You're the boss - What would you do?

[Freddy]

I would like to know other peoples opinions about the subject of letting employees go. This was talked about in another thread, but OBD just kept spewing slogans and calling me names for stating what I believe to be the cold hard truth. So I ask everyone to chime in and answer with what you would actually do in the following situation.

You own a small manufacturing business with say 25 employees. You have already taken every austerity measure possible inside the company but because of the recession things have slowed down. You do have a few solid contracts that will ensure the business can go on but there is a catch. You currently make $150,000 a year as the sole owner of the business. But, if everything remains as is, the company will actually lose $40,000 a year. You have two choices, you can:

A) Take a personal $40,000 pay cut - That equals to about $17 an hour after you add taxes and insurance but NOT including benefits
B) Let one employee go - And remember due to the decreased workload, this employee is not needed anyways. No production will be lost at current and near future demands.

Note: I'm not asking what is the nice thing to do, I'm asking what is the correct business decision. Personally I would not hesitate to let the employee go. I would certainly offer a separation package and help them find a new job, we don't have to be jerks about it. But I won't cry for weeks on end nor will I jeopardize the other employees nor my family just to be nice. If there was a reduction in production or other adverse effect to the employees departure, I would consider it and most likely take a temporary pay cut. But I will not take a personal cut just to be nice. Where would that stop? What happenes if the work load drops again, do I take another pay cut? Sorry, the employee goes.

What say you?

[spartan]

Depends on the scenario.

If, like in the other thread, employee or your kids college? Employee goes.
If it is the company goes belly up or the employee goes? Employee goes.
If the employee is going to sit their with nothing to do ad infinitum, employee goes.

If the idle time is probably going to be short lived, as you yourself said, the pay cut would be temporary, and/or the employee was for the most part extremely constructive, I would probably try and keep the employee. Good labor is a premium and it would probably cost more to hire and train someone new down the line. Employee stays.

It would also be different if the company operated in an industry with a high(ish) employee rate or if the company was more along the lines of a family business where people have worked there for decades. That of course does not alter the logic behind the decision, but it certainly could effect the nature of the decision made. It might not be logical, but close ties and emotion can have a large impact.

In short, there is no one single answer.

[Franchise 5]

Let the employee go.. you are not obligated to anyone. Its business. If you take a decline in business and do not need the help you let the employee go.

I would not be interested in taking a pay cut while my employee's enjoy a reduced work load.

Let the employee know there is an option to return if business picks up. if not tell them youll be glad to help them find another job buy giving a recommendation.

[Biggs3535]

B

[NovaBuc]

Most likely B, but the main deciding factor would be if there was no way to increase income in future years. If this was the business I currently have, we could weather a couple of years of $40,000 in losses due to cash reserves and some other options we have available to us due to business and banking relationships. In that case, it'd come down to just how replaceable that one employee is when the work catches back up to previous levels. The majority of my year-round folks would be tough to replace, but then I'm not a small manufacturing business as in your scenario. I'd imagine there would be at least a half dozen or so folks in a business like that you can let go and replace easily when it was time to ramp up production.

[Skull and Bones]

I'd make their lives a living hell so they would just quit and I wouldn't have to pay them unemployment. 

[shawn731]

In business never make it personal.  If your goal is to make money following option one is not for you.  But if you value employees on a level more personal than just profits than B is more suited to you.  In the long run it all depends on how you treat your employees.  Most employees sense when something is up and expect change would be made to adjust. 

[bucinnj]

Given those as the only two remaining choices, I'd let the employee go but I'd thrown in a pair of Bucs season tickets to soften to blow.

[John Galt?]

I would like to know other peoples opinions about the subject of letting employees go. This was talked about in another thread, but OBD just kept spewing slogans and calling me names for stating what I believe to be the cold hard truth. So I ask everyone to chime in and answer with what you would actually do in the following situation.

You own a small manufacturing business with say 25 employees. You have already taken every austerity measure possible inside the company but because of the recession things have slowed down. You do have a few solid contracts that will ensure the business can go on but there is a catch. You currently make $150,000 a year as the sole owner of the business. But, if everything remains as is, the company will actually lose $40,000 a year. You have two choices, you can:

A) Take a personal $40,000 pay cut - That equals to about $17 an hour after you add taxes and insurance but NOT including benefits
B) Let one employee go - And remember due to the decreased workload, this employee is not needed anyways. No production will be lost at current and near future demands.

