Enter your keyword

The Furlough Challenge – Should employees really ever come back?

The Furlough Challenge – Should employees really ever come back?


As the world, and specifically the United States, works to find normalcy amid multiple disruptions, I’ve taken pause to explore how the country and business leaders should deal with the highest unemployment rate of all time due to the COVID-19 pandemic. Specifically, I look at how to bring employees back, how the decision ties to innovation and how to capture the entrepreneurial spirit in order to open up the economy and work to make businesses stronger than they were prior to the pandemic.

Understanding the Current Unemployment Rate

As of April 2020, the long-term and short-term unemployment rates in the United States hit an all-time high at 14.7%. This equates to an additional 20.5 million people who are now unemployed. Of those unemployed, it is believed 18.1 million of those are temporary layoffs including furlough, laid off, temporary, etc. workers. Regardless of the name, it’s simply people not working. And it’s a lot of people.

So what are we to do?   

I’m not an economic policy advisor by any means, but I do think about the effects some of these things have on industries and specifically how to continue to innovate businesses to better compete. How do you find the silver lining and the opportunity in disruption?

One thing business leaders could consider is NOT bringing some of these employees back.  You read that correctly.

Some employees should never really come back, and let’s get the obvious out of the way: I’m not talking about people that were bad, not the right fit, mismatch, etc. because they shouldn’t have been there in the first place. I’m also not talking about the roles that will no longer be needed over time due to various advances. What I am talking about is really at the heart of innovation: trying to unleash potential.

History of Innovation & Entrepreneurship Grown from Disruption

Stay with me… I’ll explain more. Before we get too far in on unleashing potential, we need to first take a look at what happened in regard to innovation and entrepreneurship over the course of the last few large-scale disruptions.

World War II |Market innovation-entrepreneurship went through the roof. Nearly 50% of all returning veterans of WWII became entrepreneurs resulting in 8 million businesses being created after the war ended. Some did this by need and some were absolutely because of the opportunities being created in the years shortly following the war. Some of these businesses included Sperry Shoes, FedEx and Walmart.

What’s interesting is if you dig deep in the research, the equation to make this work was a combination of a clear vision and available resources. Military personnel upon returning home had time to think and break down problems and recognize market opportunities. Combined with available resources (it was one of the highest savings rate periods because there was a shortage of consumer goods so people saved their money), the opportunities were almost endless.

The Great Recession |Following the 2008 mortgage crisis, entrepreneurship had mixed results. While there was a growth in the number of entrepreneurs, a large number of those businesses failed. The US lost 146,000 employer firms; companies that aren’t just sole proprietorships. There were some bright spots though. The companies to emerge from the Great Recession include: Uber, Slack, Square, Venmo, WhatsApp, Instagram and more. These companies seemed to be the result of pain points of the recession and a lack of good career options.

So where do we stand today?

COVID-19 |It is reported COVID-19 has had similar effects on savings, similar to WWII, and we’re now sitting with a savings rate 62% higher than it was just before the pandemic hit. As many of us know and feel, there just are not a lot of places or things to spend money on. Time will tell if some of these spending habits stick.

What’s more, a 2009 study showed at that time, 57% of Fortune 500 companies were started during a recession or major down years.

So if you take a bunch of people out of work who have some time on their hands, and you take the ability for some portion of them to save money, there might be a few who could actually self-fund and bring new ideas to market. This may even change the landscape. So, will history repeat itself? We will have to wait and see.

The main thing is this: people are amazing. We are a resilient creature and sometimes you just need a forcing function to bring change.

Potential Silver Lining of Disruption

Let’s bring this back to my original statement… should some people never come back from furlough? Again, I say yes.

Perhaps some have started to freely build and have the savings to mirror efforts like in the post-WWII era of entrepreneurship.

Others may be a little more of an interesting conversation. What should leaders inside a company do? Which employees should you bring back? What type of employee should return? Who specifically should you bring back? What’s the pace of bringing them back?

Large organizations may have a unique opportunity with some level of channel control, access to capital and ability to influence buying power. All of those things are extremely useful to early stage entrepreneurs. So why not implement a two-part Return-to-Work plan?

Type 1: Bring back employees who can return to their typical job to fulfill today’s mission and earn value.

Type 2: Bring back some employees, those who have some entrepreneurial spirit starting to emerge, in a different way. Consider starting to support certain furloughed employees by investing in their new ventures, fanning the flame of innovation vs. extinguishing it to get them “back to work”. Give them the freedom to spread their wings, move fast, and connect their new ventures to your current firm. You help them get off the ground and capture some of their strategic value in the process.

Many firms looking to create an innovative culture lean to a Corporate Venture Capital Fund to do just that.  They use all their buying power and influence to be able to stimulate new companies. These are strategic investments as they usually compliment the firm’s core business or help them to move much faster to a new, more innovative space while protecting some level of control through ownership or deal terms.

So, use this approach. If you say culture is standing in your way, why not consider pivoting and actually making a special furlough fund? Steal the best of your big established firm: all of those things you have, make them available to your motivated furloughed group who are already showing signs of growth. Show your trust and make room for them in the open market to make it happen.

While there are certainly a lot of rough edges, my goal is to help you start thinking of how to turn on a corporate innovation function within your organization during this pandemic-driven disruption. I have spent a lot of time discussing and helping companies bridge the outside innovation with the inside innovation and establish successful corporate ventures – so why not make that part of the equation for not only re-opening your business, but also preparing to grow it into a resilient version for the future?  

As always, be brave and lead with no regrets.

Gregg Garrett is the CEO and Managing Director of CGS Advisors LLC, a boutique strategy and innovation advisory firm.  As such he pushes the limits of corporate cultures by developing and implementing unique strategies that capitalize on technology-oriented disruptions to industries and markets.  Previously, Gregg served as chief strategy roles in the Volkswagen Group and Deutsche Telekom and was part of Ernst & Young’s Management Consulting Practice. Gregg is an experienced international keynote speaker & lecturer, and he has recently authored a best-selling business leadership book titled Competing in the Connecting World. He can be reached at greggory.garrett@cgsadvisors.com