PCPS Offers Cost-Savings Advice to Firms and Human Resource Professionals

As busy season ends, CPA firms are pondering next steps for surviving the economic downturn. This memo will aid firm owners and firm human resource professionals in considering options for dealing with employee expenses during tough times.

April 15, 2009

Dear CPA Firm Managing Owner and/or Human Resources Professional:

In today’s tough economic times, the AICPA is aware that some firms are tightening their belts and considering cost-saving options. The AICPA is concerned with the well-being of our individual members and member firms. We offer you the following guidance as you consider next steps in terms of your short-term staffing levels.

Avoiding Layoffs
We all know that the current economic climate will change for the better in the future. What we don’t know is when things will start to turn around. As firms feel the pinch of tough times, often a knee-jerk reaction is to cut personnel. Instead, we encourage firms to reflect on ways to be proactive and to protect your most treasured assets.

1. Protect your current assets and concentrate on performance management – Continue to regularly evaluate and give frequent feedback to top performers. Some geographies and markets are flourishing. Be aware that your best people might have other options. The firm wants these people to stay through the thick and the thin and they want to know that you have their best interests at heart. Remember that dropping turnover rates is NOT an excuse to relax retention efforts.
2. Guide poor performers and adhere to a poor-performance management system – In a slow economy, poor performers may stay with the firm longer than expected and you can’t count on previous attrition rates. It is essential to get all people who are not performing at a desired level on a formal and regimented plan that progresses to improvement or termination. One option for dealing with cost-cutting measures is to expedite the warning and discussions timeframe in an effort to move-up the firing date of chronically poor performers. Additionally, dealing with your poor performers can give your brightest team members a boost in confidence and aid in creating efficiencies that were otherwise unattainable. Bear in mind that you should document the entire process. PCPS offers its members guidance on dealing with poor performance and tools for a complete performance management system. Visit http://pcps.aicpa.org/Resources/Human+Capital+Center/ to learn more.
3. Encourage team members to take unpaid time off or self-funded sabbaticals – Check out Mark Koziel’s March 12, 2009 blog post for a great example. You might be surprised at how many people would be interested in this opportunity.
4. Consider cutting back on annual raises and/or discretionary (non-performance based) bonuses – These may be the best areas for your firm to halt or delay in the short-term in an effort to retain people long-term.
5. Reduce salaries or hours across the board – A five percent reduction in all salaries or a ten percent decrease in hours (and effectively in salary) may save overhead costs for the firm and allow you to maintain current benefit levels. See the Wall Street Journal.com article. Also review the reminders below for issues to watch if you go this route.
6. Scale back certain benefits – Consider asking your employees what they value most during tough times. If some of the firm’s benefits are at the bottom of this list, perhaps your best opportunity is here.
7. Cut owner/partner salaries and/or draws – Although quite controversial, this option might buy the firm the most breathing room in terms of cost savings and employee loyalty. Also, if the firm decides to reduce employee benefits or salaries in the future, the staff should be more receptive in sharing the pain if the partners have already contributed. Let’s face it, the profession has seen many good years and owners have profited as a result. Lucrative years are in the future. The point now is to make it to the future with the strongest firm you can muster.
8. Listen to the CPA Straight Talk – Podcast Series for insight into how other CPA firms are weathering the current economy

Focusing on performance management is a given. And the firm can always reevaluate salaries and policies and enhance the benefit mix in the future. However, after the economy turns, hiring back your best people, and getting rid of the firm’s dead weight could be infinitely more difficult and expensive if the firm’s decision is to perform layoffs and ignore the options above.

Reminders
Keep in mind the following tips as you go about making any cost cutting decisions.

