PLANNING FOR STAFF REDUCTIONS
Here is the second installment of our weekly series Departing with Dignity, a conversation between Higher Landing Founder & CEO Jackie Rafter and Brian Hallamore, formerly an HR Executive with Imperial Oil. This week, Jackie and Brian discuss the process by which organizations plan to reduce staff and the common pitfalls that often come along with those decisions.
For part one of this series, click <HERE>.
Jackie Rafter: Let’s start at the beginning. How does an organization start down the path of staff reductions?
Brian Hallamore: It’s important to keep in mind that the beginning of the planning process is often not related to people at all. It is usually the result of weeks, or more likely, months of deteriorating financial results. Often the organization has already responded by cutting “easy” costs – discretionary spending, stopping projects, etc. But these haven’t done the trick, or the factors contributing to the poor financial situation have deteriorated to the point that more drastic cost reductions are required.
Alternately, management may have completed a strategic reassessment, or can become concerned about the organization’s performance, again over time, and initiate an improvement initiative.
Rafter: This seems pretty obvious, so why point it out?
Hallamore: Well these points are important for a couple of reasons. First, all of these items are visible to everyone – management and employees. Second, these early decisions and how they are handled are important. Taking the first point, employees are not in the dark about what is going on. This is a good thing in that the organization can use it to garner support later for more drastic changes, provided it communicates well.
Also, if the HR department is at the table at the very beginning or on an ongoing basis, it can positively influence how some of these early decisions are made and executed. Management's credibility can be enhanced or harmed in these early stages, and this can become critical later when more drastic actions are taken. Finally, what this implies is that there isn’t a sudden “ah-hah” moment. Rather, the realization among senior management about where they are and what they might have to do, develops over time. Since the starting point isn’t people reductions, management can become so focused on cost reductions that they basically forget about their stated values about people and head down a rabbit hole from which they may never return. What I’m saying is it is very easy to become exclusively focused on reducing costs to the point where considerations about how employees are treated, which aren’t quantifiable, become secondary or are lost altogether.
Rafter: So, are there some ways to address this and not go down that proverbial rabbit hole?
Hallamore: Sure. To begin with, assume the worst – that staff reductions will occur at some point. The starting point then is the organization’s values. Taking some time to affirm these at the beginning, and what they mean for staff reductions generally is a great way to start. Another key element is to be clear about what is going to occur and why. It is critical to have spent sufficient time here so that management can clearly articulate the case for change, what alternatives were considered, and the process and timetable for staff reductions. This needs to be boiled down to something like an “elevator speech” once the case for change has been articulated, and it needs to be real, not full of euphemisms and jargon.
Next, the staff reduction effort needs to be treated like any major project the organization would execute. It needs to have a few dedicated people, and it will need to have very well detailed processes, policies and programs, and training. Most importantly, it needs to be designed for those employees who leave the organization as well as those who remain. It deserves the attention that any major project would receive if for no other reason (and there are other reasons) than the organization has probably not spent this much money on an employee-related initiative in a very long time.
Rafter: This seems pretty clear and intuitive. So, why doesn’t this sort of approach and detailed planning happen more often?
Hallamore: There are many reasons for this, but one of the dynamics that people don’t always recognize is that senior management, who ultimately are responsible for whatever is going to happen by way of reductions, have generally had a great deal of time to get their heads around what will happen, long before the rest of the workforce. They have had lots of time to consider options for a new organization, appreciate the significance of the cost challenge, etc. As a result, senior management is operating with a different mindset to everyone else and because they can see the end game, can easily see the steps required as being on the one hand unpleasant, but on the other hand a straightforward means to an end. This results in overlooking both the complexity of undertaking a significant staff reduction and the productivity hit that will occur in the weeks leading up to the reductions and the months following.
Rafter: What are some other considerations?
Hallamore: Many are specific to each organization, but a key one is this. While you can always reduce the number of employees, getting rid of their work is far more difficult. Doing one without the other is pointless because those remaining will start to burn out and look for work elsewhere. So working the detail as much as possible about what work will disappear and how it will disappear is critical. A great fallacy is that in times like these employees have no choice but to stay and “work harder or smarter” because there is no other employment option available. This is simply not true, and a view such as this one can lead management to take employees for granted, which only harms productivity even more. Your best people always have employment options, because there will always be a competitor who will high grade their organization if they can.
Rafter: Many large-scale staff reductions have been handled just like terminations for performance reasons. What is your perspective on that?
Hallamore: Treating these two types of employment terminations the same is inappropriate for a number of reasons. To begin with, virtually none of the large-scale staff reductions are because of individual non-performance, even if the organization biases the terminations towards their lower performers.
The rationale for these reductions is pretty simple – to maintain and enhance the financial viability of the organization. Prior to reducing staff, all of the work being done was valued by the company. If it weren’t, it would have been stopped or redirected long ago. So on Day ‘A’ you have everyone working away, entrusted with the organization’s assets. On Day ‘B’, the organization announces it will no longer do a large number of certain tasks. It no longer has enough work for the number of employees currently on the payroll. You could be the best performer in your area, but if your work is no longer required, you will no longer be employed.
So, there is no actual performance issue here, and no reason not to continue to entrust these same employees with work for at least a few days, and let them leave with some dignity and respect, as I mentioned previously.
Rafter: There seem to be a number of forces that can work together and cause problematic approaches to staff reductions.
Hallamore: Yes there are, so it is critical that a real business case is built for taking a different approach. Ideally this would be done by the HR department and could include discussions with organizations who have tried both approaches in the past, contacting retired managers and HR employees with prior experience in the 1990’s, consulting firms, and so on. In the end, there needs to be a solid business case that addresses the productivity impacts of reducing staff one way versus another. Some of the productivity impact is quantifiable, and some of it is not, but if you can establish strong credibility based on your information sources for the items that are less quantifiable, it should be possible to successfully influence a better approach.
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