Everything you didn't learn in school that will help you survive the world of work. A place for newbies, for working moms, for seasoned professionals and "free agents" to share strategies, tips and tales from the trenches.

Jan 25, 2010

Unpaid Furlough is Not a Good Management Tool

Guest Lecturer, Eloise, Fundraising Director

Nothing creates an us-versus-them dynamic and blows employee morale quite like implementing unpaid furlough, especially when it’s done twice in six months.  What begins in a meeting room as a compromise to save money and jobs can worsen your employees' situation if not planned with real-life outcomes in mind.  Read more in Eloise's story below.

For the past two years I have worked as a fundraising director for a nonprofit arts organization in fiscal crisis.  In mid-April of 2009, senior management announced that due to impending financial disaster, they were forced to cut 10% of the staff and were implementing mandatory unpaid furlough for the remaining staff. This was presented as a necessary last resort that would get the budget back into balance.

The number of unpaid days to be taken was on a sliding scale, based on each employee’s salary level that ranged from two to 10 unpaid days.  Unpaid time had to be taken between April 15 and the end of our fiscal year on June 30 -- in other words...now.  Human Resources presented it as "not a big deal" because everyone qualifies for unemployment for their furlough time.

That just sounded wrong to me in so many ways.  I did not ask the government to pay me because my organization could not control its finances, but the majority of my co-workers—including the senior management team who created the fiscal problem—filed for unemployment for their furlough.

Since the last quarter of the fiscal year is the busiest time in the fundraising world, taking time off was not an option for me.  I worked two weeks without pay because foundations and the federal government have specific deadlines, and the work had to get done before those deadlines, or we would have no possibility of incoming grant money.  My manager, however, not only took two weeks of unpaid furlough, he took an additional four weeks of vacation time throughout the summer months.  I was astounded when all of the senior staff followed suit, taking their two weeks of unpaid furlough as well as their full complement of vacation days last summer.

We were in worsening fiscal crisis, they had said.  The organization needed increased management attention, and most of the management team was absent for six weeks to start our new fiscal year. My experience in similar situations in the for-profit work world had been that senior management is more present, not less, in times of financial difficulty.  They had role modeled team work, worked longer hours, and rallied the troops with specific goals, communicating constantly to get the organization back on track. 

We heard nothing more about the fiscal situation until six months later in October 2009 when Human Resources sent an email at 4:55 pm on a Friday announcing a second mandatory furlough…only this time, everyone was taking the hit of 10 days without pay on mandated single days selected by senior management staff.  So, from April 2009 to April 2010, I will lose four weeks of pay—that’s one month without a paycheck or an 8.3% pay cut.  It is significant, it is painful, and it feels like punishment for all staff because of poor fiscal management by senior management and the Board.

Webster’s Dictionary defines “furlough” as a noun meaning “a leave of absence from duty granted especially to a soldier” and as a verb “to lay off from work.”  We have been treated like solders, handed orders from on high.  And we are expected to accept those without question or rational discussion.  My position generates about $2.5 million of revenue a year—one quarter of the organization’s total annual revenue.  Cutting my paid work time by 8.3% did not result in a similar reduction in my fundraising goal.  In this time of crisis, my goal was actually raised 10%.  How was that supposed to happen?

I should also mention that my organization gives its employees 22 paid vacation days, 21 paid sick days, and five paid days off between Christmas and New Year’s Day each year.  Add 20 days of unpaid furlough, and (if I actually took all that time off), I would be taking off 68 days or over 3 months of potential work time each year.

In the midst of this fiscal crisis, Board members do not seem to comprehend the impact to staff members of the financial hit of two to four weeks without pay.  Perhaps it’s because Board members are selected for their wealth and have never had to worry about paying the rent or buying groceries. When the second furlough was announced at the Board meeting, the Board president said “employees have to take a couple of unpaid days.”  Board members shook their heads and gave sympathetic looks to the staff members in the room, but they had no idea that staff had to go two to four weeks—not "a couple of days"—without pay. 

In that same Board meeting, the Managing Director reported that “employee morale is good given the circumstances.”   Senior management has become so out of touch with employees that they do not recognize that morale has been flushed down the toilet.  Yes, we enjoy our co-workers, but we do not enjoy continual denigration.  We have a lot of gallows humor because if we weren’t laughing we would cry every day that we have to slog to our dank basement workplace and pray for 5:00 pm to come more quickly.

Some advice to senior management considering implementing unpaid furloughs:
1.      For God’s sake, analyze your financial plans and create organizational budgets based on reality before you mandate unpaid furlough time for your staff.   

2.      Don’t downplay the severity of each employee’s economic hit in an unpaid furlough—it’s painful to go without a paycheck for a week or a month.

3.      Don’t tell employees that you are in such financial crisis that you are unable to budget for “extras” like training and professional development and then send six senior management staff to the same expensive conference on the other side of the country.

4.      Don’t ignore employee morale and pretend everything’s okay because it’s not.

5.     Understand that most of your staff are currently looking for employment elsewhere because they cannot take incessant abuse, inept management, and repeated pay cuts any more. 

Finishing School adds:  Know the law.  There are laws regarding furloughs in your state, additional guidelines for federally funded organizations.  Managers and Staff both are strongly encouraged to know responsibilities and rights before planning mandated furloughs.

related reading
Companies turn to furloughs
Employee Furloughs and Related Wage and Employment Laws
Avoiding Legal Pitfalls in RIFs and When Reducing Hours
MSNBC on "Furlough Frenzy"

Twitter Delicious Facebook Digg Stumbleupon Favorites More

Powered by Blogger