During trying economic times like this, I am frequently asked, “Should I cut everyone’s salary by 10% or lay off 10% of my staff?” My answer is, “It depends.”
Obviously, if you have an employee who performs poorly, or who you are unable to keep productive, you should act on that person first. In fact, you should have resolved that problem before the economy became an issue.
You also need to understand how the staff feels about their coworkers. If the majority feels an employee is not pulling their weight, they will resent taking a pay cut while that person remains employed.
If, on the other hand, everyone feels they are part of a well-oiled machine, they are more likely to accept the pay reduction in order to keep their team intact and keep their friends employed.
– Darryl Salerno, Owner, Second Quadrant Solutions and Strategic Management Consultant