Note: I'm not asking what is the nice thing to do, I'm asking what is the correct business decision. Personally I would not hesitate to let the employee go. I would certainly offer a separation package and help them find a new job, we don't have to be jerks about it. But I won't cry for weeks on end nor will I jeopardize the other employees nor my family just to be nice. If there was a reduction in production or other adverse effect to the employees departure, I would consider it and most likely take a temporary pay cut. But I will not take a personal cut just to be nice. Where would that stop? What happenes if the work load drops again, do I take another pay cut? Sorry, the employee goes.

What say you?

There is a 3rd option:

C-tell all employees that because of the economy and slow down, they have to take a (pro-rated) $1,600/yr pay cut ($40k loss/25 employees of course adjusting so no one goes under minimum wage and higher earners bear a little more) OR we let one person go. Get their opinions and make a decision. Maybe there is an employee that all the other hate and canning him might improve morale.

Tough question with just the facts given. Usually, with a 25 person workforce, there is at least one dill-wad that could use a good firing. But if I liked all 25 people and thought they all had potential I'd probably take the $40k pay cut (but I'd make sure everyone understood the economics and my sacrifice-tactfully). Future reputation and morale is worth a lot. Besides if I can't figure out a way to overcome economic conditions, then I, as an entrepreneur, deserve a pay cut.

Without more details it's tough to call.

[Rusty]

Remember the scene in Raiders of the Lost Arc where Harrison Ford sees the guy swinging the sword......just shoot the guy and keep your income.

[Freddy]

I would like to know other peoples opinions about the subject of letting employees go. This was talked about in another thread, but OBD just kept spewing slogans and calling me names for stating what I believe to be the cold hard truth. So I ask everyone to chime in and answer with what you would actually do in the following situation.

You own a small manufacturing business with say 25 employees. You have already taken every austerity measure possible inside the company but because of the recession things have slowed down. You do have a few solid contracts that will ensure the business can go on but there is a catch. You currently make $150,000 a year as the sole owner of the business. But, if everything remains as is, the company will actually lose $40,000 a year. You have two choices, you can:

A) Take a personal $40,000 pay cut - That equals to about $17 an hour after you add taxes and insurance but NOT including benefits
B) Let one employee go - And remember due to the decreased workload, this employee is not needed anyways. No production will be lost at current and near future demands.

Note: I'm not asking what is the nice thing to do, I'm asking what is the correct business decision. Personally I would not hesitate to let the employee go. I would certainly offer a separation package and help them find a new job, we don't have to be jerks about it. But I won't cry for weeks on end nor will I jeopardize the other employees nor my family just to be nice. If there was a reduction in production or other adverse effect to the employees departure, I would consider it and most likely take a temporary pay cut. But I will not take a personal cut just to be nice. Where would that stop? What happenes if the work load drops again, do I take another pay cut? Sorry, the employee goes.

What say you?

There is a 3rd option:

C-tell all employees that because of the economy and slow down, they have to take a (pro-rated) $1,600/yr pay cut ($40k loss/25 employees of course adjusting so no one goes under minimum wage and higher earners bear a little more) OR we let one person go. Get their opinions and make a decision. Maybe there is an employee that all the other hate and canning him might improve morale.

Tough question with just the facts given. Usually, with a 25 person workforce, there is at least one dill-wad that could use a good firing. But if I liked all 25 people and thought they all had potential I'd probably take the $40k pay cut (but I'd make sure everyone understood the economics and my sacrifice-tactfully). Future reputation and morale is worth a lot. Besides if I can't figure out a way to overcome economic conditions, then I, as an entrepreneur, deserve a pay cut.

Without more details it's tough to call.

I'm sorry John, I disagree 100% with letting the employees decide. Lets say they all pick the one they hate, and I let them go. I will be sued to high heaven, you know that. The decision must be fair and rational for the business. As for they all take a pay cut, first off, I highly doubt you would get 100% agreement on that. If they know it's not them being laid off, why should they give up something for someone who works a different shift and they never see? Yes some would agree, but it would be minor miracle to get them all to agree. Oh and, should the minimum wage (less than 20k a year) guy take a $1600 pay cut just like the $40k. Again not fair. So now we are asking the 40k to take a $2500 cut. Nah they won't agree and would probably walk. And heck, if they did agree or a company wide pay reduction was forced on them, then many would in turn work $1600 less.

The worst decision that can be made, IMHO, is to default the decision to the employees. Right or wrong, you need to stand up and lead from the front and make the decision.


Hey OBD, I noticed you haven't answered. But I shouldn't be surprised, you haven't answered a single question yet. Maybe you're trying to think of another political slogan for a response.

[BucsGuru]

It is a simple business decision; you must lay off the employee.  In productivity, each additional employee must equate to additional sales and net profits.  As sales go up, you boost your number of employees, but as they come down, you must reduce the same number.

