Two innovative companies in Michigan have been using a similar idea as a creative technique for avoiding layoffs. When production is slow, Brooks Beverage Management Inc. (BBMI), a soft drink bottler based in the city of Holland, temporarily loans employees to its corporate neighbor down the street. When things pick up again, it knows its workers haven't been lured away to other jobs and will be happy to return. Also, like the neighbor you paid to take care of your home, the corporate neighbor in this exchange situation benefits significantly.
For the last three years, BBMI has faced a seasonal dip in demand for its new line of alternative beverages: teas and flavored juices. Typically, as September and October hit, Americans return to what they traditionally have consumed in the colder months—usually coffee and other hot beverages. This part of the cycle lasts until early in the new year.
In the fall of 1994, the company knew what to expect. So as marketing geniuses scrambled to come up with ways to overcome the trend, Dennis Eade, VP of HR, and others at BBMI worked to develop a strategy to keep people working during the slowdown between September and March. There were 55 employees in the alternative-beverages production center who specifically would be impacted. "The primary goal was to avoid losing these highly trained, qualified, prescreened employees. We're in a 3% unemployment market. The minute we would have laid these folks off, I'm certain other companies in our area would have hired them on the spot," says Eade.
Plus, layoffs have been uncommon throughout the company's 64-year history, and BBMI didn't want that to change. Eade says: "In the soft drink business we typically staff to the low periods and then supplement for the high-demand periods—so we don't have a history of a lot of layoffs. Therefore we've cultivated [a reputation for] being a good employer... and that image is important to attracting good new people to the company."
BBMI forms a task force.
Faced with the slowdown, BBMI formed a team of representatives from manufacturing, legal, finance, production and HR. Members brainstormed possible solutions to this staffing dilemma. One was to keep the employees and find projects for them to work on, like painting the walls and ceilings. This option was ruled out because the plant had been operating only for a year, and there weren't many fix-up jobs to do. Another idea was to send the workers out to blitz the marketplace—washing shelves and doing resets at retail outlets—providing an unusual level of service to customers. Yet another idea was to acknowledge that layoffs would be costly, but to do them anyway—with plans to save money in the months before they would need to recruit and train again.
Then someone suggested: "Can't we just loan these people to somebody for a while?" Immediately everyone agreed this was the best choice—if the company could make it work. This alternative would preserve the sizable investment BBMI already had made in training. Much of the company's equipment is state-of-the-art machinery run by computers, and employees receive three months of instruction before operating it on their own.
Eade says, "We figured if we made the accommodations—which were to offset the employees' difference in pay, continue their insurance benefits and continue their 401(k) matching—that had a fixed cost. But compare that to what it would cost to retrain a new workforce, and suddenly it was a third of the expense to make the accommodations than it was to be faced with having to replace those people."
Eade called Randy Evans, his counterpart at Haworth Inc., an international office furniture manufacturing company also based in Holland. Haworth was Eade's first choice because he knew the company was growing. Plus, Haworth offered two additional benefits:
- Availability of multiple shifts:
Evans was extremely receptive to the idea because Haworth had been having a difficult time recruiting enough qualified workers. Aggressive business development efforts by the state and the automotive industry's solid performance in recent years has created a strong Michigan economy. And this has a serious impact on unemployment rates. John Berrett, VP of corporate communications for Haworth, explains: "The counties surrounding Holland have some of the lowest unemployment levels in the country. We've been under 3% for the better part of a year. And that has been a real challenge for companies located here."
Add to that the fact that Haworth also deals with its own cyclical trend: Corporate America buys more office furniture at the end of the year, creating a peak demand that lasts through the beginning of the next year. Also, the U.S. government's fiscal year closes at the end of September, and many of its purchases happen around that time.
"We try to hire people on a temporary basis to expand our production capability at the end of the year. When you're in an area that has an extreme shortage of skilled labor because of low levels of unemployment, plus... you have a higher level of demand, it becomes a problem," Berrett explains. And the problem is compounded when you need special skills. "The most important requirement [for factory workers] is that they're able to work with machinery, some of it computer-controlled," says Berrett. "Many of the employees available from Brooks were [workers with these skills]."
A three-way partnership is born.
