I Run a Big Company: Here’s Why I’m Not Doing Layoffs, Despite Recession Fears
In nearly 100 years of business, Torani, a flavored syrup company that’s present in coffee shops around the world, has never had a single layoff. And despite the current economic uncertainty, Torani has no plans to change its approach to protecting jobs.
“No matter what the economic or business circumstances are, we believe that if we focus on making sure that our team members are taken care of, that we have 100% employment when we come through a tough situation, that we will then be better able to take care of our customers…and everything else that goes along with growing the business,” said Melanie Dulbecco, CEO of Torani.
That approach has held up through significant downturns like the 2007-2009 Great Recession and the COVID-19 pandemic. And it continues today, even with many people concerned with the economy.
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Navigating Uncertainty
By many indicators, the U.S. economy continues to chug along, such as with the most recent Q2 2024 GDP coming in at a relatively strong 2.8% annual growth rate. However, the economy doesn’t always feel great to everyone.
Although issues like high inflation and high interest rates generally reflect a rapidly expanding economy, they can make certain spending and investment decisions difficult, and a recession often follows an overheated economy.
So far, the U.S. has been able to avoid a recession, but many expect growth to slow down — not necessarily to the point of a recession, but not the same strength of late either. The Conference Board, for example, forecasts a cooldown in consumer spending and for annual GDP growth to only be around 1% for this third quarter of 2024.
In addition, the New York Fed forecasts a 56% chance of a recession by June 2025, based on an indicator of short-term interest rates being higher than long-term ones.
Still, Torani is not deviating from its strategy of avoiding layoffs. Yet the company isn’t ignoring risks either — far from it. Instead, its approach has been to diligently analyze what would happen during an economic downturn and plan accordingly through careful investments and cutting back where possible in areas besides labor costs.
During the early days of the pandemic, for example, Torani faced significant challenges, such as with many of its cafe customers having to close during stay-at-home orders. But rather than react to the risk of lower revenue by doing layoffs, Dulbecco and her team analyzed what the downturn might look like and how they could cut back in other areas like marketing and travel spend, or put new projects on pause, to navigate the difficult period at full employment.
“It really means a lot to gather together with a group of people who share core values around people and say, ‘Alright, what will make us proud in this moment is making it through with everybody intact.’ We know these folks, we know their families, we care about them,” said Dulbecco.
“And especially when we look at hourly team members, hourly people need more stability than companies often provide. And that’s a baseline for us. We think of ourselves as an opportunity company,” she added.
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Creating Opportunity
During the pandemic, Torani forecasted a 20% downturn, which played out initially, but then retail and e-commerce sales quickly started to take off again.
So, with the company’s belt already tightened, Torani was able to engage in new initiatives like providing grants to help independent cafes reopen, via company funds that would have otherwise gone to travel expenses. Meanwhile, having a full team rather than being short-staffed due to layoffs meant that Torani was also better positioned to handle the supply chain challenges that followed the early months of COVID-19.
“We had all the right people in place to help us through some pretty intense situations,” said Dulbecco.
On top of that, during the “Great Resignation” in 2021 and 2022 — when many employees decided to leave their jobs voluntarily — Torani had low single-digit turnover, she said. “So this meant that our business was healthy through some turbulent times.”
Now, despite the prevailing economic uncertainty, Dulbecco has no plans to change her approach and start doing layoffs. Even if there was another large downturn, she doesn’t foresee a scenario where Torani would have layoffs.
“We’re out to make sure that doesn’t happen,” she said. “Our goal is to share wealth, share success, get people as quickly to a living wage and beyond as possible and ensure that they’re doing that by learning new skills, developing, growing and contributing more and more.”
That’s not to say that Torani is ignoring risks. On the contrary, accounting for risks helps them avoid issues like overhiring followed by layoffs.
“We keep a vigilant eye out. We’ve lived in such crazy times,” said Dulbecco. “So we’re ready for the shoe to drop. We know we can’t take anything for granted, and we have to be smart with everything we do.”
At the same time, “we need to invest in our growth. So we make very deliberate, thoughtful investments,” she added.
That includes areas like trying to hire right on the curve of sustainable growth, rather than getting too ahead of the curve, explained Dulbecco. Another example is managing projects like building out one manufacturing line for a certain product with the infrastructure in place to add a second line if needed, rather than jumping right into both.
With this approach, Torani has been able to avoid layoffs for almost an entire century. That has helped the company retain a strong workforce and achieve a 20% compound annual growth rate over the past 33 years.
“We don’t imagine ever having layoffs. It’s our goal not to and to actually prove that this is a healthier way to get to a [strong] bottom line,” said Dulbecco.
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This article originally appeared on GOBankingRates.com: I Run a Big Company: Here’s Why I’m Not Doing Layoffs, Despite Recession Fears