Analysis
As many manufacturing executives face sharp revenue declines and liquidity challenges, finance leaders are aggressively managing operational, compensation, and employment costs to protect stability. Furloughing of employees is widespread in the manufacturing industry right now.
Currently, over a third of Manufacturers Alliance member companies who participated in recent polling on this topic report implementing furloughs. Nearly another half are considering it. Many companies find furloughs preferable to layoffs because furloughs keep the employee connected to the company, which makes it easier to resume operations. However, employee retention is a risk for manufacturers in planning and executing furloughs. Irrespective of specific furloughing policy, Our research finds three priorities for effective leadership:
- tailor plans to employees,
- communicate transparently and authentically, and
- keep lines of communication open.
Avoid a one-size-fits-all approach
Company responses to the pandemic have varied from country to country over the last several months, often following guidance from local government. Many companies are similarly coordinating furlough policies at the corporate level but allowing the implementation to vary based on the country and business needs. Former Honeywell CEO David Cote offers an important perspective: companies don’t have to impose standardized furloughs. Instead, develop a plan that yields the desired cost-savings but is least disruptive to the furloughed employees. In countries where there is more government support for employees, such as Germany, member companies report they are leveraging those programs to manage the need for furloughs.
When furloughs are required, flexibility should be prized. One company shared they use rotational furloughs, so employees rotate between a two-week furlough and two weeks of work. Another company is rolling out 4-week furloughs in waves. Yet, another company introduced a corporate-wide policy requiring all corporate employees to take a one-week furlough but didn’t include all operating companies. Adjust timing requirements, if possible, or as SHRM has suggested, give employees the choice of when to take the furlough. For example, another company was asked by a union to adjust the timing of the furlough to take advantage of extra state help. Another company simply asked employees to take one week in the month but they could choose when to do so. Address employee concerns, uncertainty, and difficulties. Another company implemented emergency paid leave policy to augment existing paid time off to help keep employees with pay and benefits as long as possible.
Instill trust and lead with transparency
Employee trust is always important and more so during times of crisis. Employers can build trust by being transparent about business conditions, such as through town halls and video messages from the CEO and other leaders. People are unable to trust what they don’t understand. As one company shared with MAPI, its messaging has been transparent about the reasons for furloughs: a decline in sales resulting from the pandemic. This provides grounding in a time of uncertainty. Leaders should disclose the measures the company has already taken to reduce costs and those which it may have to take, such as furloughs. Detail and describe the benefits being offered to the employee, whether it is healthcare or more. Recognize and express employee’s value to the company, and convey that the furlough is not reflective of performance but circumstances beyond the employee’s control.
In response to employee concerns about the company’s financial health, one company is holding town halls with the company’s C-suite in between its regularly scheduled quarterly town halls. During these sessions, they answer employee questions live. Another company scheduled small group sessions (15-25 people) where C-suite leaders shared actions they were taking to protect the financial health of the company. The executives report receiving a strong positive response from this added level of transparency around the company’s health. As experts in crisis management note, transparency increases trust in the company and leadership. People expect tough decisions to be made during a crisis, but companies with leaders who demonstrate empathy and authenticity when making those decisions will fare better. This is not the time to hide behind legal jargon or euphemisms. Be straightforward to connect and convey difficult messaging authentically.
Keep lines of communication open
Retention in this uncertain economic environment will remain a top issue for manufacturing employers, which makes it imperative to take a long-term view, not only near-term cost savings. Leaders must act and communicate decisively to prevent the rumor mill from starting. Make sure employees hear the news from a leader directly either by phone or web meeting. Moreover, maintain employee connection with your company during furloughing. For example, set up lines of communication with managers and HR partners so furloughed employees get questions answered. Establish clear communication protocols by site to keep in touch with employees and provide any necessary updates through text or phone calls. For example, one company posts a bi-weekly video from the CEO on a benefits platforms. Finally, provide a reason and incentive to encourage employees to return after the furlough. Several companies have added a “return to work” bonus for furloughed employees.
Executives determine whether furlough is necessary for the stability of the company; however, there are key actions they should take into account to increase their chances of retaining critical talent on the other side of a crisis. Tailor plans to employees to demonstrate consideration, communicate transparently to earn trust and keep lines of communication open to engage and retain. Taking these simple but decisive actions signal clarity and commitment to employees which enables confidence in the employer, an essential component to retaining employees during a crisis and recovery.