Because of the good match in skills, Evans expressed interest in the loan, but also some concern. He was, in fact, planning to hire 150 temporary workers—50 of them immediately. But he was worried he would have trouble with approval from his legal advisors. His primary concerns included:
- Which company would handle workers' compensation exposure?
- Which company would handle unemployment compensation?
- How would employees maintain benefits continuity?
- When the workers were recalled, would it leave Haworth in a bind?
Haworth usually hires temporary workers through Kelly Services, with the help of two onsite Kelly employees. So, Evans felt it made sense to bring Kelly in as a partner for this project; Eade agree. Claudia Wallace, a Kelly Services supervisor located at Haworth, went over to BBMI and worked with Eade to handle the administrative details of registering the 31 workers as Kelly employees.
Eade found that one benefit of working with Kelly was that the quality control (QC) employees with chemistry degrees had the option of pursuing positions in QC at other Kelly client companies. So far, however, the BBMI employees have preferred to stick together at Haworth.
In hammering out a written agreement between BBMI, Haworth and Kelly Services, the following points were made:
- Kelly would pay the rate normally offered to Haworth's temp employees
- BBMI would pay the difference when the Haworth rate was lower than employees had earned at BBMI
- BBMI would sponsor the insurance benefits and 401(k) plans
- Kelly Services would cover workers' compensation and unemployment
- BBMI agreed to give Haworth a 48-hour notice when recalling employees
- Haworth agreed not to solicit BBMI employees for permanent jobs.
BBMI shares the plan with its employees.
When all the details were settled, BBMI called a meeting to announce the temporary reduction in force and the options the employees had—including the Employee Loan Program. "I think the greatest satisfaction I had was when we made the announcement. At the same time that we announced we were going to need to cut back, we also talked about the provisions we'd made. I looked at those eyes and saw the fear leave immediately... as if people were thinking, 'Wow! We're realists, we see it—production is down. But, boy, the company sure thought of everything.'"
Workers chose whether or not to participate in the Employee Loan Program. BBMI simply provided the information to help them decide. Employees learned that not only would their compensation and benefits remain intact, but also they would retain their seniority accrual. They were told they would be invited back for a holiday luncheon and other special occasions. They also learned HR had created a special biweekly newsletter, with updates on current events, to help them continue to feel connected to BBMI while they were working at Haworth. And if they still felt apprehension, they were given the opportunity to visit Haworth for a tour and to meet the supervisor they would be working for. In the end, 31 people accepted the offer to transfer to Haworth, and the remaining 24 took the layoff.
These two privately held companies were able to move forward quickly. After six weeks of preparation the workers began to transfer over, staggered according to demand at the BBMI site. Since the duration of their employment at Haworth was uncertain, they were placed into assembly line positions with limited on-the-job instruction. At this stage Wallace played an active role in orienting the workers to Haworth and keeping everyone on both sides of the exchange informed of the status of the program. She also served as the main contact for BBMI when it came time to recall workers.
When March and April rolled around, all but three employees returned to BBMI. One was left behind at Haworth to pursue an outstanding career opportunity—with BBMI's blessing. The other two accepted jobs at other companies. All parties involved deemed the 1994 exchange a positive experience, so BBMI, Haworth and Kelly agreed to try it again in 1995.
The 1995 program was nearly identical to the first one. This time, because BBMI had improved at adding new products and generating additional business, only 10 employees were transferred over. Also, BBMI agreed to accommodate Haworth with a longer recall time. "We said we would certainly live by a two-day notice, but that informally we would give them at least a week's notice from when we wanted our people back," Eade explains.
As for the future, Eade expects that as consumers develop brand loyalty for the alternative beverages, they will begin to look for the product regardless of the season, and the cycle will be broken. In the meantime, it can count on an invaluable relationship with the company next door.
So if the shoe were on the other foot, would Haworth consider sending employees over to BBMI? "Oh, absolutely, absolutely—to hang on to trained, qualified people.... It's a win-win situation," says Berrett. And how would BBMI feel about taking on some of Haworth's folks? "Out of respect and admiration for their cooperation, I think I'd jump through hoops. We'd find something for them to do," Eade says. Now that's what being a good neighbor is all about.
Personnel Journal, June 1996, Vol. 75, No. 6, pp. 81-84.