Rules of Engagement

“It was very difficult for me to fire people because we are like a ­family here,” says Gregory Cancryn, owner of Payment Transaction Systems in Atlanta. “For me it felt like a personal failure.” Cancryn had been running his 29-employee credit card processing company for 10 years, when in late 2006 he first noticed a decline in consumer spending and the trickle-down effect that it had on his company’s bottom line.

Actual revenues were significantly lower than his projections suggested–they should have been 50% higher. “As a business we saw revenues drop, we reacted accordingly,” he recalls. “We cut costs, renegotiated contracts with vendors, eliminated services, and brought the services we could in-house. We cut employees who were not pulling their weight and had people doing more than one thing. Rather than laying people off, we decided to fall a month behind on paying the lease for two of our offices. And that’s how tight things got.”

Cancryn says he figured things would get better and the next month, he would just double-up on the payment. But things did not get better, so he was forced to lay off six employees over the course of the next two years. “It was a last resort.”

While layoffs, salary cuts, and furloughs can help some small businesses stay afloat during an economic downturn, living through it can be traumatic– causing feelings of anger, anxiety, insecurity, and a sense of betrayal for those who are let go as well as for those employees who remain on the job. And, like Cancryn, business owners may feel a personal sense of failure for having to take such measures. Left unchecked, any of these negative emotions can wreak havoc in a workplace already weakened by financial crises.

“The first casualty is usually morale, quickly followed by performance and retention of top talent,” says Chris Bryant, founder, executive coach, and national speaker of Beverly Hills, California—based Rapport Strategies Group. With fewer resources, small business owners must face these difficult times and make hard choices.