When an earthquake happens and the following aftershocks have occurred, we often think that is the end – the dreadful event is over. But, when an earthquake occurs in the ocean, another cataclysmic event develops - the Tsunami that we refer to as the second wave. We’re going to talk about the impact of the economic earthquake we’ve all experienced – that was the first wave, and then we want to address the second wave, the tsunami, that we believe will come with recovery. As consultants we spend our time with multiple clients, many of CBI’s clients are small businesses. Purpose: We are gong to talk with you about what we have learned from our clients about how they are surviving the economic downturn, the first wave. And also to expect, and how to prepare for the next wave as recovery begins. Outcome: Leave you with some new ideas for coping with current economic storm. Alert you to the next wave that’s coming Give you some ideas that will allow you to position your company to emerge strong and well prepared; to ride the next wave to future success.
How many of your business, or the businesses you serve, fit that description? Want to have an interactive conversation – to begin, let's introduce ourselves. Introduce yourself and your company: Tell us what you do We'll share some statistics with you first - to set the stage - and then talk about the effects of that data, the reality behind the numbers.
The Department of Commerce confirms what we all know - small business is the backbone of our economic engine. We employ more than ½ of the workers in the private sector Generated most of the new jobs in the past 15 years.
Responsible for more than ½ private gross domestic product – non-farm. Pre-recession, average of 29.6 million small businesses in US
American Bankruptcy Institute As we know, those trends continued throughout 2009 Small businesses find themselves struggling to survive. Market uncertainty stifles opportunity Capital dried up and bankruptcies are increasing Small businesses are failing because they can’t get a loan. Entrepreneurs are being asked to increase their guarantees and in some cases to give their homes as collateral. If you can get credit it was too expensive. Example: Share story of CLIENT A Pre recession $4 million business with 30+ employees and a $600,000 line of credit 2009 Line of credit reduced to $375,000 Due to devaluation of the business the owner was asked to pay back $100,000 $ 9Million cleaning company lost in the bureaucratic shuffle and unable to get a loan.
CNN Money.com reported in December 2009 that small businesses collectively shed 23 million workers in the previous 12 months. Enthusiasm that resulted from business success and optimism about the future gave way to fears of business failures and job loss Pressure increased to do more with less to increase productivity. Work group cut from 4 to 2 - survivors: do all the work their pay has been cut = discontent / exhausted / depressed Employee engagement and high morale became a thing of the past. Increased r dissatisfaction Depression - Unemployed 4X more likely to display symptoms Employed who experienced cuts/reduced hours as twice as likely to display symptoms* Lower productivity Remember Client A? Their 30 employees were reduced to 12. Devastates the business, challenges the culture and leaves survivors uncertain and unsure of where they stand. .* Mental Health America national study
Small business owners/entrepreneurs were forced to make changes to survive. These are things you know – you’ve been living them. Hiring frost –don’t tell anyone/freeze you announce it No more free lunch - coffee/donuts/cokes in refrigerator Initial cost cutting initiatives may have provided some relief but, in most cases had to be supplemented with even further cost cutting to keep the business alive. Major medical center with 13,000 employees – all C levels meet weekly for 1½ hours to approve every singe job requisition!
Furloughs Salary reductions Shortened work weeks Unpaid, or partially supported, sabbaticals Eliminating 401k company match Increased employee contribution to health care premiums No replacement strategy Raise the performance bar : How have you experienced this? Other initiatives that you have tried or heard about? Discussion : Perhaps chart answers. Tell story about alternating week worked with week on unemployment. (OK in DE and PA) Unpaid sabbaticals– some people may want to have time off to write a book, travel etc. Others may volunteer for layoff to have time with family – pursue other interests. Watch for unintended consequences - Comply with governmental regulations. Example: A shortened work week is OK for non-exempt employees. But - if you shorten the work week for Exempt staff you have to pay them for the full week.
The world is getting by and re-building with temporary workers. Companies are bringing contractors back before they re-hire. We know that because we are providing some of those resources - recruiters and HR generalists- to our clients. It’s a good decision in a time of uncertainly. Intro Chris –Chris has been writing /blogging about this. What are you thinking about/ What are you seeing in your industry? Closer to home, demand for our HR Experts business, providing seniors level HR advice and guidance to small businesses is growing because we can provide the expertise they need, on a retained basis at a cost they can afford.