1. Be professional in every action you take. Remember that your clients and employees are watching how you treat others. These observations could affect their decision to work with you in the future. 
2. Communicate, communicate and communicate. Be certain that your people are aware of what is happening and how decisions will affect them. You don’t need to give away all of the juicy details before actions are taken, but team members are anxious and need to hear from firm leadership regularly. Contemplate some of the following points/ideas:
• Reach out to employees at least every two weeks
• Use a variety of methods, including video, voicemail, email, town halls and memos
• Explain the benefits of the firm’s recent actions
• Be honest and don’t sugarcoat the facts
• Promote confidence and instill optimism whenever possible
• Choose your words carefully and avoid promises that could change
• Cascade quickly from the top to the bottom initially and then provide open access on intranet sites and in the break room
• Develop talking points for leaders and distribute before communications go live
• Include congratulations for an achievement, client compliment or personal event of team members
• Offer opportunities for employees to ask questions and respond
• Share personal stories and how you are feeling
3. Demonstrate non-bias and fairness. Cost-cutting measures should not discriminate against any protected class of employees or cause reverse discrimination. Whether or not the cutback intentionally has a disparate impact, statistics show that discrimination complaints raise during tough times. The U.S. Equal Employment Opportunity Commission provides guidance at http://www.eeoc.gov/.
4. Research the law. For example, if the firm chooses to reduce staff member hours, certain statuses and eligibility requirements may be affected in relation to the Fair Labors Standards Act (FLSA) and Workers Compensation rules. Visit the U.S. Labor Department for more information at http://www.dol.gov/.
5. Encourage optimism. Find the silver lining and lessons learned in today’s situation and share these with employees. Ponder activities, stories and quotations that will lift people’s spirits. We can all use more of this lately. This article offers a few more ideas.
6. Organize support for families. Let’s suppose your firm is simply planning to cut back on frivolous benefits. But some of your employees have spouses or aging parents that were laid off or are losing benefits for special needs children. Those family units as a whole may be struggling and could use some extra attention in the form of support meetings, meal organization, childcare, eldercare, etc. Offering support may not cost you a dime but could be a life-saving gesture for an employee.
7. Mentor your staff. If you’re business has slowed down, now is a great opportunity to mentor your people. Use this time to take staff on sales calls, listen to their concerns, offer tips, etc. PCPS also offers informal mentoring guidance to members at http://pcps.aicpa.org/Resources/Human+Capital+Center/. If time is on your side, use some of it to build the firm’s future.
8. Concentrate on client service. An economic downturn provides an excellent opportunity to retain and wow your most preferred clients. Firms who treat superior client service as the newest marketing tool will achieve better client retention when the economy turns than firms who do not. Read more at Mark Koziel’s March 31, 2009 blog post.

When a Layoff Occurs
In an effort to support the accounting profession and our constituency, we developed the Outplacement Checklist for employees who are being laid off. This tool is designed to walk the team member though the major actions they should take to secure a new position. Helpful web sites and hyperlinks are referenced throughout.

If your organization ultimately experiences a layoff, we ask that you provide the Outplacement Checklist to the displaced employees. Additionally, you can use the Outplacement Checklist as a guide during exit and outplacement planning discussions. We recommend that your Human Resources department also consider the following during this difficult process:

• Visit the AICPA’s Economic Resource Center to learn how we are assisting our members during this recessionary period.
• Encourage the displaced employee to post their resume on the AICPA’s CPA Job Finder. Starting in February, the AICPA has opened the site to CPA Firms to post their jobs for free during this recessionary time to try and match the jobs with our members in need. Hopefully, this will reduce the number of unemployed CPAs or the length of time the CPA is unemployed.
• Determine if your firm meets the requirements of complying with the Worker Adjustment and Retraining (WARN) Act for certain mass layoffs. In some cases, employers are required to provide 60 days notice before a layoff. The criteria are complex, but some basic levels are layoffs of 50 or more workers at a single site, where 50 is at least one-third of the total full-time workforce at that site or for an employer with 50 – 499 employees, if the laid off workers make up at least 33% of the employer’s active workforce.
• Research the COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act to determine if your company must comply with new notifications requirements regarding reduced premiums and revisions to Form 941, Employer’s Quarterly Federal Tax Return.
• Formulate a communication plan for affected and non-affected workers. All employees need to understand how the decision impacts them. This plan could include some of the following points and items:
• A lay-off memo to all team members that outlines the number employees or percentage of workforce that will be laid off, relevant facts, a contact name for questions, relevant dates and details of a question and answer session
• If the firm had previously said there would be no layoffs, explain what has changed. Don’t lie, rather own up to the reversal in position, apologize and offer as much support as you feasibly can to your current and terminated team members. There are a number of qualified reasons for the change, including incorrect words were used in the past, a major client recently went bankrupt, bank funding has been withdrawn, etc. Just be sure to state the true reason and move on.
• Talking points for leadership and others to use with external parties
• The communication’s tone should be firm but kind
• Termination letter personally delivered to each laid off employee – the internet has several free samples
• Contact the Rapid Response team, which is equivalent to the state Dislocated Worker Unit, who can come on site to help the workers who will be laid off.
• Develop a Frequently Asked Questions document for your employees. Topics could include:
• What the firm is offering in terms of job search assistance, severance and continuation of benefits
• How accrued vacation and bonuses/gain sharing will be paid out
• Process for accessing CPE tracking documents
• Timelines for use and return of firm equipment
• Process for submitting time and expenses
• Information on the Employee Assistance Program (EAP), if applicable
• Research other helpful tips, such as those in the following articles:
  • A survival guide for the unemployed
  • Layoff Survival Guide: What to do if you’ve been laid off
  • Layoff Survival Guide

Please remember to include the Outplacement Checklist in the layoff materials for your displaced workers.

Feel free to contact us if you have any questions or concerns.

Warm Regards,

Private Companies Practice Section (PCPS) Team
800-CPA-FIRM
pcps@aicpa.org