By Perminus Wainaina
2023 is proving to be a challenging year for businesses and households. The government has unveiled plans to raise more taxes, and for a recovering economy still rebounding from COVID, the initiative will do more harm than good to businesses and individuals.
The proposed taxation measures will affect the employer-employee relationship and companies. At a macro/broad economic level, there is a high possibility that we are looking at another period of businesses struggling, and closing up.
Increased taxation will erode consumer purchasing power, resulting in low demand for goods and services. With the high cost of doing business, most companies will most likely declare employees redundant, which again affects the demand for goods and services, and the resultant effect is low business performance. But at a company level, what are we likely to see regarding the employer-employee relationship?
Expect agitation for pay increase/reviews – with the rise of National Social Security Fund, House Levy, and a general price increase in goods and services, employees will fill the pinch, which might translate into agitation for more pay. If your organization is unionized, expect heated discussion on that collective bargaining agreement.
Low morale and quality of work – while the problem is not your own, reduced spending power might lead to general apathy as employees try to cope with a challenging economic situation. And especially employees who are earning low salaries/basic wages. Lack of money affects all other areas of our lives, including relationships, health, one’s self-esteem, and will impact employees’ productivity.
Potential for an increase in fraud for staff who handle cash – this came to the fore last year while recruiting for a finance manager and a chief executive officer role for two different clients. For the in-depth reference check that we offer clients, we had to drop two highly qualified and experienced candidates. Still, their credit reference bureau report showed they were heavily indebted, taking home less than a third of their pay. While they hadn’t done anything that spoke to their lack of integrity, the fact that they had many “loans” was a red flag.
Increase in employees who are “checked out” – employees who are doing the bare minimum and just working for the paycheck. While not all employees will be committed in any economic situation, this number will likely increase. What to do?
If your business will survive these challenging times, the key is dealing with the crisis head-on and working out how to move forward as a company. Here are the steps you take to stay afloat:
Develop big picture thinking
People tend to attack the most apparent immediate problems with vigour and without hesitation. That’s understandable and might make good business sense in some situations.
However, stepping back and looking at the big picture is advisable to see what is still working and what needs changing. It’s an opportunity to better comprehend the size and scope of existing problems and further understand your company’s business model – determining how its strengths and weaknesses come into play.
For example, suppose a business owner or head of the department discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be overstocked or understocked. While an initial reaction might be to fire those employees, it could be wiser to examine whether the manager who hired and supervised them has adequately trained them.
If the manager is to blame, that person could be fired, but there might be better approaches. If the manager’s relationships with existing clientele have a history of bringing in repeat business and substantial revenue, they are likely someone you’d want to keep. Retraining might be a better alternative than termination.
By thoroughly scrutinizing the strengths and weaknesses of the employees, the owner is looking at the issue from a top-down perspective, reducing or eliminating the chance that the problems will recur while avoiding a change that could adversely impact future sales.
Determine your HR needs
Fluctuating demand for your products or services and changing customer expectations for service level will influence your H.R. needs. You may not need as many employees as you did previously, and the way they do their jobs might change.
You will also have to determine whether your current employees can move your company forward and whether you can afford to keep them on. If not, you will have to accept the reality and make a tough decision.
Inventory your staff
Payroll is often one of the top costs many small and midsized business has, so seeing to it that the money is well spent makes sense. This may involve a thorough review of the staff – both when a problem arises and during the ordinary course of business – to ensure the right people are on board and doing their jobs effectively.
At the onset of COVID, a medium-sized firm hired us to conduct a. H.R. audit, which entailed comparing what the staff were hired to do, what they did and their results, their skills, and qualifications. The exercise resulted in 35% reduction in payroll as most roles were duplicated, and some staff had nothing to show for their 2 to 5-year stay with the organization.
Penny wise and pound foolish
Both small business owners and large corporations tend to be penny-wise and pound-foolish when they hire the least expensive workers. Sometimes the productivity of those workers may be suspect. Hiring an employee who costs 20% more than the average worker but works 40% more effectively makes sense, particularly during periods of crisis. If you are hiring during period, make a smart long-term decision, as focusing on the pennies will cost you more in the long term.
Show strong leadership
Strong leadership and a clear vision are crucial to thriving in a crisis. You may be feeling the uncertainty, but what you show is that you know where you want to go. This is especially important with employees and clients. They are looking for leadership to rebuild confidence. Everyone is fearful, which is why demonstrating your leadership skills is essential.
Support your staff
Why don’t you sponsor your staff for personal finance training during this period? Seeing that their incomes will be negatively impacted. Training on managing their finances may not have a direct return on investment on your business compared to sales or customer service training.
Still, such training is a testament to the staff that you understand what they are going through, and while you may not have the budget for a salary increase, you value them and are willing to support them. This will go a long way in improving employee morale and productivity as well as reducing the instances of staff requesting salary advances due to poor financial habits.
Bottom line: When times become difficult for your business, it is crucial, more than ever, to retain a cool head. Sometimes, there is a simple solution that may help you keep the business running that you wouldn’t have noticed if you were too stressed or bogged down in tiny details.
Writer is the C.E.O. of Corporate Staffing Services Ltd. An H.R. firm based in Westlands, Nairobi. He works with business owners and top managers, helping them solve their most pressing employee/people management issues.
