Cost Cutting: Do Not Lay Off the Most Expensive Employees Just Because They Cost

When Croatia found itself in the crosshairs of the global financial crisis after 2008 and domestic employers began to feel the decline in orders and revenues, they had to literally cut costs overnight and resorted to the most classic, risk-averse restructuring. Instead of seeking new business opportunities, offering new services or products, entering new markets, and thus increasing revenues, they only knew how to cut costs, primarily by reducing the number of employees.

They started with the most expensive employees, the managers they had brought in to launch the business, design new products and services, and enter new markets, and then they began shutting down entire departments. The larger the company, the longer the lists for ‘culling’ were. HR departments worked overtime trying to present layoffs as an opportunity for a new beginning, and those opportunities, at least in Croatia, were quite scarce because the crisis lasted longer here than in other EU countries.

Bad news travels fast

But then Croatia entered the EU, and for a while, buses full of domestic labor with one-way tickets abroad did not overly concern anyone. Until the economy recovered. Employers suddenly realized that laid-off managers with top-notch CVs quickly found their place in companies where management was not so ruthless and shortsighted, making it no longer easy to rehire them, and it was not easy to find new people with those qualifications because bad news travels fast.

Not only were there suddenly no workers with special qualifications, but there were also no ordinary ‘laborers’, so by 2016, we read the first complaints from employers that there was no one to work in Croatia, that there were no workers even in the ex-Yu countries, and today they are hiring Nepalese, Filipinos, Indians, and suddenly retirees are also good. All this might not have happened if there had not been spontaneous layoffs a decade ago and if key employees in the workforce had been recognized. Those without whom it is not worth staying!

– If I had to mention just one lesson I learned in the crisis, it would be this – said an entrepreneur who found himself in that situation in a casual conversation with Lider recently.

He says he would not only lay off those with the highest salaries, who cost him the most, because without them he lost the backbone of the company, but he would also keep some people in production, just so he wouldn’t have to patch things up month to month, says the entrepreneur who today imports more than half of his workers from various countries.

Lessons from the previous crisis are more important than ever because we are facing another uncertain period. A crisis and recession are quite a likely scenario that awaits not only Croatia but also other countries in Europe, and if the worst happens, it is entirely reasonable to expect that companies will again have to cut costs. But before uncontrolled crossing out of names on the employee list, it is worth considering this time and asking: ‘Who are my key people in the organization, those without whom it is not worth staying?’

Without whom one cannot

Key employees are those who have competencies that are difficult to replace, who bring ideas and creatively solve problems, who create value and significantly participate in the strategic future of the company, explained Martina Kessler, director of organizational design and development at Selectio.

– Key people have several qualities that should be objectively assessed to be correctly recognized in the organization. First of all, they directly and significantly influence the value of the business, which means that their responsibilities and decisions affect sales, business growth, profitability, product and service development, or some other value generator. Losing such people would mean damage to the business – explains Kessler.

Irena Jolić Šimović, director of Studio 5 business consulting, thinks similarly, stating that a key employee is primarily difficult to replace. This is the man or woman in the workforce whose exceptional performance, skills, and knowledge can be tangibly linked to the success of the organization, who stands out especially in critical moments, who is important not only for business processes but also for maintaining relationships with clients and customers.

– A key employee has a unique mix of personality, knowledge, relationships, and impact. He or she must possess the expertise, certifications, or licenses necessary to maintain the business, must keep in mind the results of work, i.e., a closing mentality, must know how to positively influence their colleagues as a link between teams or departments, and must also know how to maintain strong relationships with clients and suppliers – emphasized Jolić Šimović.

Such individuals should not be lost, especially not due to competition!

Despite the fact that it is almost clear to everyone in theory that one cannot do without key employees, in practice, it means nothing. For someone, a key employee is one who responds to every one of his or her remarks with: ‘Great idea, boss!’, who agrees with everything; someone who is loyal and self-confident without much backing, someone who does not deliver results nor is capable of following multiple company goals. Of course, when we are surrounded by such colleagues and when we encourage such behavior, it is difficult to recognize and value key employees, and it can happen that they slip through our fingers.

That there are plenty of such examples is confirmed by Sanja Damiani, owner and consultant at Vedas Consulting Group. She says that owners or management of companies too often do not know how to assess who their key people are, how satisfied they are, and they do not know how to attract or retain them. However, she adds, there is a huge number of tools that companies can use to retain key employees. After all, she added, people today, unless they work in jobs that can only cover basic living needs, do not leave jobs for money, i.e., for salary.

– They always leave because of someone, primarily a boss or leader – emphasizes Damiani, who believes it is important to invest in the right people in management positions with developed emotional and social intelligence.

Everything else is just excuses and can cost us a quick recovery when the economic climate improves. And no one wants to witness that outcome again.

And what does the real sector say about all this, do companies know how to recognize key employees and who they are, are they only those in high positions or also those with blue collars, and why are they actually afraid to say it publicly? Read in the printed and digital edition of Lider.