Ideas for startups to implement in order to avoid laying off (good) people

Have you ever wondered why so many great entrepreneurs and intrapreneurs tend to sport more gray hair than usual, even in their early 30s?  It is because the best ones get it! One of the main things that keep us awake late at night is the worry that our talent may bail on us or we may not be able to find the right people to join us. It is much harder to find great employees than it is to find capital. Now, I am not an expert on manufacturing, but in knowledge-based businesses, people are the biggest investment. Companies often fail, because they can’t find enough good talent. In addition, many companies are currently faced with the need to drastically cut their expenses to survive. The first thing that goes under the knife is staff. So the company survives the downturn and then what… you have to go out and overspend on hiring again. There has to be a better way!
Here are some ideas to implement in order to avoid having to lay off valuable employees:
  • Make cuts in salary proportionate to an equity stake. The bigger the equity stake to be received, the bigger the salary cut. In slow times, the CEO and founders should be the lowest paid people in the company. I have seen this make companies strong, morale impregnable, and the staff willing to move mountains for their leaders. Transparency in this process is important.
  • Trade salary for equity with vesting on the traded part immediate. If a person is giving up immediate income, the equity stake should begin immediately as well. Some might cry “danger”, since I am not mentioning the “cliff” here. People are giving up cash, cash is “now”, hence equity stake should be “now” too. 
  • Kill ALL executive perks. No more drinks on the company, no fancy laptops, no car service. If an admin does not get a particular perk, neither do you.
  • Have everyone takes care of duties outside of their “job description”. If anyone answers it is not their job, hand over their pink slip now. Just say no to prima donnas.
  • Ask everyone to contribute more towards health benefits (rather than cutting them all together). You should never force your people to take risks with their health.
  • Let your team tell you who is not pulling their weight. You must sacrifice the dead weight to conserve resources to maintain your best crew.
  • Lastly, no secret meetings or phone calls. Your entire C-suite must move into the same work area as the rest of the crew, or remove doors from the hinges. Transparency causes unity.
What have you done at your organizations to make sure you don’t lose your prime human capital?
UPDATE 1/19: Peter Cappelli wrote also a great article on this subject: Alternatives to Layoffs
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