Cut staff hours but keep the morale

March 19, 2009: 11:10 AM ET

If you need to cut costs, here's some tips on how to break the bad news to the staff.

Richard Ryan, Barberitos Southwestern Grille and Cantina, Charleston
I own a small restaurant that grosses around half a million a year. I am going into my third year and I currently employ six people. Most of them live off this job. I am holding a meeting today to explain why everybody will have their hours cut in half. Any advice on how to do this without losing the good performance and enthusiasm of the staff?

By Emily Maltby, CNNMoney.com writer

Many business owners today are finding themselves in the same position: The down economy forces them to make tough cost-cutting decisions, which may entail layoffs, pay cuts and reduced hours. These actions, while often essential to the bottom line, can make employees nervous, discouraged and sometimes depressed.

Because you don't want those negative feelings broadcast to your customers, you should prepare yourself well before diving into the meeting.

The first thing you need to evaluate is whether axing hours is actually the best course of action. Ask yourself whether eliminating jobs, for example, might be a better choice for your business and the employees, advises Bonnie Bernie, director of service operations at HR outsourcing firm Administaff.

"You have to look at all the options because you need to feel confident that you are making the right decision," she says. "Confidence is key when you are delivering negative news."

Keep in mind that employees probably see the writing on the wall. They know the economy is bad, and if they are seeing fewer customers, they can easily put two and two together. So make sure you give them credit for that by being open and honest.

"Acknowledge what they already know. You don't have to go deep into the company's financials, but you have to convey that you are in survival mode, that the downturn is impacting the business. Maybe that means stating that revenues are down a certain percent," Bernie says. "Convey that changes have to be made in order for the restaurant to remain open."

"You also have to send a message of hope," says Kevie Mikus, vice president of client services at The HR Group, another HR outsourcing firm. "Let them know that this was a difficult decision, and recognize that it will impact people's lives. But also stress that, because of these measures, you don't anticipate having to close the doors. If you believe this to be a temporary solution, then send them that message. If you can spell out the expected duration, then paint them a clear picture of what this will ultimately mean for the business when it's over."

Both Mikus and Bernie stress that leaders need to emphasize to the staff that everyone is in this together. Help them stay motivated by getting them involved in rebuilding the business.

"Ask for recommendations on cost containment and increasing sales," Bernie says. "Also consider cross-training them so that they can boost their skills."

Chances are that you know which employees are going to feel the impact of this decision the most - some may be struggling with bills, or with having other family members out of work. But don't make special concessions for them.

"You need to ask employees to step up their game, and if you are treating some people differently, others will hear about it," Bernie says. "That will take the focus off their own productivity."

One way to soften the bad news is to evaluate any other incentives that you may be able to offer to the employees. "Any little measure you can afford, like free meals, for example, could help to offset the blow," Mikus says.

As with any situation where you are dealing with people's livelihood, communication is essential. So make sure that following the meeting you are available and accessible.

Bernie recommends using this as an opportunity to hone your leadership skills. For example, keep the employees informed of the restaurant's progress so that they're not left making assumptions. Also, be sure to roll up your sleeves and show them that you, too, are stepping up your game.

If employees come to you with problems stemming from the new arrangement, do some research for them.

"Depending on where you are and on the employee's salary level, they may be eligible for benefits through a workforce commission. Give them some tools to work with if they need additional employment," Bernie says. "And when possible, be flexible if they have to take on another job."

Give us your advice: Check out recent "Ask & Answer" questions.

Related links:

Creating structure in a family business

Are layoffs my only cost-cutting option?

To fire or not to fire - the ethics of the layoff

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