Employees are acknowledging that chaos and impermanence may be the future What an employees have experienced in their current companies has been painful. They’ve: Been through the lay-offs Had their salaries cut – Career Builders Sept 2009 report – 30% of workers @ $100,000 live paycheck to paycheck – up from 21 % in 2008 Lost some benefits and now pay more for others The future may look bleak or, even if things are improving, the sense of possibility and commitment they once had is damaged or gone. They didn't experience the pain at your competition where they probably had the same sort of cost cutting going on. The grass may look greener elsewhere! Recent : 84% employers feel employees are loyal and content to have jobs 58% of employees actually feel that way Let’s hope the other 26% aren't’ key employees!
The first wave - the economic meltdown. You did what needed to be done and your business is still standing. Now, just as we are cleaning up from that earthquake, the next wave is about to hit – that wave may be the departure of your workforce. Human Capital Institute& Monster report 79% of employees surveyed report they are looking for another job 48% report that they are less productive Just as you are starting to get business back on track, your star employee may come in to say “ Hey boss I have a new job!” This is real and it is happening now! Remember Client A? As that business struggled to survive, a few long term employees questioned whether the business would make it and looked for a safe haven elsewhere. When key employees resign because they are afraid they don’t have a future where they are that’s a serious business loss and one that can often be avoided.
It’s time to shift gears to the people side of the business. The strength, resiliency and potential of a business is predicated on its workforce. If you haven't got the right people in the first place and if they aren’t committed to their work – you cannot succeed.
What is the fist thing you plan to, or want to, bring back as business improves?
Rebuild your connection with employees – enhance their commitment Are you talking to or avoiding your people? Have regular meetings been shelved? Tell story McI – “We used to have all hands meetings – not anymore!” What did you do with together prior to recession? Anyone having fun anymore? Try something new Restore trust & confidence in you and in the business Won’t happen in a vacuum Wont’ get better by itself as business improves Something fundamental has shifted You have to work at it – Communicate, communicate, communicate! Re-engage Identify and nourish future stars Retain key contributors Re-evaluate HR practices Story: Client couldn't identify high potentials – Not necessarily current leadership, not necessarily management High potentials are the people who have the skills, flexibility and potential you need to succeed in the new environment that is the future
General discussion about Share the good news – don’t be afraid that if you tell employees about success because you think they'll want more money/benefits etc. Be what we at CBI call “front door” with them. Let them know the state of the business (to the degree you are comfortable sharing that information) and Need for open/honest communication. “Business is improving but…can’t give back yet…etc.” Provide confidence that when your business recovers you will do the right thing: Restore salaries, Review benefits Reward the people who got your through the storm. Be aware of what works in your unique environment (everything isn’t transferable) and any regulatory requirements that may impact initiatives.
Helped client see that asking employees for ideas isn’t relinquishing control: – offering sabbaticals didn’t create stampede – just a few opportunities. Example – suggested client offer opportunity to volunteer for lay-off. Surprise response that alleviated another lay-off and provided others with an opportunity for time away from work. You never know what your people may want to do or wish they could do! If they had a the time.
HR Experts: Help business leaders to navigate the turmoil so they can plan for the future. Allow CEOs to get out of the middle of the people issues that suck up their time and energy and back to running the business. How to fire a non-productive employee (in a protected class) who is causing morale and productivity issues. Implementing simple system for complying with new COBRA regulations that resulted from the stimulus package? Controller: “we’re just not doing that?” Can we do that without being sued? Demand a level of behavior and/or performance from difficult employee. Request a physical for worker who mentions an injury sustained on the weekend that may impact their work and become workers comp claim Hire a contractor, not an employee, without running afoul of DOL Bonus one person and not another who has a similar role. Begin to think strategically about how you will add staff . We can help you: develop a staffing plan that recognizes your financial realities Turn the lights back on in recruiting. Verbal summary here : Strategies to survive the first wave of the economic storm The the second wave – the Tsunami that’s coming How you can act now to ensure your company’s post-recession success.
Final presentation hr experts 2.19
The Economic Tsunami… How Small Businesses Are Surviving Trends Challenges and Human Resource Solutions
What is a small business? The Office of Advocacy defines a small business as an independent business having fewer than 500 employees.
