Sometimes, no matter how hard you try, there is no alternative but to reduce your workforce. So, what’s the best way to approach every boss’ worst nightmare?
You have two priorities – your business and your employees. Most of your staff should understand that without the first, the second is a redundant concept. That won’t stop them feeling upset, confused and uncertain when you make job cuts. And they could be prone to bitter resentment.
So, first, you need an objective selection criteria. Inevitably, your first consideration will be to identify the employees you need if you’re to continue trading. But there are always likely to be either/or choices. Your workforce may be familiar with the phrase ‘last in, first out’. Many see this as ‘fair’, but you should be wary of this approach. “It could be discriminating on the basis of age. It also doesn’t necessarily give you the best people,” warns Acas’ Stewart Gee.
As well as ageism, there are other forms of discrimination you could easily fall foul of, such as disability, race or gender. As Gee rightly queries, are you disproportionately cutting in one particular area from the pool?
“Automatically ‘unfair’, says Bindmans LLP solicitor Emilie Cole, would be making employees redundant on the basis of “assertion of statutory rights, whistleblowing, and health and safety complaints, all of which are hot topics at the moment”. If you have concerns about any of these, seek professional legal advice.
You’re on safer ground with qualifications to do the job, performance measured year-on-year and punctuality. Attendance is also acceptable, but use this with caution if absence was enforced or unavoidable. It will help if your company has carried out performance appraisals each year to support your decisions.
Death by a thousand cuts
In an ideal world, you’ll get redundancies over in one go. As Chris Phillips, of talent management company Taleo, says: “Don’t commit ‘death by a thousand cuts’. Plan for it well and do it all at once.” Stephen Bentley, chief executive of Granby Marketing Services, has been through the redundancy process already. He engineered the company’s turnaround after it hit trouble.
“The handling of the redundancy was all important,” he recalls, “and we elected to use a points-based system rather than ‘last in, first out’, which would have penalised the business. The matrix we developed included length of service, attendance, skills, quality and aptitude. We reduced the overall staff number from 82 to 65 and left ourselves in much better shape to develop. We now employ 117 full-time staff.”
Breaking the news
Ideally, you’ll have communicated the likely timescale beforehand, provided the appropriate period of consultation for those affected, and used it to consider alternatives and to listen. As Ann Bevitt, partner at law firm Morrison & Foerster, says: “Consultation is important, and a failure to do this can result in some stiff financial penalties.”
A round of closed-door meetings with key staff members are a giveaway. If you’ve followed last month’s advice, the workforce will at least feel informed, but people still don’t need to see it unravelling before their eyes. Clear communication is crucial. Don’t soft-soap it, don’t waffle, don’t do it by email or text message, don’t do it on a Friday, and don’t let it seep out through the rumour mill.
When outlining the reasons for your decision to the individual concerned, be objective and reiterate how you’ve come to the decision, assuming you had communicated this when the likelihood of redundancy was first raised. Also remember to outline the form of remuneration they will be entitled to. Redundancy pay is one week for each year employees have worked for you up to 12 years. As Roger Byard, partner and head of employment at Cripps Harries Hall LLP warns: “At all stages of the process, the outcome of any oral meeting should be confirmed in writing either by letter or email.”
Managing the aftermath
Once the ‘victims’ know, address the remaining team as early as possible to make you less vulnerable to negative responses from employees, shareholders, customers and the public, recommends entrepreneur David Leyshon of engineering recruitment firm CBSbutler. Then it’s time to move on. You need to make a decision about how you’d like them to serve their notice. “Is their continued presence in the office the best thing?” asks Acas’ Gee.
It’s hard to predict how likely they are to perform and whether their presence will have a negative impact on the remaining team members. If you do require them to work their notice, Gee suggests it’s worth being flexible and offering a little time off with pay to pursue other opportunities. The American entrepreneur Richard Titus, who headed up digital operations for the BBC until recently, called competitors to ascertain whether there may be positions going for staff he was about to release. It paid dividends later when many of the employees returned to work for him.
Your actions at this point will produce a ripple effect. Managing the aftermath cannot be underestimated. Alison Doyle, director of HR Capability at Henley, advises tailoring your response to each individual and taking their feelings into account. This may help offset the slump in motivation and morale, reduced loyalty, trust and scepticism, which results in a continued high staff turnover.
According to Taleo’s Phillips, who cites Herman Trends, voluntary turnover of key performers has gone from 10% to 25% in the past 12 months.