Many lessons have been learnt from the harsh methods used by employers
cutting staff in the 1990s’ recession.
So how do today’s employers face up to the task of downsizing,
especially the effect it can have on remaining staff? Jane Lewis reports
Corus, Vauxhall, Ericsson, Motorola, Marconi… you don’t have to look too far
to see that redundancy is squarely back on the agenda in many sectors – and
many more are bracing themselves for the return of the corporate axe. With
2,000 jobs already lost in the City this year, some commentators believe a
second wave of cuts is inevitable – something’s got to give, they argue. For
example, staff numbers at global giant Merrill Lynch rose from 38,300 in 1991
to 72,000 last year as the bank expanded around the world. "We were hiring
people all over the place, often in completely irrelevant places", one
Merrill banker told the Financial Times. "When I look down the directory I
can see almost 5,000 names that could go without even trying."
Inevitably comparisons have been drawn between this latest round of cuts and
the often vicious corporate blood-letting that characterised the UK’s last
major recession of the early 1990s.
The central question is what lessons have been learnt from that experience.
One difference already emerging is timing – evidence from the US suggests that
many of this year’s lay-offs were taken as preventative measures rather than as
reactions to existing troubles. Sophisticated IT systems mean companies were
able to forecast the coming slowdown faster and take "ameliorative"
action to counter it. One of the easiest ways for chief executives to calm a
nervy stock market in the short term is to announce a cost-cutting programme
with lots of redundancies.
But what is the danger of cutting too deeply? How many companies emerged
from the last recession too emaciated, demoralised and drained of core skills
to take proper advantage of the eventual upturn? Some never recovered. It will
be interesting, this time around, to see how many business leaders are prepared
to stand up against market pressure to slash and burn. "They should tell
investors true shareholder value will be built by sticking to our guns, and not
making unnecessary, damaging cuts to the very heart of our business," says
New EU rules on employee consultation – due to become law in 2003 – have
already taken much of the "knee-jerk" element out of redundancy.
"Employers know the penalties are greater and the likelihood of employees claiming
they haven’t done it properly is stronger," says management consultant
David Brown of Collinson Grant. No-one needs reminding that a badly executed
redundancy programme can do serious damage to a company’s outside reputation
and internal morale. Lay-offs, like ghosts, can haunt for years.
A clear difference this time around is the emphasis companies are placing on
countering the negative effects of so-called "survivor syndrome".
While acknowledging the need for compassionate and fair treatment of those
leaving, there is awareness that the people who really count are those left
behind to shape the new organisation. "In plain language you look after
the winners more than you do the losers," says Martin Goodman, senior
consultant in Watson Wyatt’s Human Capital practice.
Surveys suggest HR practitioners bel-ieve they have got better at handling
the implications of redundancy. According to a study of City employers
conducted by Meridian Consulting, 75 per cent of senior HR managers believe
their organisation is better equipped to realign itself with the current
economic downturn and manage subsequent changes than it was five years ago.
Indeed, most large organisations now plan the redundancy process with all the
precision of a military campaign.
For those that have been through the process several times before, it is
almost a case of business as usual. But that in itself could be a problem.
Could it be companies have become so proficient at the science of lay-offs they
have forgotten there’s an art to it as well? "You can’t pretend it’s
business as usual – it isn’t," says Brown. "A new sense of momentum
has to be created". Here we offer a three-stage guide to finding the right
HR can play a key role in ensuring a smoother redundancy process simply by
sowing the right seeds. If staff are educated and informed about the running
state of play in the company and its markets, any future blow will at least be
tempered by a degree of forewarning.
Telecoms giant Nokia – which has not yet suffered the redundancies that have
afflicted many other players in the sector – has nonetheless readied itself for
any situation. As HR director Lynn Rutter recently explained, "HR can
support a culture where change is normal [and] help staff to recognise that
change is nothing to fear." Certainly the widespread acceptance that the
job-for-life culture has long since vanished will make things easier for
employers this time around.
Similarly, when planning redundancies the experts agree the first thing to
do is to communicate a clear rationale for the cuts. Although warning of
possible lay-offs may create anxiety, it does give employees time to prepare
themselves emotionally and financially. The problem, as Brown at Collinson
Grant points out, is while most individuals will accept the necessity of cuts,
many will be surprised and hurt to find themselves selected.
The new rules on consultation are clearly already having a big impact on how
companies go about planning redundancies, although cynics have argued that even
lengthy consultation rarely changes the outcome. But if the process is to
retain any credibility, employers must be seen to be open to suggestions. Corus
is a recent case in point. Countering union criticism that the three-month
consultation period had been a waste of time (Corus took up none of the five
proposals submitted by unions), HR director Allan Johnston claims the process
has nonetheless proved useful in terms of how to deal with the impact of
redundancies on staff.
Consultation could well prove its worth in the tricky business of selecting
who stays and who goes. Handling redundancy selection entirely through the HR
department is a common mistake. You must ensure that division managers are
closely involved, so you don’t end up laying off an employee with irreplaceable
"There’ll be some people you’ll know are key to the organisation,"
says Martin Goodman at Watson Wyatt. "But it is the people in the middle
who cause the most doubt and very often organisations shoot themselves in the
foot by not having collected reliable information on individual performance.
