With the potential for layoffs facing more and more companies, the realities of laying off great workers is confronting many business owners and managers: owners and managers who have never before faced this hard act. To help ease the pain for the employees being laid off, the owners and managers making the hard decisions, as well as those employees staying behind, I thought I'd share a 5 Step approach that may help you, your employees, and your business. It will not work for many of your businesses given union contracts, etc. but if it helps some others - use it.

Everyone knows the economy is uncertain and most employees are rightfully concerned about job stability. When people become nervous, the rumor mill kicks into high gear. We all know the rumor mill can destroy individuals quicker than many things. So if you haven't yet, start communicating now. Lay out clearly how your company is and will address future business slow-downs.

Step 1 - Hold a "State of the Business" meeting with all employees and let them know the current state of your business. Let your employees know what your plan is for lay-offs and how you'll handle lay offs if your company needs to resort to them. Share with your employees the following - or your own plan - for dealing with a slow down. The important thing is to communicate clearly the state of your business now and what will cause you to move to the next step.

Step 2 - Reduce management salaries. Should business start to slow down and you need to more proactively preserve cash and control costs, don't immediately lay-off the lowest paid, front-line workers. They're the people who do what your business is known for. Do what you can to retain them. Instead, consider doing what a few of my clients are doing:

Cut management salaries. Tell your employees this during your State of the Business Meeting. Let them know, you're working to protect the front-line workers' jobs, so the first wave of cost reductions will be borne by the management team. (One client cut all executive salaries by 15%; all mid-level managers by 10%.)

If you, like one of my clients, has a manager who "jokingly" asks, "But I'll still get my bonus won't I?" consider my response. "Absolutely. But first I want to sit in the meeting you're going to have with the employee(s) who will need to be laid off in order to pay you your bonus. I want to hear how you explain to them that you will still get your bonus while they lose their jobs. Once they give you the O.K., you'll get your bonus." (Yeah I know it's mean, but - duh. No bonuses.)

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