Damage limitation

Laying off staff is never easy, and companies whose policies assume that such short-term cost cutting is an effective response to...

Laying off staff is never easy, and companies whose policies assume that such short-term cost cutting is an effective response to recession may come to regret it. Monica Seeley trawls the management publications for the latest thinking on how to handle downsizing

For organisations that are re-grouping for the start of 2002, uppermost in many directors' minds is how to continue to manage the business out of the current downturn.

Cutting staff has been the traditional first choice, although a recent survey from Mercer Management Consultants has shown that this may not be the way to future profitability.

The firm surveyed 800 US-based companies, looking at their responses to the 1987-1992 recession: out of 120 that focused solely on cost cutting, 60% failed to achieve profitable growth over the next five years. Why? The authors suggest it is because they were unable to seize any opportunities. Winning strategies involved combining selective cuts with moves to strengthen existing customer relations and keeping an eye on future technological developments.

This line of thinking is supported by Darrell Rigby in "Moving upward in a downturn" (Harvard Business Review, June 2001). Rigby says smart organisations keep a long-term perspective and strive to maintain the loyalty of employees, suppliers and customers. He cites companies such as FedEx and Harley-Davidson, which have "no-lay off" policies. Consequently employees at these companies dig in during hard times, he says.

To survive you need to think counter-intuitively, asserts Rigby. "Assume the downturn won't last and make friends with others who are trapped in the same foxhole." There is a better chance of combating a problem if it is shared so you could, for example, think of asking key suppliers - even clients (internal or external) - if they could use someone on secondment.

Doing the deed
But what if you have to make people redundant? Is there a way which can leave both parties feeling good?

Laurence Stybel and Maryanne Peabody, in "The right way to be fired" (Harvard Business Review, July-August 2001) suggest that it is not about what you say but rather about the culture of the organisation. Many firms still engender a "job for life" culture, although this is probably unsustainable in the 21st century.

Stybel and Peabody propose that on day one you should prepare employees for redundancy by creating an "assignment mentality". Employees will then see their job as a series of projects and career opportunities. At the end of any assignment they should be prepared to look elsewhere for the next one. Employees are then less susceptible to the pain, resentment and feelings of betrayal and rejection that are often associated with being made redundant. Food for thought for the future but where does that leave you now?

Adam Leyland in "His loss could be your loss" (Human Resources magazine, December 2001) suggests how to avoid the top 10 management blunders when planning redundancies. First, "forget the black bin liner", he says. Treat those you are sacking decently and not as disposable resources - survival means managing your human assets.

Second, think carefully before actually getting rid of people. Try to find other options such as a sabbaticals or secondment (an option which some of the big consultancies are adopting). Many people would be delighted to have an opportunity to develop themselves and take an MBA or other degree course at their own expense but knowing they have a job to return to.

Much of Leyland's advice is common sense and not new. For example, he recommends that you avoid "management speak", be generous and invest in the survivors. However, we all know how stress can make even the most rational and compassionate person behave irrationally.

"Ready, aim fire" by David Butcher (Management Today, November 2001) aimed to offer similar home truths, but it was hard to extract the key point from the anecdotes. For my money Leyland offers a good crib sheet on how to create a win-win situation from a potential lose-lose one.

Handing out the P45s is among the most stressful tasks an executive may have to face. Holly Weeks, in "Taking the stress out of stressful conversations" (Harvard Business Review, July-August 2001) reminds us that it can help to rehearse what may be said beforehand, and prepare some responses to employees' likely reactions.

Investing in survivors
Once the deed is done what about those left behind? Leyland cites investing in the survivors as the eighth critical success factor. Some might - quite reasonably - put it much higher up the scale.

Investing in the survivors is all too often overlooked, yet writers and consultants such as David Noer have been urging us to do this for years. They emphasise just how important it is to create a positive culture for

the future survival of the organisation. His book Healing the Wounds still makes classic, thought-provoking reading for anyone who wants to motivate the remaining staff and engage them in constructive forward thinking.

So think twice before you pull the trigger. Try to imagine what the future might hold and what competencies and behaviours you might need. Think about who, regardless of their job title and current expertise, has transferable skills and can cope best with change - these may be the people to retain, to nurture and retrain for a project-based future, where the job is the project.

Useful Web sites
Mercer Management Consulting
: www.mercermc.com
Human Resources magazine: www.humanresourcesmagazine.com
David Noer: www.noerconsulting.com
Management Today: www.clickMT.com
Harvard Business Review: www.hbr.org
This was last published in January 2002

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