You can’t read a newspaper these days without reading about organizations that are implementing employee furloughs in order to save money and to avoid layoffs. They might seem like a good idea but they might end up not saving money at all and could cause more turmoil than they are worth.
This article will cover the many problems associated with putting employees on furlough, or a temporary leave of absence or temporary layoff and a “lower-impact” alternative to permanent layoffs.
Under furlough programs, employees are asked or forced to take days off without pay. The net effect is a reduction of an employee’s annual income. Furloughs are being used in a variety of industries from healthcare and education to transportation and high technology.
Firms that have deployed them recently include newspaper giant Gannett, network appliance superstar Cisco, computer chip maker Intel, the state of California, Arizona State University, and the #1 car maker in the world Toyota.
While the tool may be popular and widely used, that doesn’t make it effective or the best choice.
Managers Lack Courage to Make Tough Decisions
Firms use furloughs instead of layoffs because they lack the courage to look individual employees in the eye and terminate them.
The key to any effective salary-savings program is to target the individuals who add little value compared to their salary. The process of selecting low-performers can cause turmoil among employees, so managers take the easy way out by cutting a portion of the salary of every employee.
In my view, managers get paid to make tough decisions, not to avoid them.
This “peanut butter” approach where you spread the pain evenly might seem like a good socialist type idea, but if your goal is to maintain a high level of organizational performance, furloughs can cause more problems than they solve.
