Ready to Respond to Recovery? Another Advantage of Flexible Downsizing

Posted by - . 0

(Tune in to Public Radio’s The Takeaway on Monday morning 3/9 between 6:00-6:30 am in NYC, I will discuss how to present a flex plan to your emloyer if you think layoffs are coming.)

Right now, with the Dow dipping below 7,000, unemployment at 8.1%, and the news that the economy contracted a breathtaking 6.2% in the last quarter of 2008, it’s hard to imagine a recovery anywhere in sight.  But what happens if the Administration’s record $3.5 trillion budget and stimulus package have their intended impact?  Which organizations will be best positioned to respond to the opportunities when they present themselves—those that undertook massive layoffs, or those that used flexible alternatives to layoffs to reduce labor costs and minimize job cuts?  

This question isn’t rhetorical, and it is worth considering. Just as the rapid downturn took many by surprise, the opportunities of a recovery could present themselves just as unexpectedly.  In my comments in this past weekend’s New York Times article by Hannah Seligson, “An Alternative to Layoffs: The Shorter Workweek,” I pointed out that “if a steel company lays off employees and then suddenly gets money from the stimulus package and everyone is building bridges, they are going to be ill-prepared.”

Look at the mortgage industry.  My father, a former mortgage industry executive, brought this example to my attention a few weeks ago.  Last year when the sub-prime mortgage market began to unravel, the mortgage industry let most of its experienced originators and processors go. At the time it looked like an unavoidable move.  A few months later, mortgage rates were so low that companies were flooded with applications to refinance.  But without the experienced originators and processors, they had to hire third-party vendors, or in some cases miss the opportunity. 

Think about how different that scenario would be had the mortgage companies tried to reduce labor costs by instituting furloughs, or cutting salaries and schedules 25% across-the-board.  They may still have had to cut jobs.  But they would have retained some of the experienced talent the organization needed in order to benefit from the unforeseen change in the market–the key word being “unforeseen.”  The same flexibility that allows a company to reduce labor costs, also prepares them to rapidly gear back up. 

What industries might directly, or indirectly, benefit from the public works projects in the $789 billion stimulus package?  The projects include:

  • California High Speed Rail $45 billion
  • NextGen Air Traffic Control: $15 billion to $22 billion
  • California Drinking Water: Tens of billions of dollars
  • Gulf Ports: $1.04 billion for New Orleans; $1 billion for Gulfport, Miss.
  • Bridge to Canada: $1.8 billion
  • Dulles Airport Train: $5.2 billion
  • Seattle Highway Tunnel: $4.24 billion
  • Hudson Rail Tunnel: $8.75 billion (a personal favorite as it will make my commute to Manhattan from New Jersey much easier!)
  • Chicago Rail Network: $2.5 billion
  • Miami Port Tunnel: $1 billion
  • Second Avenue Subway: $4.35 billion. 

Then there are the “winners”in the Administration’s budget as noted in The Washington Post’s The Federal Eye Blog:

  • The Defense Department: $533.7 billion, a 4% increase over 2009
  • The EPA: 1,300 new water projects, and $475 million to restore the Great Lakes
  • National Infrastructure Bank—“The mission of this entity will be to not only provide direct Federal investment but also to help foster coordination through State, municipal and private co-investment in our Nation’s most challenging infrastructure needs.”

When you consider who might benefit from the investments listed above, the comments of Chris Simpson, a senior vice-president of the manufacturing company, Pella, in the Good Read blog make sense:

“Like many companies, Pella is looking to cut expenses because of the economic downturn. But instead of laying off more workers, the Iowa manufacturer of windows and doors is instituting a four-day workweek for about a third of its 3,900 employees. Chris Simpson, a senior vice-president at the company, acknowledges it’s an unconventional move. But Pella believes the economy could turn around faster than most people expect, and it doesn’t want to be caught short of experienced workers. ‘Our contention is, consumer confidence will rebound,’ says Simpson. ‘If there’s a (government) stimulus package of some kind, we think people are going to respond.’”

We—organizations and the individuals who make them run—operate in an era where rapid change is the rule, not the exception.  Just as many organizations were not flexible enough to respond rapidly to the economy’s downturn, will an equal number be unprepared to flexibly respond to the recovery?  And chances are, it will appear unannounced.