Good Housekeeping

You may have heard that three Hyatt Hotels in the Boston area terminated 100 housekeepers as a cost cutting measure to offset a decline in revenues. In light of the massive job losses all around the country this wouldn’t seem like much of a news item. But, how Hyatt terminated the housekeepers has resulted in a hailstorm of protest reported by the Boston Globe, The Wall Street Journal, National Public Radio and all the major networks. It was reported that the housekeepers were asked to train some new workers who would be filling in during vacations. The housekeepers discovered on August 31st that they were all being replaced that day by the same employees that they had trained. The trainees were employees of a Georgia company, Hospitality Staffing Solutions. These employees will earn about half of what the housekeepers were earning. So, in one swift move, Hyatt succeeded in reducing some costs, creating a public relations debacle and losing the trust of its remaining employees. Not so good.

Meanwhile, other hotels in the area have taken a different approach in response to declining revenues. Earlier this year one hotel ended its contract with the company that provided its security and night janitorial service and replaced them with hotel workers from other departments who might have otherwise been laid off.

Over the last year many of my clients have faced similar if not worse revenue declines. I talk with many business owners and thought I’d share a couple of stories how two companies dealt with their issues. Although they’re in different industries, they have similar values and take them seriously. Their values guide them through very difficult situations and help them make the right decisions.

The first example is from a restaurant company that began taking action over a year ago in anticipation of a slow economic recovery. In November of 2008 the executive team developed a plan that has resulted in an overhead reduction of $800,000. This included departmental staff reductions, eliminating some benefits and reducing executive salaries 10%. One of the members of the executive team told me, “Our goal was to do as much as possible without impacting our field operations team. We communicated these steps to the field by holding a series of meetings with all of our General Managers and providing them with the complete picture so they would understand what steps we were taking and why we were taking them.”

Despite this action, revenues continued to decline to the point that the initial savings were not enough. What to do? Having fostered a culture of transparency, the executive team called a town hall meeting. “Midway through 2009, we realized that we would need to trim additional costs. We also realized that we had reduced overhead as much as we could and we now needed to impact the field team. We scheduled a General Manager off-site meeting to pull them into the solution. We communicated the impact of our earlier actions, where we NOW stood financially, where we needed to go and, several cost savings ideas. We then let them discuss alternatives among themselves. The next day, as part of a breakout session with our executive team, the General Managers provided their suggestions. We then asked each GM to force rank his or her top three actions. One week later, after we had time to tally the results, we conducted a series of Webinars to share with them the final outcome. They had identified over $900,000 in savings and taken ownership of the decision".

Each year this company conducts an employee survey to gain feedback on how it’s doing as an employer. This year’s survey was completed after the round of cost cutting initiatives. The company surprisingly had some of its best survey results ever. One of the General Managers stated, “It’s great to be able to face upcoming tough times and changes that need to be made for the company to stay afloat. Thanks for being proactive.”

The second example is from a manufacturing company with 185 employees that produces machined parts for the automotive industry. As you can imagine, this company has been hard hit. At the beginning of 2009, revenues were off 40%. Faced with this challenge the CEO and executive team considered its options; massive layoffs, reduced hours across the board, wage cuts, to name a few. They decided on the following: 1) terminate 25 temporary workers, 2) terminate 20 workers whose jobs were no longer needed due to loss of particular business segment, 3) offer 10 employees early retirement, 4) offer furloughs of 4 to 12 weeks to employees on a volunteer basis (15 employees took furloughs), 5) close the plant one week each month from January through August.

The CEO held meetings with all employees letting them know the severity of the problem facing the company as well as the course of action. Individual meetings were held with impacted employees. Both management and hourly employees were affected and shared the pain equally.

Closing the plant one week per month allowed employees to collect unemployment for the week that they didn’t work and they continued to receive their insurance benefits. Throughout the 8 month period, the CEO and executive team conducted plant-wide meetings to keep everyone abreast of the health of the business. This action helped the company survive the most difficult period in its 59 year history. Business began to rebound in August and in September the plant operated for the entire month. The company also hired 8 temporary employees.

I hope these two examples show you that your business can not only survive these difficult times but also thrive in the future. Ultimately it’s the owner who must make the difficult decisions that keep the business on course. By involving everyone in the solution, the weight of the decision is borne equally and the best is made of a bad situation. You’ll live to fight another day. It is good housekeeping.