Our client was an owner-managed publisher of magazines, websites, newsletters and advertisements in the specialist pet and traditional rural sectors. Following a significant shift in the industry away from physical print to digital content, the reduction in advertising sales; and the non-renewal of one of the contract titles, the company’s turnover had been suffering for a number of years. This, combined with other personal reasons, led the owner to make the difficult decision to look to sell the company; however, to ensure that he maximised the value by selling a sustainable business, the company decided that it needed to reduce its current level of expenditure.
The company’s accountants contacted us because, amongst other initiatives including reducing property costs by sub-letting some office space, the senior management team identified that they needed to reduce staffing costs. The annual direct staffing costs including benefits and employer NI were approximately £1,100,000. The aim of the project was to reduce this by 25%.
We started the project by facilitating a meeting to get to know the business and understand the aims. We conducted an exercise where senior management was asked to imagine the staffing structure required if they were to set up a new business today with the current turnover, client demand and market pressures. This allowed us to identify the areas where we may need to reduce staff but also where investment in expertise was needed.
Although there was a significant need to reduce staffing costs, due to the paternalistic culture of the organisation, there was a reluctance to do this purely through redundancies. We therefore considered a range of measures which would allow us to reduce costs whilst preserving the skills and experience required to make the business sustainable and attractive to future owners. The range of measures adopted included:
- Ending employment contracts for a number of junior staff who were still in their probation period. Although culturally, this was a difficult decision to make as the company liked to support development of skills, it was decided that in a scaled-down operation experience of the industry and flexibility to carry out a broad range of functions was critical. In some functions such as digital publishing, developmental roles were retained to develop this growing area of the business.
- The business’ turnover was 75% from the pet industry and 25% from the rural sector whilst the staffing was roughly equal. We therefore had a conversation with the rural editor outlining the challenges the business was facing – he had for some time been discussing his remuneration with the senior management. As a result he agreed to reduce his hours to a part-time contract for 6 months to allow him to train the existing deputy editor whilst setting up his own freelance work. At the end of 6 months, the intention was to review the situation again with the potential to continue on this basis, reduce hours further, or for him to eventually resign.
- The company provided benefits in line with their size as an SME and therefore there was minimal scope for reduction in expenditure; however, private health insurance had been historically offered, which had been taken up by a small number of staff. This benefit had increased in cost considerably over the previous few years and was becoming less appreciated by employees due to the tax implications. We therefore commenced consultation to remove this benefit from the next renewal date.
- A number of recruitment campaigns were already underway to replace employees who had left the company recently or were in their notice period. Each of these posts was reviewed in the context of a scaled-down operation and all but those in the digital area were cancelled.
Despite the above measures, there were still a number of areas where following the review, the company was over staffed – some of these were standalone roles which could no longer be justified as such and others where there were too many staff performing a particular role. This resulted in a number of redundancy processes and 5 employees being made redundant.
During the process, Beststart HR and the senior management team were keen to ensure that all employees who were affected were treated openly, fairly and were given appropriate support to find a new role. However, we were also focussed on those individuals who would remain with the company and ensure that it had a sustainable future. This was achieved through a planned communication strategy: informing staff of the reality of the situation and the challenges it was facing; and seeking involvement and contribution to the process. Communication was encouraged with senior and line management, as well as the opportunity for employees to speak to Beststart HR as an independent and objective external adviser. This strategy resulted in a smooth process with no appeals, subsequent legal action or voluntary resignations and many of those leaving the company, remaining in contact to inform us of their progress in securing new roles.
The savings required were achieved and the senior management team are focused now on the sale of the business but have also started to implement the measures identified to build the skills and experience required for the new digital age.