But as simple as it sounds, it is still difficult.  This same person or persons is someone with a family and needs; business is never easy.  I have found over the years to shoot it straight; let them know the facts and be honest.  They may not like it, but the majority will appreciate being told the truth.  In the end, it is your business and you have more at stake than the single employee who can go find work elsewhere.  There are still 24 other families who are looking to you to keep the ship afloat during tough times; for this alone, you should not take a pay cut for the one.  provide a severance, and lay them off.

[Legend]

Obviously just lay them off, give them a severance and if the times comes when you could use that person again than give them first option to come back.

[Freddy]

And the pawning of OBD is complete. It is apparent he lacks the courage to make a real decision. I guess now we know who the real leader is.

[John Galt?]

I would like to know other peoples opinions about the subject of letting employees go. This was talked about in another thread, but OBD just kept spewing slogans and calling me names for stating what I believe to be the cold hard truth. So I ask everyone to chime in and answer with what you would actually do in the following situation.

You own a small manufacturing business with say 25 employees. You have already taken every austerity measure possible inside the company but because of the recession things have slowed down. You do have a few solid contracts that will ensure the business can go on but there is a catch. You currently make $150,000 a year as the sole owner of the business. But, if everything remains as is, the company will actually lose $40,000 a year. You have two choices, you can:

A) Take a personal $40,000 pay cut - That equals to about $17 an hour after you add taxes and insurance but NOT including benefits
B) Let one employee go - And remember due to the decreased workload, this employee is not needed anyways. No production will be lost at current and near future demands.

Note: I'm not asking what is the nice thing to do, I'm asking what is the correct business decision. Personally I would not hesitate to let the employee go. I would certainly offer a separation package and help them find a new job, we don't have to be jerks about it. But I won't cry for weeks on end nor will I jeopardize the other employees nor my family just to be nice. If there was a reduction in production or other adverse effect to the employees departure, I would consider it and most likely take a temporary pay cut. But I will not take a personal cut just to be nice. Where would that stop? What happenes if the work load drops again, do I take another pay cut? Sorry, the employee goes.

What say you?

There is a 3rd option:

C-tell all employees that because of the economy and slow down, they have to take a (pro-rated) $1,600/yr pay cut ($40k loss/25 employees of course adjusting so no one goes under minimum wage and higher earners bear a little more) OR we let one person go. Get their opinions and make a decision. Maybe there is an employee that all the other hate and canning him might improve morale.

Tough question with just the facts given. Usually, with a 25 person workforce, there is at least one dill-wad that could use a good firing. But if I liked all 25 people and thought they all had potential I'd probably take the $40k pay cut (but I'd make sure everyone understood the economics and my sacrifice-tactfully). Future reputation and morale is worth a lot. Besides if I can't figure out a way to overcome economic conditions, then I, as an entrepreneur, deserve a pay cut.

Without more details it's tough to call.

I'm sorry John, I disagree 100% with letting the employees decide. Lets say they all pick the one they hate, and I let them go. I will be sued to high heaven, you know that. The decision must be fair and rational for the business. As for they all take a pay cut, first off, I highly doubt you would get 100% agreement on that. If they know it's not them being laid off, why should they give up something for someone who works a different shift and they never see? Yes some would agree, but it would be minor miracle to get them all to agree. Oh and, should the minimum wage (less than 20k a year) guy take a $1600 pay cut just like the $40k. Again not fair. So now we are asking the 40k to take a $2500 cut. Nah they won't agree and would probably walk. And heck, if they did agree or a company wide pay reduction was forced on them, then many would in turn work $1600 less.

The worst decision that can be made, IMHO, is to default the decision to the employees. Right or wrong, you need to stand up and lead from the front and make the decision.

Freddy, I didn't say let the employees decide, I said get their opinions/feedback and YOU-the OWNER decide. I'd probably let them give feedback anonymously (like a suggestion box). The idea is maybe there is a turd in your punchbowl that you don't know about, if so that makes the decision easier.

Say 20 of the employees drop a card that says something like "fire Jack, he doesn't pull his weight, is rude to women, and causes us to clean up his sloppy work". You check Jack's performance and see he is late a lot, misses days, and is under-producing. Now you can make a much easier decision. OTOH, if Jack is a top producer, but a bit of a egotistic wad, can someone else.


It is not an easy black or white question, there are a whole lot of other factors to consider. For instance, if the company was a manufacturer that did a whole lot of Govt. contracting and that well is drying up, I'd reduce employees. If it was a case where business overall slowed AND you lost market share to a rival, I'd eat the paycut and crack the whip on the sales team.

Lot of factors