Executive Insight: How to Tell It's Time to Bring Back Workers

This month's Executive Insight deals with human resources.

How do you know when it's the right time to hire back laid off employees?

— Design/build remodeler, Michigan

Steve Melman, an economist with the National Association of Home Builders, says this is "the question" facing businesses of every kind. Certainly you want a sufficient buildup of demand before bringing on employees. Melman warns against interpreting regional, tax-credit-induced "bubbles" as indicators of sustainable market recovery. They're not. Keep in mind, too, that many companies, probably yours included, have been changed fundamentally by the recession. They have become smaller and more efficient, able to absorb considerably more work before needing to hire.

Over the past two years remodeler Dean Herriges of Urban Herriges & Sons in Mukwonago, Wis., laid off all nine non-family employees. Recently he has seen an uptick in calls from serious prospects, but he will wait for a steady backlog of six weeks of work before considering any rehiring. In Ann Arbor, Mich., Washtenaw Woodwrights owner Bruce Curtis employs four carpenters and project managers, down from 10 a few years ago. He wants to book at least a couple of months of work before bringing back crews, partly to protect those former employees from the hassle of re-registering for unemployment if work slacks off again.

Albuquerque contractor Lonny Rutherford of Legacy Construction is down to one field worker plus himself. He'd have to have several good-size jobs scheduled before thinking about adding staff. "Carry [surplus] labor for very long and it eats up your profit past and future," he says.

If you are ready to hire, who will you choose? Don't assume that the people you laid off are the ones to bring into the company. Martin Freeland is founder of the Atlanta-based Berke Group, a management consulting firm experienced in providing hiring training in the residential construction arena. His rule is short and sweet: "Don't confuse tenure and loyalty with talent and competence."

Rutherford has laid off three workers over the last several months. One was a 16-year veteran of Legacy Construction. When Rutherford considered whom to retain, he faced the reality that this fellow had the bad habit of going away for two or three weeks at a time. Another worker had been with Legacy a shorter time but showed up for work every day. Weighing longevity against dependability, Rutherford chose the newer employee. Now more than ever, says Rutherford, "We don't need any bad jobs," or unhappy clients.

Most remodeling companies are relatively small, and small companies can be like families. Friendships and emotional bonds develop. It's especially painful to lay off employees in this context and very tempting to bring back workers you have known for years. Industry consultant Beverly Koehn, of Beverly Koehn & Associates in San Antonio, urges remodelers to take the emotional element out of hiring choices. "Be objective. Look at the facts," she says. "Just because you've gone through tough times and laid people off who are loyal doesn't mean those people are right for your company."

Recognize too, adds Koehn, that even if you do rehire people, their trust of and commitment to your company have suffered permanent damage.

One positive aspect of the recession is that hiring has become a buyer's market. There are lots of great workers out there. Some of them may have been employed by your competitors before the downturn. Others may have been self-employed or come from another area. Start recruiting now. Freeland says you should be networking, looking for the best eight or 10 potential employees and trade contractors you can find. When you are ready to hire, half of them may no longer be available, but you'll still have numerous A-1 candidates ready to come onboard.

Many remodelers are subcontracting more now and plan to keep doing this instead of hiring employees. Herriges has found another good option: skilled labor services. He works with two companies, a regional placement service called Skil-Tech that functions as a temp agency, and Tradesmen International, which provides construction workers at the skill level, price point, and number of hours needed for particular tasks. "We're going to use a combination of crew and labor service" going forward, says Herriges.