With rising unemployment and firms in a wide number of industries slashing jobs, companies need to have in place a clear strategy for redundancies, which targets job cuts with the future business strategy in mind.
It is vital to understand the repercussions of any possible cuts, as removing the wrong jobs or employees could have a long-term negative effect that outweighs the short-term cost benefits. But targeting the right redundancies will reduce the risk and severity of any negative impact, and could actually help strengthen the organisation in some instances.
Segment the workforce
A useful strategy for achieving this is segmenting the workforce, allowing for a deeper understanding of the different roles within a company before making any decisions on job cuts.
Segmenting the workforce in a structured way can help pick out the roles that are critical to the organisation’s future success and protect them, as well as identifying roles that are less critical in areas that can be restructured.
Getting this right will mean once the economic downturn ends or the company begins to grow again, the organisation will be able to capitalise and benefit from economic recovery, hopefully gaining market share from competitors.
While job segmentation is carried out in many companies, the process is often hurried, and it seems to be even more so at the moment as the recession deepens and senior managers begin to expect instant results.
Organisations should take the time now to properly segment the workforce, and understand where job cuts could come should it become necessary. The recommended approach is to be more considered and to better research ‘job families’, with greater preparation allowing for more targeted cuts. It should not be one-size-fits-all.
Those responsible within the organisation for considering these issues will need to follow a particular process to ensure they do not risk making cuts that will hit revenue or adversely affect business in the long term.
A strategic profile needs to be determined from the business plan to understand the organisation’s primary means of growing and competing. Coupled with this will be an analysis of the business’s strengths, weaknesses, opportunities and threats, and identifying the capabilities required to execute the desired strategy.
Once this has been established, the next stage is to identify the various job families that most directly contribute to the strategy by analysing the relationship between the performance and the perceived value of each job family.
The output of this stage is to classify each job family into one of four categories.
Certain strategic job families are critical to long-term competitive advantage, requiring specialised skills or knowledge. Some are considered core to the business, unique to the company and fundamental to delivering its products and services. These two categories need to be protected if possible. Others, however, are more of a support role, where alternative staffing strategies and/or reducing headcount may be appropriate. Finally, there are non-contributing roles – skills that no longer fit with the company strategy – where job cuts make sense.
By identifying which job families fall into each of these four categories, decision-makers can help determine the job families the organisation should protect, streamline, outsource or cut. Within a job family, certain jobs may also be more critical than others, and this should also be taken into account.
It is also vitally important to mine data to better understand how staffing levels vary by job family, location, grade, and business unit, taking into account any benchmark staffing levels that are available.
This analysis could provide insight to help restructure part of the organisation, leading to savings. If job cuts are identified and necessary, it is important to look closely at the workforce to ensure key talent is retained during the process. Make sure you do not cut staff in an area of projected high growth.
Towers Perrin recently worked with a global airline that had identified the need to cut costs, but at the same time saw an opportunity to grow its premium flyer business, which operated at a higher profit margin.
We worked with the company to help create a new Customer Experience division, while cutting pilot and flight attendant jobs. Overall the company’s operations shrank as a result, and costs were cut, but the remaining business was better placed to gain market share in the more profitable premium flyer business.
By taking the extra time to fully research the business and segment the roles within it, decision-makers will be better able to communicate the reasons for any cuts.
If cutbacks must be made, introducing transparency and addressing employee concerns will be the key to managing levels of engagement and offsetting any dissatisfaction felt after the cuts are made.
For instance, an employee will appreciate far better why changes have been made when they understand the strategic reasons behind them, and see that a rigorous process has been followed by the company in making the decisions. However, avoiding the issue will only serve to breed more resentment.
Segmentation of the workforce is a valuable strategic and business tool. A company that has taken the time to analyse and segment its workforce in this way will have a headstart over its competitors when the economy begins to recover.
Do’s and don’ts of targeted job cuts:
take time to analyse and segment the workforce before performing targeted job cuts.
make a strategic overview of your business plan.
identify the capabilities required to execute the strategy.
identify the critical and non-critical roles.
analyse staffing data against external benchmarks where possible.
effectively communicate the reasons for any redundancies made and the strategy behind them.
cut jobs that will directly impact your revenue or are critical to your organisation’s long-term success.
be pressured into making quick cuts without fully understanding the repercussions.
cut high performers and key talent.
wait to begin analysis – start now to be prepared.
take too much time to carry out the analysis as a rapid response is still likely to be needed.
avoid communicating about any major redundancies.
by Chad Daugherty, principal, professional services firm Towers Perrin
IRS Conference: Flexible Resourcing
Date: 12 March 2009
For more information on how best to target your resources in the downturn, Personnel Today’s sister organisation IRS is running a conference on different approaches to reviewing and reducing employee hours, from cutting or suspending pay to unpaid holiday leave. Speakers include Neil Carberry, head of pensions and employment at the CBI, and Elena Crasta, employment rights and EU policy officer at the TUC.