Frequent Downsizing Blunders

Six Best Practices for Doing It Right

RIGHT VIEWPOINT™

In the changing world of work, the one constant is the Parts of the following article have
been extracted from “Employment
need for an exceptional workforce –undoubtedly an Downsizing and Its Alternatives:
organization’s most important asset. How this asset is Strategies for Long-Term Success,”
Wayne Cascio, 2010. The Right
managed spells the difference between success and Management-sponsored paper was
failure–regardless of the economic environment, industry produced by the SHRM Foundation’s
Effective Practice Guidelines series.
or geography, size or earnings. It is reprinted with permission.

Increasingly, the demands and composition of the workforce are shifting in

response to economic, social, political and demographic trends. Given growing
shortages in skills needed in the workforce, as well as the scarcity of leadership
talent and growth in individual choice, it has never been more challenging to
effectively manage a workforce.

“Downsizing has become a fact of working life as companies struggle to cut

costs and adapt to changing market demands. It is often implemented dur-
ing economic downturns as a reactive, tactical action. The most successful
organizations, however, use downsizing more strategically as part of an overall
workforce strategy. Layoffs become just one tool in a portfolio of alternatives to
improve firm performance.”1

1
Employment Downsizing and Its Alternatives
PRACTICES TO AVOID WHEN DOWNSIZING:
WHY DO COMPANIES USE
SIX COMMON BLUNDERS OUTPLACEMENT WHEN DOWNSIZING?
While downsizing can be an appropriate tool in certain situations, making the
following mistakes virtually guarantees that an organization will not reap the
intended benefits from a reduction in force 2:
49%
71%
1. Using downsizing as a first response rather than a last resort.
Employees and labor costs are rarely the true source of the problems facing 49%
an organization. Workers are more likely to be the source of innovation and
69%
renewal. Anyone can lay off personnel, cut budgets and change an organiza-
tion chart. It takes true genius and creativity to grow a business. 67%

2. Failing to change the way that work is done.

Burnout and stress are typical by products of simply taking the same amount Top 5 reasons for offering
of work and loading it onto fewer workers. outplacement worldwide:
■ It’s the right thing to do...............71%
3. Failing to involve workers in the search for ways ■ It sends positive signals
to reduce costs, waste and inefficiencies. to remaining employees.............69%
■ It ensures former employees
Employees on the ground may see more clearly than the CEO where
potential savings are. Embrace and encourage everyone’s involvement. receive training needed to
transition quickly.................................67%
■ It helps reduce threat
4. Ignoring the effects on other stakeholders.
of litigation................................................49%
The ripple effects of downsizing can be substantial—touching customers, ■ It makes good
suppliers and the local community. Partner with customers, suppliers and business sense......................................49%
even vocational-training providers to find solutions that mitigate such effects.
Source: Right Management study of “Severance
Practices Around the World” involving more
than 1,500 responses from 28 countries and
5. Underestimating the damage to a strong company culture. 19 industries.
Employee morale is the first casualty in a downsizing. Long-term conse-
quences of altering the work environment include increased voluntary
turnover and decreased innovation.

6. Failing to evaluate results and learn from mistakes.

Downsizing is generally not a one-time event for most organizations.
Listen and learn from managers, survivors, customers and others in order
to improve the processes and outcomes the next time.

2
Employment Downsizing and Its Alternatives

2
 CHECKLIST: WHAT TO LOOK FOR
IN AN OUTPLACEMENT PROVIDER

TABLE-STAKES: BASICS YOU SHOULD EXPECT FROM ALL PROVIDERS

Relevant Experience
FF H
 eritage, geographic breadth of reach, and specific experience
with companies that are your size or in your industry
FF Consistency in how services are delivered
FF Financial stability and loyal stakeholders

Excellent Quality
FF Regular, systematic client and candidate satisfaction measures
FF Satisfaction ratings in excess of 90%
FF Credible reputation
FF Proof of service effectiveness

