Our Analysts' Insights

After taking temporary measures and expedients to continue operating during the pandemic, companies must now develop plans for what happens after COVID-19. They will do so against the backdrop of the two biggest concerns that CEOs of language service providers expressed in CSA Research’s mid-March survey: the existential threat of decreasing demand and uncertainty about how long the pandemic will last.

While CEOs wrestle with those two issues, they have an immediate business challenge – how can they keep paying their employees and thus retain the team that delivers the LSP’s value? In this brief we analyze the most critical factor – human capital – that companies must address to be ready for the post-pandemic world and lessen the impact of the COVID-19 shutdown of the world economy.

What You Can Do Now to Preserve Your Most Important Asset

Let’s be frank. For many companies, the easiest solution to the “declining demand versus too many people on the payroll problem” is to take the approach of large employers like Macy's and Marriott and simply furlough, lay off, or terminate employees. Others, like Tesla, have cut executive pay while laying off “non-essential” employees. However, forward-looking companies like Apple continue to pay their retail employees while they’re not working or like Bank of America that vowed not to lay off anybody.

For any knowledge-centric business like language services, it’s long been said that your biggest asset walks out the door of your company every night, taking with them their accumulated experience and expertise, and thankfully returns the next day to work. It’s their knowledge that your clients buy, so you have to ask yourself whether you can shut down part or most of your operations, wait out the pandemic, and then expect to go on with business as usual when it’s all over.

The need to preserve talent affects staff with close knowledge of your internal systems whose departure would disable operations as well as competent leaders who are in short supply. According to a Harvard Business School survey of global professionals, only 32% of global leaders are confident that their organization has the necessary leadership talent and skills to achieve their strategic goals. Having to eliminate the staff who bring the value to your business or leaders will only make talent management problems worse.

This is one of the most crucial decisions you will make during this challenging time. If you lay off people, will your reduced staff be enough to meet demand when the economy recovers? Will you be able to deliver the same services having laid off much of your intellectual capital? And will those who continued working during the pandemic be burned out from carrying too much of the load? Will you be able to get the best team back together when the economy recovers?

Here’s an alternative to layoffs –cut all non-essential costs while you temporarily reduce salaries and wages by the same amount across the board. Do this with full transparency, letting people know that everyone from management to gopher is taking the same short-term percentage cut to their income. Make sure that they understand that the salary cut is not permanent and will be reversed as revenue recovers.

Consider Your Staff’s Perspective on Such a Cut

What’s the effect of cutting all salaries by a percentage while demand has slowed? What are the benefits and risks of this strategy? Look at it from your team’s perspective.

• The main advantage of this option is to circumvent the trauma of losing one’s job in addition to the confinement stress, the uncertainty about the future, and for employees in the United States, the prospect of losing healthcare benefits.
   
• The main risk is the unhappiness of some of the employees, especially the single breadwinners on your team. It’s critical to communicate that these are exceptional times, that “we are all in this together,” and it’s better to have a job now with less income — and the health insurance that comes with it in the U.S — than no income.

How Will Your Company Benefit?

This is your opportunity to demonstrate leadership, your belief in the company and all the employees who make it work, and your care for their livelihood, health, and wellbeing. The upside of this approach would be increasing trust in the company and management, keeping your smart people around you, and reducing the stress and guilt of CEOs who would otherwise have to decide who stays and who’s laid off. Your management team is already stressed by business issues, confinement, and economic uncertainty, so why add to it?

The investment you make in retaining your staff will touch every aspect of your business:

• Company culture and the team factor. The decision to retain all or most of your employees can bring them together and generate a collective spirit of endurance during the pandemic. You will keep your team of smart and skilled people with knowledge of the company and processes intact. Your company culture and identity are sure to change with this move – executed transparently, this will foster renewed trust and confidence in the company’s leadership that its employees matter.
   
• Client service, loyalty, and business continuity. Clients will remember the companies that reached out in meaningful ways during the pandemic so keep employees in place to continue servicing them. Reduce the risk of losing clients or prospects by pushing faster response times; creating new initiatives; and training staff to help with prospects, expanding existing accounts, and revisiting lost accounts whose LSPs might not be able to service them with their diminished staff.
   
• Rebuild and renovate. Review your technology and processes. Software systems that were slow and inflexible before COVID-19 will still be slow and inflexible after the virus goes away. Devote time to training so you have a better team ready to hit the ground running. Work on improving the remote interactions – for example, take this opportunity to build stronger relationships between your employees with new technologies such as GoToMeeting or Zoom.
   
• Experiment and innovate. Plan and execute new initiatives and projects that you couldn’t do in the past or that you have to develop for the new normal. Prioritize and coordinate new initiatives that will future-proof the organization and take advantage of the ability of a team that allows you to take a long view and plan long-term scenarios. For marketing and sales, it’s time to develop or refine your in-depth market segmentation strategy and start targeting better prospects – use the time and team to improve your knowledge of accounts.
   
• Differentiate. You worked so hard to develop the teams – do not let those skills end up working for competitors in the future. Your full team is what makes you different and competitive. During and after COVID-19 you will compete against companies that will be weaker because they let go employees. You scan strengthen your differentiation by having the resources to service clients and prospects well while you display the human side of a company during COVID-10 by taking care of your employees.

Practicalities and Legalities – Do the Math

Retaining your staff through the pandemic obviously has a cost – figure out the impact on your financial state:

• Conduct your financial analysis. By now, you’ve probably removed any non-essential costs. Work with your finance team or accountant to compare expected cash flow with the loaded cost of paying salaries and benefits for your team. Don’t forget the crucial importance of employer-paid benefits such as healthcare in the United States. Run best- and worst-case scenarios for the coming months, plugging in a range of moderate to aggressive percentages for wage cuts. Determine how long your cash will last using the various percentages for cutting salaries. Plan further out – given the uncertainty of the stay-at-home orders in place around the world, you may have to reduce salaries again depending on how long they last.
   
• Review legal requirements. Consult with your human resources manager about concerns such as the minimum wage required by law for healthcare benefits. They will bring up any other issues that you should build into your staff retention plan.
   
• Factor in Government Assistance. Review the availability of government loans or grants under plans such as the Kurzarbeit in Austria and Germany and the Paycheck Protection Program (PPP) in the United States. Note that these programs may require keeping all or most of your employees on the job.

• And do whatever you can to identify cash flow sources.Think about how you can amplify sales. For example, put in place separate commission plans that incentivize bringing in new accounts and upgrading existing accounts.

Don’t Stop Thinking about Tomorrow

Addressing the human capital question by keeping your team intact will help you become more resilient – until things return to normal and you restore full salaries. If you can manage to have your team in place ready to contribute to the planning and execution of plans during this pandemic and after, the organization and its customers will benefit.

Without their team’s energy and participation, many companies will find it tough if not impossible to come back solidly and rapidly after the recovery. They will have to spend time rehiring and training people to regain their lost experience and expertise. Companies that keep their teams in place and trained can emerge as market leaders fueled by their investments in people during the pandemic.