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Do’s and don’t’s of downsizing

Automation business analyst Jim Pinto reveals the rules of redundancies.

In this recessionary business environment, many employers are being forced to lay off employees to reduce costs. Done poorly, this can bring devastating long-term results. Here’s my own considered advice.

Downsizing is a serious commitment with long-term consequences. Take a serious look at alternatives: early-retirement incentive plans, voluntary exit incentives, work-sharing, cut-backs on the use of overtime or temporary staff, company-wide pay cuts, short-weeks, reductions in benefits and entitlements, hiring freeze, reducing head-count through attrition, retaining and moving staff between areas. Involve all employees in the review of all the alternatives. Everybody should understand the objectives and feel part of the process.

Weigh the potential costs of downsizing. It can often be an expensive decision when you start calculating consulting and attorney’s fees, unemployment claims, severance pay or possible litigation. Beyond raw costs, layoffs affect morale among the remaining employees, which affects continuing performance.

Determine the types of work that can be eliminated; the functions, the people. Review documented performance, and move good people to replace poor performers. Forget narrow job-functions — good people like the challenge of change.

Focus on key people — the positions and talent that must remain. What does the organisation need for the future? What areas will be most profitable? Who are the emerging leaders? What type of talent will help get the company through the rough times, and back to growth and profit?

Hence it has been decided that a layoff is imperative, establish communication strategies — for those being laid off and those that remain. Include outside stakeholders: customers, suppliers, shareholders, local community. Before and during a RIF, transparency becomes more important than ever.

It’s important for managers to develop an open dialog with their teams, and answer any questions as honestly as possible. Each person should get a private meeting with a manager to hear the news.

The separation package should include a mix of benefits and severance to support people while they look for a new job. Try to provide assistance to help those affected find work. When possible, offer career transition support and access to Employee Assistance Programs (EAP). Provide a financial safety net and outplacement services. This also sends a message to current employees that the organisation takes care of its people, even in the most challenging times.

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