The Greatest Risk to Furloughing Your Employees

The Greatest Risk to Furloughing Your Employees

As I’m sure it was for most of you, the word furlough was a new word for me a few weeks ago. I needed to do a quick Google to understand the meaning of it. I wasn’t much wiser from the search engine result to be honest. But having had many coronavirus related conversations for the past 3 weeks, I’m pretty au fait with the world of furlough.

The 80% government contribution to furloughed worker salaries has been a life saver for many UK businesses. As has the Coronavirus Business Interruption Loan Scheme (CBILS) and the deferred payments offered by HMRC, and many lenders, landlords, local authorities and utilities companies.

The sense of community and support for one another has been amazing. Across the whole of UK we’ve heard many stories of selflessness and bravery. During the initial fire fighting phase, most people were disorientated and anxious, but in true British spirit we pulled together and got things under control.

For many businesses it’s just a case of how long. How long before we can get back to normal? How long before we can start to pay off some of these debts that are building? How long before the social distancing is lifted? How long before we are back to business as usual?

So, why would furloughing employees be a risk?

When I ask hands-on business leaders, what is stopping them from… making improvements, developing that new product, developing their people, doing market research to enable growth, and so on, what do you think the main reason/excuse is for not doing it? Time and resource. We’re too busy. We don’t have the spare capacity at the moment. Ask me again in 3 months time when we’re less busy.

Let’s say you’ve been affected by the Covid-19 pandemic in a negative way. You’ve got a reduced order book, no order book or you just wanted to close your business because you couldn’t guarantee the safety of your employees. As a result of this you’re furloughed a percentage of your staff (in line with the reduced order book) and they are sat at home waiting for the call to come back to work. Can you see where I’m going with this?

You have an opportunity. A strange set of circumstances where you have more time and capacity that you need. You have spare resources in abundance, and you are not taking advantage of this time to work to your advantage.

What could you be doing to turn this crisis into an opportunity?

While your competitors are ‘sitting it out’ and waiting for the starting gun to go off in how ever many weeks’ time, you could be getting ahead. You could be working on:

·      Developing your team in areas that would provide a ROI when they are un-furloughed, such as, self-awareness, resilience, communication skills, managing conflict and coaching. (The government have provided a further opportunity by allowing you to train your team while furloughed).

·      Improving your systems and processes to achieve better levels of transparency and productivity.

·      Researching the market to improve penetration in existing markets or identifying new markets (that are of less risk in a future pandemic).

·      Developing new products and services to reduce the level of risk should something similar happen again.

·      Implementing new technology and automation to remove basic human tasks and improve productivity.

·      Completely diversifying and doing something different.

This is not an exhaustive list, but if you are already brilliant at all the above (and everything else), then this article obviously doesn’t apply to you. But if some of the above areas resonate and you feel you could be making some headway, consider how much leverage you have to work with before you un-furlough everyone.

How much leverage do you have?

Some of you will have more working capital to play with than others. Based on running a basic cash flow model for your business, how much time can you buy yourself before you run out of cash. I know this may be crystal ball territory but try running a few scenarios that are best and worst case for your business with your team. Deferred payment are a great short term fix, but the deferred amounts will still need to be paid, so factor these into your cash flow analysis.

What if we have no leverage?

Maybe you have genuinely run out of cash or it is imminent and on the horizon for your business. Not a great place to be and a situation that I can wholeheartedly empathise with. Having been in this situation myself nearly 10 years ago, I understand these are dark days. Days filled with self doubt and not wanting to face things. My lesson was the one thing you always have control over is, how you respond to the situation. My advice would be, ask for help. There are many great people out there that are offering their time for free to help. Swallow your pride and ask for help.

Mindset Shift: Cost to Investment

Rather than looking at the above list of opportunities as additional costs that we cannot afford right now, view them as investments. If I un-furlough a group of people and invest that £5,000 (say 250 hours) of salaries in improving our processes, what will my return on investment be? Could I turn that £5,000 investment into 20% improved productivity? What would the value of that be?

The initial shock of the crisis forced a lot of people to reduce the risk and furlough as many people as possible. I am challenging you to re-consider your thinking and utilise this time to invest. Invest in areas that will set you apart and differentiate you when we emerge from the crisis.

Leaders with a Growth Mindset are more likely to approach the situation with a more open mind and view the opportunities as investments.

How do I decide where to invest?

There is a quick and easy way of doing this. You just need to arrange a virtual meeting with a cross functional team from your business and carry out a SWOT analysis. Based on what we have learned about ourselves over the past few weeks:

·      What do we believe our strengths are as a business? What are we good at?

·      Where are our internal weaknesses? What could we be better at?

·      What external factors are threatening the business? Where are the risks?

·      What opportunities have presented themselves? What could we explore?

Work with your team to populate the 4 box matrix and pull together a simple action plan with 4 headers WHAT, WHY, WHO & WHEN. I think you will be surprised by the ideas and how quickly the ideas mobilise into action.

Your WHY’s should help you to prioritise your action plan. Your WHY’s should lead you towards the focus areas that would provide the best ROI. And that may not always be financially related. Maybe think about the bigger picture and the VALUE rather than the numbers.

In Summary

I hope this article has provided some food for thought and you are more open minded to taking the current time and space as an opportunity to invest. You don’t need to knee jerk react. Take some time to reflect on:

·      How your thinking and behaviour is affecting the business

·      Your attitude to risk and does this need to be challenged?

·      What you need to prioritise and improve to grow the business

·      Areas you could invest in and improve (without any time pressure)

·      Things on your ‘we will look at that when we have more time’ list

·      How much leverage you have?

·      What are your competitors doing?

·      Who could you ask for help?

·      Should you reconsider your position on furloughing?

·      A cross functional team you could pull together that would be energised by this opportunity to transform the business

·      When and how you should run your SWOT session (probably virtually and ASAP)

Ask for help

If you are a manufacturing business leader feeling a bit lonely in the current climate and looking for a sounding board, the Manufacturers Alliance are running Covid-19 Clinics every Wednesday afternoon at 3pm. Feel free to register and join in. This may be your opportunity to start to ask for help.

Other Articles that may be of interest to you:

The Mindset that Leads to High Growth Leadership

Do You Have a Fear of Asking for Help?

12 Habits of Excellent Manufacturing Leaders


“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin