In making the reduced workweek announcement, we offered to work with those who couldn’t sacrifice their paycheck being reduced by 20%, and if we couldn’t find a solution, we would provide a letter of recommendation and paid time off for interviews with prospective full-time employers. This became, in effect, a “self-selection” method of determining who gets the axe, and it was perceived as much more equitable than having “the suits” make the decision. We were surprised that no one needed to take us up on this offer.
Over time as natural turnover occurred and business picked up, we returned to a full 40-hour workweek with fully trained, knowledgeable, and dedicated people. The technique proved to be harder on supervision and management, but in the end, it was well worth the effort.
Tuck Aikin was a former SCORE colleague of mine for many years until his retirement. Tuck is a prolific writer and wrote small business-themed articles for the Colorado Springs Gazette for many years. As a co-mentor, Tuck was my inspiration for me starting this blog. The preceding post is reproduced with permission from the author.
