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How to get furloughs right—and recover fast

Worker walks past a "welcome back!" sign during preparations ahead of reopening of a shopping mall, in Jakarta.
REUTERS/Ajeng Dinar Ulfiana
The best ending to any furlough.
  • Jason Rosenbaum
By Jason Rosenbaum

Chief operating officer, Crowd Favorite

Published Last updated

Coming off the 2019 holiday season, the digital strategy company I help lead had gotten off to a slow start, which is not unusual in our industry; clients sometimes need the early weeks to prepare for the year ahead. However, wariness about the novel coronavirus had started to creep in and activities were being postponed as everyone waited to see where the virus was going to take us.

With a business to run and employees’ livelihoods to consider, I would have been shortsighted to simply wait on the sidelines and hope for the best. Like many businesses in the same situation, we looked into loans to sustain us, but those took time. The Paycheck Protection Program (PPP) wouldn’t kick in until mid-April and Economic Injury Disaster (EID) loans even later. We had to make difficult decisions and act quickly. We knew that the longer we took in making the tough decisions, the longer it would take to heal and rebound.

Furloughs, pay cuts

As soon as we understood what our financial situation looked like at the beginning of the pandemic, we enacted one-time pay cuts for management and furloughed 20% of the staff. In mid-March, we sent an email to our employees, which included a situation overview outlining our financial position and the following details:

  • Leadership (ownership and management) would take significant pay cuts for the foreseeable future to minimize the disruption of furloughs.
  • Those selected for furlough would have their situations reevaluated after 60 days.
  • We would cover health insurance, including employee portions, and other benefits to ensure no lapse in coverage.
  • For those who needed to pursue employment elsewhere, the company offered use of its tools and recommendations.
  • A Q&A session would take place the next day in lieu of the usual monthly meeting agenda.

Providing the email in advance of the meeting allowed staff time to gather their thoughts and questions. Equally as crucial, we kept the lines of communication open and had very candid discussions. After that, every two weeks we held a company-wide meeting that furloughed employees were also invited to attend.

Within 60 days, all of our furloughed employees had been hired back except two, who had taken positions elsewhere. Managers who had their pay cut got their lost wages back by the close of the year. And, most importantly, we proceeded to increase our revenue by double digits quarter-over-quarter for the remainder of 2020.

This tough situation did allow us to grow as a team. As I continue my commitment to being a human-centric leader, here are the biggest lessons I’ve learned.

Temporary Band-Aids should be pulled off fast

This wasn’t our first crisis. We had faced a tough time a few years before; requiring us to furlough team members and restructure parts of the business.

In that case, I wasn’t aggressive enough. It wound up hurting the team. We held onto every employee as long as possible and instituted pay cuts in increments, only having to repeat the measures all over again. Every two weeks, employees wondered if there would be another round of pay reductions, which decreased morale, production, and output. It was death by a thousand cuts, unnecessarily long and painful in hindsight.

Leaders should always respect the humanity in others, but they also need to follow that maxim of providing the greatest amount of good for the greatest number of people. This meant acting quickly when the pandemic hit, and it ended up being less painful than our previous experience, for everyone involved.

Transparency and truth always wins

While the truth was not going to set us free from the furlough, it was going to make it a lot easier. My partner and I were candid with every member of the team in all interactions, and they could tell. It was one of the points of feedback that the team was thankful for as we brought everyone back.

The biggest mistake leaders can make during a crisis is to make promises you can’t keep. For example, telling your team members that things will just get better if you don’t know for sure will only be more emotionally excruciating for everyone involved if the prediction doesn’t pan out. Trust and morale will suffer.

Consistent communication will ease concerns

If employees feel like leaders have disappeared, panic sets in. I’ve been on the other side in the past, so as part of the leadership team now I made it a point to communicate regularly. While these conversations were painful, we weren’t avoiding the conflict. We made ourselves available to listen and hear what team members’ concerns were and how they were feeling each week.

It’s important, though, to think about what employees need to hear and when they need to hear it. We wanted the team to remain productive, motivated, and present. So, while we were transparent, we tended not to communicate news until we were ready to combine the information with an actionable plan. Without that, too much information sharing can lead to unnecessary speculation and distractions. For example, we didn’t get into how much the company was taking out in loans or how much it had received. We did, however, spend time with the team on confronting some of the weaknesses in our systems that the crisis had exposed and how we would be successful if and when we took certain steps. We kept it factual. We kept it simple.

A crisis can open up opportunities

During those 60 days of furloughs, we looked very closely at our operation to identify flaws and weaknesses. We analyzed how we sell, who we target, and the value we offer, and made strategic pivots in sales and marketing. We drilled down on the type of content we were creating, and our own positioning, and revamped our service packages to create a tier that reduced the barrier to entry.

The leadership team also used this time to reboot our thinking about how we could do better for the collective team, which led us to streamline what we believed in and look for value-aligned clients. So, we re-evaluated and renewed our core values, and then focused on various ways we could embody our values throughout our organization. We began a monthly Giving Day initiative, where we donate to a different nonprofit and then match all donations from employees and clients who choose to participate. We also created a profit-sharing program to give back to our biggest assets: our people.

I know bringing everyone back from a furlough hasn’t been a reality available to all firms. I know we are lucky to have smart and passionate team members. I also know that if I need to ever do this again, I would do almost exactly what we did in this situation. If you lead businesses this long enough, you are bound to face challenges, but there are always new lessons to be learned. The lesson here was we’re clearly better together—and we’ll do what it takes to keep it that way.

 Jason Rosenbaum is a partner and the chief operating officer for Crowd Favorite, an independent, international client services firm specializing in enterprise-grade digital strategy, web development, and support.

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