Post-pandemic recovery, inflation and economic turbulence are all issues that companies are wrestling with today. Some companies (Gap, Warner Bros. Discovery and Patreon, to name a few) have resorted to a more traditional cost-cutting path: layoffs. But smaller businesses are considering a different route — closing early to reduce energy bills.
In fact, more than a third of 579 small business owners are considering reducing operating hours as a way to offset rising inflation and soaring energy bills, according to a survey by Norwegian tech company Disruptive Technologies, released on Tuesday. The research, which spanned service industries including restaurants, call centers and other service centers, revealed that cross-industry energy bills have risen by an average of 43% in the last year, and 90% of businesses are actively trying to reduce their energy consumption. One way to achieve this is to close the doors early. In New York alone, 52% of small businesses are considering cutting operating hours.
However, experts have warned that reducing operating hours may not be the right call.
The pros and cons of closing early
Bengt Johannes Lundberg, CEO of Disruptive Technologies, said he believes cutting operating hours should be a last resort because it could stunt any potential income flow within those hours. Randolf Saint-Leger, a management consultant at Smart EDI Solutions LLC, who works with small and medium-sized companies, agreed. He said while it may be a tempting short-term fix to reduce operating hours, it could cause more damage in the long term.
“There’s a level of trust [among employees] that a company loses when they start to reduce hours,” said Saint-Leger. “Why are you reducing my hours? Why me and not this person when I have seniority? Companies need to understand that there needs to be a level of communication with employees.”
If a company does decide to cut operating hours, it is critical that there is a strategic plan that includes transparency with employees and managing expectations, Saint-Leger stressed. Another thing to consider is that reducing hours could also cause a company to lose talent if people decide to go somewhere else where they’re given as much work as they need.
According to the Disruptive Technologies survey, 34% of small business owners said they’d consider reducing their hours. Whereas fewer business owners (25%) said they may have to reduce staff numbers, and 23% said they may have to resort to pay cuts.
Possible solutions: Increasing prices, going green, flexible hiring
Outside of reducing operating hours, companies are also considering increasing customer prices to cover operating costs, according to the survey — a risky strategy during a cost-of-living crisis.
Experts have pointed to other ways to save money. For instance, many organizations have already stripped back their office footprints to reflect the smaller volume of staff working from their buildings at any one time — and to reduce costs. “The last big recession in 2008 and 2009 shone a spotlight on the high cost of real estate,” said Kate Lister, president of consultancy Global Workplace Analytics. “Real estate is the second highest cost to an organization. Real estate is the second highest cost to most organizations after people.”
Another option that some companies are considering amid economic uncertainty is flexible staffing. Fifty-three percent of senior finance executives see flexible staffing and resourcing as an effective strategy for protecting their company against marketplace volatility, according to AI-powered marketplace Paro’s 2022 Financial Maturity study.
Matt Kamhi, vp of experience at Paro, said adopting this type of flexible hiring can help save money in two ways: The first is being able to hire remote workers from anywhere in the world, which means a company could find someone who has different expectations from the compensation levels of the city where they’re based. The second is it allows companies to hire for just a project or period of time instead of long term, which would help them avoid potential layoffs down the road.
“You can scale up your fractional team or scale down your fractional team,” said Kamhi. “It’s a lot more flexible and scalable than hiring full-time employees where you have to consider restrictions over employment. These are independent contractors.”
Hires can even be made in this way to help with strategic management through uncertain times.
“It can be really expensive to hire a CFO or a high-level executive to come in and think through financial uncertainties,” said Kamhi. “If you think fractionally and you just need a little bit of strategic guidance from someone who has seen market uncertainties before, who has weathered different storms and helped different businesses, you can leverage their insights for a few hours a week here or there to be your strategic partner and not hire someone full-time.”