You can have two people with identical skills on paper – and you haven’t the
data to decide between them."
Finally, don’t forget to prepare the people who will be breaking the news.
Managers need to know how to convey calmly that the decision is final, but not
personal. This may sound obvious, but surveys show that surprisingly few firms
have taken this elementary step.
Everyone has a horror story to tell about their own – or someone else’s –
redundancy from hell. In the bad old days, says Brown, companies were
particularly prone to go for the short, sharp shock (everyone comes into work
and is issued with a black bin-liner) in the interests of maintaining
confidentiality in a competitive commercial environment.
Even leaving aside the cruelty of this approach from the point of view of
the individuals concerned, it can also be shown to have a devastating effect on
those left behind.
Nonetheless, the issue of confidentiality is clearly still key. Recent
high-profile redundancy programmes in the UK have all highlighted the necessity
of getting news to staff personally before they hear it elsewhere.
Again, the Corus example is telling. Although the company managed to ensure
that most of those targeted for redundancy heard the news from management,
there were inevitably those who didn’t. And these were the cases that grabbed
As to the nuts and bolts of the process, it is widely agreed that it is
better to make any announcement early in the day – and early in the week.
Avoid holidays, keep the meetings short, emphasise the business rationale
and address employee concerns. It is always best to ensure that an employee’s
manager is on hand to break the news: don’t leave the job to an anonymous
Above all, says Goodman, companies need to strike a difficult balance
between showing the compassion due to anyone made redundant, while maintaining
a degree of sang-froid – "As an HR practitioner you have to divorce
yourself emotionally. Losing a job can undermine a person’s status at home and
in society – it can be close to a death experience.
"But organisations can’t afford to take that view. You’ve got to look
to the future."
A good outplacement agency can make all the difference when it comes to
bridging this gap. The success of outplacement companies used to be determined
by how quickly they found re-employment for those on their books.
But "services now are very different", says Tricia Dicks, managing
director of management consultancy HDA. Look for one with the flexibility to
include career management, mentoring coaching and retraining – and counselling
One lesson that companies appear to be learning from past experience of the
redundancy process is the danger of overlooking the needs of those employees
who remain. Put bluntly, you need a survivor programme. "A lot of HR
directors and CEOs have looked at past downsizing programmes and discovered
that the cutbacks didn’t work," says Dicks. "It didn’t work because
the people side of the equation wasn’t thought out. So the question is how do
we help those managers who are staying behind?
She claims companies are increasingly factoring this issue into their
outplacement budgets – a good programme should accommodate survivors as well as
leavers. Those remaining will need to know if their jobs have changed and
whether they’re expected to do the work of those laid off.
Above all, companies need to communicate a new vision and highlight future
prospects. Redundancy has to be shown to be a positive thing. As one
commentator concludes: "Part of laying off people is recruiting those who
Case studies: Vauxhall
Vauxhall pulls back from a daunting task
It has been an interesting six months at Vauxhall to say the least. In
December the company announced plans to close its Luton car plant – a move due
to be completed in March next year. The decision was unavoidable – taken
abruptly because of a sudden shift in the car market – but its suddenness
surprised even senior management, says Bruce Warman, director of personnel at
Of the 3,000 "hourly" workers at the Luton plant, 2,000 will take
early retirement or voluntary separation and 1,000 will go to other plants.
Half the 350 salaried workers at the plant also face redundancy. But "we
were lucky", says Warman. "We had a plant next door [van-plant IBC]
which was expanding."Others are going to Ellesmere Port."
Because the move was so sudden, Warman had little time to plan and a
combination of union and public outcry made it difficult to get down to the
nitty-gritty of consultancy. "Initially the reaction from the unions was
to stop the closure. If you are having that battle you can’t consult on how
you’re going to do it."
But once the unions accepted the inevitability of the move, some solid
progress was made. Vauxhall modified its transferral package in line with union
recommendations, for example. Vauxhall has also been working closely with the
Employment Service and management consultants to handle outplacement.
Communication has certainly played an important part in the process –
Vauxhall pioneered a daily newsletter and "look/see" trips to the IBC
Meanwhile, a gradual wind down (moving double shifts to single shifts and
switching from a five-day to four-day working week has freed up time for staff
"At the beginning of the year the situation looked daunting in the
extreme," says Warman. "But somehow or another we have managed to
pull that back."
Another case study on how HSA, the cash-plan industry health leader,
extended a caring role to its staff when its workforce was radically overhauled
appears on the Personnel Today website. See Healthcare Giant Opts for
Outplacement Help, at www.personneltoday.com/features
Clearly explain the actions taken and the reasons for them
Swot up on the new consultation rules
Prepare managers who will deliver the message
Speak plainly. Don’t use euphemisms and don’t make promises
Emphasise it is not personal
Understand the impact that lay-offs will have on "survivors"
Be positive. Look to the future