Feature: Lay Off the Layoffs!

January 29, 2009 | By: Marc Mencher

| More

As Anderson explains, game companies need to find every possible way to cut costs – while, ideally, avoiding morale-busters like layoffs. Here are some ways companies are doing just that.

Companies can reduce allowing employees to work overtime.

Companies can cut costs by limiting travel and attendance to some of the industry events.

Companies can cut costs by limiting the purchases of office supplies and equipment.

Companies can cut costs by temporarily suspending 401(k) matching contributions. "If you're thinking that you can't afford to do 401K matching or something, think of where you are in your business trajectory," Anderson suggests.

Companies can cut costs by allowing more employees to work from home. Rent for commercial space is expensive. Why maintain large office space when you can reduce these costs by sending some employees home?

Reducing the size of the workforce through attrition or a hiring freeze are possible alternatives. Another alternative is to offer employees incentives for early retirement. "Take as many people as you have and make them contingent—outsource animators and other technical people," Anderson says. "We try to keep the head count as low as possible."

Lateral transfers are becoming more common, and more acceptable. Employees are allowed, to move from one department or division to a related position in another. This can be a good move for the employee who gains a broader base of knowledge and becomes more valuable. Lateral transfers are also good for the company. They are one way to retain valued employees. They bring fresh, innovative, and potentially cost-saving ideas into a division, without the full cost associated with a new hire.

The concept of downward movement or job demotions is less well accepted and less often used but this is also a very good tool for lowering costs without losing valued team members. No one wants a demotion but isn't it fairer for some employees to suffer a little rather than be part of a layoff?

Companies can cut costs by allowing some administrative employees to work four-day, 40-hour weeks.

Companies can cut costs by doing more of their own marketing. Do you really need to spend big bucks on marketing consultants or advertising firms? For example, stop spending money on SEO services who are supposed to improve website traffic. Quit paying for Google Ad Words. Encourage your existing technical staff to blog and create a bonus program around revenue generation as a result of the effort. Blogs are a great way to connect with your audience in an informal way. Use your products to demonstrate your knowledge of the industry, and use humor to keep people reading! (Just go easy on the competitive jokes—you don't want to start a blog war with other game companies.) Game companies already maintain technical staff, so encourage then to blog about your games or your company in their spare time.

The direct costs of layoffs from outplacement services and severance pay can add up initially, but indirect costs — like losing experienced employees who have strong relationships with 3rd party developers, retail buyers or even new IP holders can cause lasting damage.

Additionally, the direct costs of layoffs negate any financial benefit if new employees are hired within six to twelve months, according to a Bain & Company study. This type of "binge-and-purge" tactic, common during recessionary periods, can place an organization in an unfavorable position.