Layoffs Only as a Last Resort

We all know home health care is under attack. There are ever-changing reimbursement schemes, increased competition from nontraditional health care providers, accreditation and competitive bidding. Throw in a little headline-grabbing fraud and Medicare/Medicaid mismanagement and … well, things are a wreck.

The situation has every home medical equipment provider, from the smallest to the largest, searching for ways to gain control of their business. Of course, many are looking to reduce costs — and without a doubt, the quickest and most dramatic means of reducing costs is to eliminate staff.

For more than two decades now, layoffs have been a commonplace tactic for giant companies in all industries, and health care is no exception. While immediately effective, it is a most gut-wrenching and unethical breach of the work contract. Why?

It means an employee, in spite of having done his job and everything asked of him, is going to be receiving his last paycheck. The repercussions are evident. We have a whole generation of workers who have zero loyalty to employers because they have seen a parent, spouse or friend laid off, or have experienced firsthand this terrible practice.

Consider the Alternatives First

A layoff is a visible sign that, for whatever reasons, owners, executives and managers have lost or given-up the battle for creativity, innovation, improvement, fiscal excellence and overall strategic leadership to keep the business prospering.

In lieu of, or at least in an attempt to stave off a layoff maneuver, first make sure you have explored these alternatives:

• Reducing individual employee hours.
• Reducing employees’ immediate pay with the promise of a “recovery bonus” once things turn around. (Realize, however, there could be severe legal ramifications if every good faith effort isn’t made to honor such an arrangement.)
• Seeking longer payment terms from vendors in order to conserve cash flow.
• Seeking credit line increases from lender relationships.
• Seeking outside investors.
• Subletting space for added revenue generation.
• Holding a sale on high-inventory/low-turn items to generate revenue.
• Readjusting marketing efforts toward higher-profit items.
• Increasing over-the-counter retail sales and using specials to attract both new and repeat customers.
• Stepping up efforts in managing your referral network, not in panic mode, but to express your desire to do whatever is possible to make your home care company No. 1 in their minds when it comes to servicing their patients.
• Investing in professional advice from a business consultant. Even though funds may be tight, this could be a wise move because now is when you need help the most.
• Thoroughly reviewing avenues of cutting or, better yet, selling your way into profitability.

This last point is critical. No company ever reduced its way into profitable growth. You have to sell. You have to service. You have to compete. You have to produce. You have to manage relationships. You have to invest in developing an edge — a distinct value proposition. It’s heavy lifting, and there’s only one way to do it all: with and through people.

After the industry craziness settles, I fear we’re all going to be looking for good people to beef up our workforce again, but they’re going to remember any past layoff. They’re going to think twice about working for a company that sees layoffs as a viable tactic whenever times are tough.

Only as a Last Resort

If, after looking at every other possibility, you feel a layoff is a must, then here are some general pointers to ease the process:

• Avoid layoffs on a Friday; it ruins a weekend and puts the employee at the greatest risk for destructive behavior. Don’t do it on a Monday; that has its own stigma attached. Tuesday or Wednesday is better. This allows time for shock, then gives the employee a few days to work on a resume, make calls and actually do something about the situation.
• Plan a generous severance package that includes direct pay, benefits, job-hunting/career counseling, etc. (Make sure employees understand there is to be no sabotage, conversation or actions that would undermine the business in their final days or they may forfeit their severance.)
• Don’t tip your hand to any other employees — except perhaps a trusted manager who may need to know — in order to minimize a groundswell of gossip.
• Don’t conduct a death march into and out of your office. Find a means of making the announcement collectively (unless, of course, it only involves one person).
• Don’t do it over lunch, coffee or some other pleasant venue. This is a lousy moment that should be carried off in a business setting behind closed doors.
• Don’t turn the situation into a tearjerker. Professionalism requires dignity and calm, no matter how difficult. Your employee will be emotional enough.
• See that your remaining team is personally addressed concerning reasons for the layoff and plans for them to continue. You don’t need panic and rumors of more troubles coming.
• Put on a confident face. While this is no time for smiles, it is a time that everyone will look to you and your management team for encouragement and determination to get through.
• Re-emphasize your commitment to the business, and stress remaining employees’ need to focus all of their efforts on serving the customers who depend on them for their HME needs.
• Plan a message for the public and outside parties if the issue arises. This should be a general statement about those being laid off, those remaining and your company’s continuing ability to serve its customers. Don’t wing it. This is a very serious matter, and your words should be chosen carefully. It is no time for humor or casual remarks. People are losing a source of income to care for themselves and their families. What’s more, your customers could be worried if they hear about the layoffs from any source other than company management.
• Don’t be seen enjoying the perks of your position. Following a layoff, seeing the boss at the club or frequenting fancy restaurants sends a bad message. You must outwardly demonstrate that you’re refocusing on ways to save money as well.
• Always consult with your legal and human resource professionals before any layoff.

All of the nontraditional providers getting into the HME/DME business obviously see a profitable future. We know there certainly won’t be a shortage of unhealthy, homebound people in need of products and services. These newcomers are investing in the best ways to serve the market that make sense with their business models.

It is time for traditional industry providers to invest in finding ways to adapt their company models to a new era. That doesn’t mean giving in to quick fixes.

Layoffs are one tactic, albeit a lousy but sometimes necessary short-term tactic. They are a traumatic experience for both employer and employee alike. Think long and hard before you take this step.

If you see no other way, at least do it as professionally as possible.