Considerations for Companies Facing a Layoff
by Rich Kolodgie, Managing Partner
Employee layoffs are almost always a tough decision for many reasons. Just the human issues alone can weigh heavily but so can the risk of legal action and other negative ramifications of such a decision. The truth is whether the economy is in recovery or recession, change is inevitable and there will be times when making necessary changes in your workforce is unavoidable as well.
Such a weighty decision must be made carefully. Is a reduction in your workforce, or “RIF”, in your company’s best interest? Perhaps you’re involved in a merger where employees performing duplicate work means people will have to go. Or maybe your company just needs to cut costs to stay competitive or more seriously, just to stay in business. Since 2008, such circumstances have become common.
Layoffs aren’t free, there will be costs involved. So ask yourself if the end result of a potentially radical change in your workforce justifies the costs you will incur. Severance packages may need to be developed. The productivity and morale of remaining workers may decline. Consider both the positives and negatives.
In production, your company may need a more flexible workforce that can respond quickly to new product developments than the team you currently have. Maybe the work of a team has become obsolete like secretaries did with the onset of voice mail and other communications technologies. Or maybe one product or service provided by your company is meeting with diminished demand. Any of these factors can lead to a layoff.
Companies that try other approaches to managing their workforces generally achieve better results in the long run. Maybe the downturn your company is experiencing is only temporary. Be careful about laying people off quickly, when business picks back up, you could be short some of your best workers.
Consider a hiring freeze and severely limit hiring for vacant positions. Wages may need to be frozen (many employees would accept this when the alternative is earning no wages at all), hours reduced, overtime curtailed and other budget cuts examined. Consider offering early retirement or voluntary separation. You might be surprised at the number of your workers who are waiting for such an offer.
But when a layoff really is the most practical approach, it’s important to create a system or process through which you and your employees make the best staffing decisions. A potentially far-reaching effort might include updating job descriptions for each position and then requiring your employees to apply for these positions. This will almost surely lead to eye-rolls and cynicism but really, you may have employees whose skills were desperately needed let’s say five or more years ago and maybe they did such a great job that now their work is done.
For anyone still believing in jobs for life, such a concept is foreign or worse, insulting. But this is the 21st century. Be very objective and dedicate yourself to assembling the best team possible for your company’s future, not so much its past. And for those displaced workers, seriously consider offering them outplacement services. They are still your agents and very likely were good employees who carry your company’s reputation with them. Recognize and acknowledge that by assisting them through this job transition.
When making “stay or go” decisions, have a valid reason for each person affected and communicate that. This goes for larger group layoffs too where diminishing sales, loss of a credit line or a merger/acquisition are all valid, business-related reasons.
Check your company’s personnel policies and review past practices. These could be used in threatened (or actual) legal cases. Think through legal implications and prepare for them.
Over the coming weeks, check back for upcoming columns related to this topic. Two are in the works:
- Deciding Who to Layoff
- The Impact of a Coach on Outplacement Services