After talking to dealers and consultants across the country, it's clear that lumberyard executives are seeking to shrink their businesses to a size that matches the markets they serve. While I applaud their doing so, I see two worrisome tendencies.
I heard about the first from numerous dealers who told me they have responded to the downturn by instituting across-the-board pay cuts. Often, these same dealers regard their workers as members of an extended family; by lightening the pay envelope of every worker, they're announcing to their staff that "we're all in this together."
Similarly, when staff rosters needed to be trimmed, I've heard many dealers say they decided who to keep based on seniority. This also reinforces the staff-as-family idea, because those who have been part of the family longest get the greatest protection.
This is a heartwarming way to run a business. It's also wrongheaded, and I can name at least three reasons why.
First, across-the-board cuts, in effect, treat all workers the same, despite the fact that there are huge differences among them in how they perform. Cutting everyone's pay by the same proportion unfairly penalizes those workers who are worth more, dollar for dollar, than their peers. That kills the motivation to excel.
Second, spreading the pain assures that everyone will feel hurt, turning what might have been a spotty problem into widespread malaise.
Third, and perhaps most important, attempting to keep all hands on board assumes that, once the housing slump ends, your dealership will have the same kind of business it did before the downturn began. But it's quite possible that you won't make money the same way in 2010 that you did in 2006. Your staff needs are sure to be different, so some of the people you're working so hard to keep on board now you might have to jettison in the future.
Some of you have discovered a fourth problem involving across-the-board pay cuts. I have spoken to numerous dealers who instituted staffwide pay cuts, thinking that by doing so, they could keep the staff intact, only to discover a few months later that they still had to fire people. The result was that the cuts didn't make anybody feel better and instead ended up making certain everyone felt worse.
As for using seniority to decide who stays and who goes: You're dealing here with a popular but overly simple way to handle a painful issue. It's based on two equally suspect notions: that long-tenured staff have better skills, and thus are more worthy of retention than newer folks; and that there's no better way to resolve who should get pink slips. While there's some truth to the first notion, we know it's untrue often enough to lead to trouble. And as for there being no better way to figure out who should go, well, that's a cop-out. Your job as a manager includes having to make sober, painful analyses of what's best for your company.
The management style practiced by George Bailey in "It's a Wonderful Life" may look good in the movies, but it's not a viable role model. LBMs should be a meritocracy. Is yours?
Craig Webb, editor