DEAL-BREAKERS: SUPERIOR SERVICES FROM THE BEST IN THE INDUSTRY “The most successful
Meaningful Results and Accountability
organizations, however,
FF C
 ommitment to staying connected with separated employees until they
achieve their career goals, regardless of outplacement program length use downsizing more
FF C
 ustomized tools and resources to meet the unique career interests and needs of strategically as part of
those separated employees so they become viable candidates for new job prospects
an overall workforce
FF M
 anagement tools for outplacement reporting, implementation,
tracking, satisfaction and ROI strategy.”
Innovative and Customized Solutions
FF Commitment to creating ongoing service enhancements and differentiators
FF Professional consultants with specialized areas of expertise
FF Dedicated resources to uncover local market job leads and opportunities
FF T ailored programs aligned with individuals’ choices and needs in how, when,
where and what services are delivered
FF Faster engagement in the outplacement program
FF E
 asy-to-use and accessible collaborative online tools to facilitate connections to
coaches, network contacts, career management resources and job opportunities
FF F acilitated connections to people, research, information and the
“hidden job market”
FF Choices about career options, program lengths and flexible delivery modes

3
BEST PRACTICES FOR MANAGING THE DOWNSIZING PROCESS
Effectively managing the process of downsizing is just as important as defining
appropriate criteria for downsizing decisions. The following is a list of sound
professional practices for the downsizing process 3:

1. Be transparent about the current conditions that the organization

faces and the potential impact on the workforce.
Employees want to hear the truth, and they want to hear it from the CEO.
Provide regular updates at least every four to six weeks, including reports
on year-over-year revenue, net income, current business strategy and future
prospects. Invite employees to ask questions and raise concerns. People who
know what is going on can be part of the solution. And being transparent
builds credibility.

2. Treat laid-off employees with respect and sensitivity. “Workers are more likely to
Give soon-to-be-terminated employees plenty of advance notice. Be sure
that immediate supervisors— not HR professionals—deliver the news of the be the source of innova-
layoff to affected employees and that they do so in private. The immediate tion and renewal. Anyone
supervisor must be able to make the business case about the need for layoffs
and the criteria for dismissals. Allow employees to vent and always treat can lay off personnel, cut
them with dignity. The role of HR in this situation is to listen and to empa- budgets and change an
thize, not to argue. Finally, create a severance plan, including outplacement
services, that provides tangible economic benefits and reflects management’s organization chart. It takes
compassion and understanding of the impact of the termination. true genius and creativity
3. Ensure that procedures used to make decisions
to grow a business.”
are seen as just and fair.
When laid-off employees perceive downsizing procedures to be fair, they
tend to file fewer claims of wrongful termination, and voluntary turnover
among remaining employees is reduced. Fair treatment has been
demonstrated to result in reduced stress and increased performance,
job satisfaction, commitment to an organization and trust.

4. On the day of discharge, give employees options

on how they want their exit handled.
Allow workers a choice regarding when and how to collect their personal
things and say their good-byes. Let them depart with as much grace and
dignity as possible. Rather than let an unwarranted fear of sabotage
govern the exit process, use sensible security measures. How these
employees are treated will impact your organization positively or negatively
for a significant time.

3
Employment Downsizing and Its Alternatves

4
5. Give survivors a reason to stay and new hires a reason to join. About Right Management
Explain how the decision to cut staff is necessary for the organization’s Right Management (www.right.com) is the
long-term health. Give survivors hope by describing future business plans, talent and career management expert
within Manpower, the global leader in
targets and details. Encourage everyone to participate in creating the future.
employment services. Right Management
helps clients win in the changing world of
6. Carefully examine the impact of downsizing on all HR systems. work by designing and executing work-
Recognize that downsizing is just one tool in a portfolio of strategies to force solutions that align talent strategy
improve firm performance. That portfolio includes workforce planning, with business strategy. Our expertise
staffing, compensation, performance management, training, job safety spans Talent Assessment, Leader Devel-
and employee relations. opment, Organizational Effectiveness,
Employee Engagement, and Workforce
Transition and Outplacement. With offices
in over 50 countries, Right Management
partners with companies of all sizes. More
than 80 percent of Fortune 500 com-
panies are currently working with us to
help them grow talent, reduce costs and
accelerate performance.

© Right Management 2010.

All Rights Reserved.
www.right.com 1.800.237.4448

Follow us on twitter:
twitter.com/rightupdates

Like us on Facebook:
facebook.com/rightmanagement

Subscribe to Talent@Work
right.com/blog