Hotel Chain’s Cost Cutting Debacle: Are YOU Making These Mistakes?

by Pamela on October 1, 2009

Business Owners: How Careless Cost Cutting Measures May do More Harm Than Good

This may be a local Boston issue, but it has far-reaching implications. The Hyatt Hotel chain in Boston recently laid off close to 100 housekeepers who were making around 15 dollars an hour and replaced them with workers from an Atlanta company who are earning 8 dollars an hour. To make matters worse, the laid off workers claim that they unknowingly had to train their replacements. It has caused quite a stir here in Boston. Governor Deval Patrick has called for all state employees to boycott the Hyatt and some other local unions are following suit. I’m not sure that boycotting the hotel and putting more jobs in jeopardy is the best solution, but that’s not the focus of this post.

In a tough economy, many companies need to take cost cutting measures. And, these measures are never easy. In this case, the people who are on the lower end of the pay spectrum were the ones who were hit the hardest. I can’t find evidence that any executive at the Hyatt took a pay cut. By replacing the workers with people from another state who are willing to take less money and no benefits, what message is management sending to the people who remain employed there? In my opinion, they are sending a toxic message. They are creating an atmosphere of mistrust, resentment, and fear. It seems pretty clear that they weren’t working with a good business coach! It will be interesting to see what, if anything, they do to recover from this PR blunder.

Before I became a business coach, I worked for a few companies who handled this situation very badly. In one case, the president had to cut over half the staff. I was in a marketing group consisting of six people and they could only keep 2 of us. They kept the director and the manager. However, because I was a hard worker and the president of the company liked me, he told me that he’d find a place for me. This executive was dictatorial and always made decisions in a vacuum. He was going to have me fill the shoes of three other people that he let go; a choice that immediately made me uncomfortable, despite his good intentions.

His decision caused a lot of resentment among those left behind. Even though they liked me, they couldn’t understand why the boss kept a marketing person to work in accounting and HR, and assist the company lawyer. They were understandably upset because their friends lost their jobs. I didn’t want to work in accounting and I certainly didn’t want to work with the lawyer to clean up the messes caused by all the leases we broke when we suddenly closed offices across the country. I lasted a few days and then gave my notice. This small business owner made some bad decisions that created an impossible working situation for everyone involved. The workplace became toxic and the company never recovered.

If you are a small business owner, the repercussions of a mistake like this probably won’t hit the press or cause a city-wide boycott like the one made at the Hyatt chains. However, the damage to your business could be just as costly. When you are faced with cutting back, what steps do you take to make the crucial decisions? Do you consider the potential fallout? I’m not suggesting that you can’t lay people off. Sometimes it’s unavoidable. It’s HOW you go about it that will determine your way forward. What can you do to keep from infecting your remaining team with a poison that may sour your business forever? You could hire a a great business coach (I’m just sayin’ is all).

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