Shape Up For Leaner Times

Financially, most businesses will go through good and bad times, but it’s all a matter of preparation when it comes to surviving and thriving through tough times, says Charles Watson.

Editor’s note: This article was originally published in our February 2020 issue before the start of the Coronavirus crisis. While it doesn’t directly reference the current situation, it is more relevant than ever.

This year will be an important one for Australia’s economy. Possible recessions, shifting international trade relations, economic downturns, lengthy market corrections and other such terms are being used or hinted at by newspapers and other media outlets. Will the Reserve Bank be left with no other option but to use ‘quantitative easing’ later this year to stimulate the flow of money into the economy? It’s a complicated issue and I’m no economist. However, in the 2008/2009 GFC I saw clients, large and small, falter by either not acting fast enough or doing no preparation. This is unsettling as there are options and concepts that will help get a business through a downturn.

One of the biggest issues you need to plan for during a downturn is workforce management. There are a range of intelligent options and alternatives to consider before simply moving to reduce the headcount. Redundancies may not leave your business in the best position to weather a downturn or to spring forward after the storm has passed. 

Whatever you plan to implement always consider the potential effects of any such decision. What are the likely effects on production and efficiency? How will morale be affected? Whatever arrangement you are able to reach with your employees, get it in writing, clearly and appropriately drafted, with time frames, compliant with workplace laws, and signed off by the employee. Ensure the agreement has been reached without coercion or duress. Remember that crystal clear communication with all stakeholders is critical. 

Time to invest in the talent

If you have rock star employees, and don’t look after them during a downturn, guess who will walk when things improve? Consider training employees across other duties, or seeking out training opportunities to advance them within the business. Career and skill development are a good idea at any time. Perhaps it is a good time for them to undertake further studies and go part-time?

Time for part-time?

If a downturn occurs, and depending upon the structure of your workforce, businesses could consider forming an agreement with employees reduce their hours of work. You will need a plausible business case to present to your employees as to why a reduction in hours is necessary and how that may for them. 

Other options

The first and simplest is to stop employees working on areas of the business that don’t generate income. Reduce any unnecessary overtime being worked. It can be expensive particularly if the work can be performed during ordinary hours. Be cautious with hiring any new employees. Fixed term or casual employment arrangements may be better options in tough times. That being said, a casual employee does not owe much loyalty and will often walk if a better option becomes available.

Although it may appear contrary to the previous point, look at shedding casuals before retrenching permanent employees. Casuals come at a premium with the loaded rate of pay, usually 25%. Encouraging employees to use accrued annual leave or long service leave may also assist the business. However, you need to ensure the business has adequate coverage even if things are quiet. If things get really tight, employers could consider an agreement with employees to take a flat hourly reduction in their pay rather than a reduction in hours of work (ensuring that award minimums rates are met).

If there is no other option

Businesses should look at making redundancies as the last option. If that has to happen, follow all contractual and Award related requirements to ensure the termination will hold up as a genuine redundancy. Client experiences during the GFC evidenced that taking care of cashflow and marketing make a difference between getting a little muddy or taking a permanent bath. 

Cash flow

Businesses should work on strategies to keep the cash flow moving when things get tight. Talk to your advisers, or if you run a smaller business there is a lot of assistance available. I strongly recommend checking out the resources and assistance that can be provided by the Australian Small Business and Family Enterprise Ombudsman. 


Some businesses virtually stop their marketing activities during periods of downturn. Analysis evidences that businesses should look at increasing their campaigns to keep on top of their competitors. Those businesses that carefully and methodically kept up their advertising were better placed to keep their existing customers or even increase their market share. 

Everybody wants to be a sailor until there is serious sailor stuff to do. Making decisions during a downturn is always more difficult, but is part of being a strong leader. There is never a bad time to prepare for the leaner times when they occur. Experience and analysis evidences that those businesses who moved early are more likely to survive better and grew strongly as the economy picked up. Those that plan ahead will look as good as your clients after receiving one of your awesome treatments.

Charles Watson is the General Manager of Workforce Guardian.

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