How Important are Small Businesses to the U.S. Economy? <ul><li>Small businesses: </li></ul><ul><li>Represent 99.7 percent of all employer firms </li></ul><ul><li>Employ just over half of all private sector employees </li></ul><ul><li>Pay 44% of total U.S. private payroll </li></ul><ul><li>Have generated 64% of net new jobs over the past 15 years </li></ul><ul><li>Source: U.S. Dept. of Commerce, Bureau of Census </li></ul><ul><li>and International Trade Admin. </li></ul>
How Important are Small Businesses to the U.S. Economy? <ul><li>Small businesses create more than half of the nonfarm private gross domestic product (GDP) </li></ul><ul><li>In 2008 there were an average of 29.6 million small businesses in the United States. </li></ul><ul><li>That all changed with the recession. </li></ul>
Storm hit… <ul><li>Capital dried up </li></ul><ul><li>- In 2008, lending was down 40 percent in the number of loans and 20 percent in dollar volume </li></ul><ul><li>Business bankruptcies in Delaware increased by </li></ul><ul><li>390 percent 2007 to 2008. ( Source: ABI) </li></ul>
Impact on Employees <ul><li>More than half of the 763,000 jobs lost in the first two quarters of 2008 were lost in small firms. (Source: US SBA) </li></ul><ul><li>Layoffs due to lack of business doubled </li></ul><ul><ul><li>600,000 in 2 nd quarter 2008 </li></ul></ul><ul><ul><li>1,300,000 in the 2 nd quarter of 2009 . </li></ul></ul><ul><ul><li>(Source: US Bureau of Labor) </li></ul></ul>
Impact <ul><li>Sales dropped </li></ul><ul><li>Many small businesses were forced to make painful changes : </li></ul><ul><ul><ul><li>Cut payroll </li></ul></ul></ul><ul><ul><ul><li>Eliminate perks </li></ul></ul></ul><ul><ul><ul><li>Adjust benefit plans </li></ul></ul></ul><ul><ul><ul><li>Renegotiated vendor contracts </li></ul></ul></ul><ul><ul><ul><li>Cut temps </li></ul></ul></ul><ul><ul><ul><li>Hiring frost/freeze </li></ul></ul></ul>
Cost cutting initiatives <ul><li>Salary reductions </li></ul><ul><li>Shortened work weeks </li></ul><ul><li>Furloughs </li></ul><ul><li>Eliminating 401k company match </li></ul><ul><li>Increased employee contribution to health care premiums </li></ul><ul><li>Unpaid, or partially supported, sabbaticals </li></ul><ul><li>No replacement strategy </li></ul><ul><li>Raise the performance bar </li></ul>
Impact on Employees <ul><li>The realities have left employees: </li></ul><ul><li>Guarding their personal goals and needs </li></ul><ul><li>Self protective and questioning their future </li></ul><ul><li>Doing what they need to protect themselves/families </li></ul><ul><li>Exhausted and discouraged </li></ul><ul><li>Ready to run – The grass may look greener elsewhere! </li></ul>
Survival is a Victory <ul><li>You have survived the first wave, Congratulations! </li></ul><ul><li>BUT </li></ul><ul><li>The second wave is coming and it’s impact may be greater than the first. </li></ul>
The Challenge <ul><li>Small businesses have survived the economic storm by adjusting salaries and benefits and implementing other cost saving initiatives. </li></ul><ul><li>Now, they must be prepared to reengage their workforce to thrive in the future. </li></ul>
What’s Next? <ul><li>What are you seeing as businesses prepare for the turnaround? </li></ul><ul><li>What’s happening in your industry? </li></ul><ul><li>What is your company doing or planning to do? </li></ul>
<ul><li>Rebuild connections </li></ul><ul><li>Restore trust </li></ul><ul><li>Re-engage remaining workforce </li></ul>Riding out the second wave…
Riding out the second wave… <ul><li>Bring employees into the conversation </li></ul><ul><li>Empower them - this if their future. </li></ul><ul><li>Know your business and your employees. </li></ul><ul><li>A good idea may not work in your environment. </li></ul><ul><li>Don’t be afraid to fail. </li></ul><ul><li>Be flexible: try it; revise it; keep it or let it go. </li></ul>
Now is the time… <ul><li>Make sure someone on your team is paying attention to your people issues. </li></ul><ul><li>Get some help if you don’t have the resources to do it yourself. </li></ul>
HR Experts <ul><li>HR leadership - so you can focus on your business. </li></ul><ul><li>Staffing plans that maximize recruiting dollars. </li></ul><ul><li>Turn the lights back on in recruiting. </li></ul>
Reflections <ul><li>What were the key points for you? </li></ul><ul><li>What action steps might you take as a result of our discussion? </li></ul>