Adopt a Holistic Approach for Effective Succession Planning

As the recession tightens its viselike grip on the economy, many companies have no choice but to force out employees to trim costly payroll expenses. Yet layoffs don’t always prove to be the money-saving measure that they are intended to be. Severance costs, which vary by position and industry, can easily approach thousands of dollars per employee. But the real financial toll on companies comes when the economy picks up (which economists say could be as early as late 2009) and companies need to increase production.

Often, the cost of finding and hiring new staff is greater than that of retaining current staff, especially when the job market is strong and potential hires retain a lot of negotiating power. Moreover, the cost of training new hires adds to a company’s expenses, particularly if the position calls for a specialized skill set or considerable experience.

Dean Baker, co-director of the Center for Economic Policy and Research, told the AP, “You don’t want to lay off 15% of your workforce, because you want to be prepared to move quickly when the economy turns around, and that will obstruct your ability to do so.”

As an alternative to layoffs, companies around the country are cutting back in strategic ways. Some have installed hiring and pay freezes or have capped the number of weekly hours per employee. Others have suspended 401(k) payments. Before implementing any of these measures, however, it’s wise to seek legal counsel with experience in business and corporate law. Firms such as Engel & Schultz, LLP, can advise companies on cost-trimming measures, as well as other areas such as commercial contracting, debt finance, software agreements, intellectual property protection, and more.