No one likes layoffs. People losing their job due to something other than their own performance creates emotional and economic havoc at homes and in communities. Yet the current environment has plunged many businesses into this exact scenario, and so the pragmatic question is how to deal with this? For the largest U.S. airlines, this creates an opportunity to rethink their long-term business model as they watch the lower-cost carriers in the U.S. recover more quickly and adapt more readily. Here is a five point roadmap they should consider:
Go Back to a Zero-Based Budget
Budgets are necessary for any company though they are hardly the thing most employees enjoy. Most budget processes require departments to justify changes in spending from one year to the next, effectively sanctioning that their prior period spend was reasonable and provided a good return to the company. A zero-based budget requires departments to justify every dollar to be spent from dollar one. This makes no presumptions about what was spent the prior period. This process, which takes time, dedication, and grit, is considered financial proctology to many people but it reveals an amazing amount about how the company spends money. In almost every case, the process shows redundancies, spending on non essential items, paying for projects that most thought were sidelined, and more.
Letting people go hurts, and so companies owe it to those people and the ones remaining that the company is looking at how it spends all of its money and is not asking employees to subsidize waste in other areas. A zero-based budget process will help this and bring transparency and new efficiencies to airlines as they deal with many more months of uncertain revenue.
Re-think the Fleet