Managing Outflow

1
Managing Outflow

• Layoffs

2
HRs Unspoken Challenge
Roles of HR

• Attract
• Motivate
• Retain
• REDEPLOY

3
Views of Layoffs

• Layoffs are now radical first aid for
  healthy companies hoping to reduce costs and
  shore up earnings by reducing head count
• (White Collar Blues, 2001)

4
Layoffs and Profit

• Profitability increased in half of firms
• 5 increase in stock price of downsized firms vs
  34 increase in matched firms
• 10 layoff ? 1.5 reduction in costs
• Separation costs
• gt50 of companies rehire employees as consultants
• Loss of human capital

5
Views of Layoffs

• CEOs who want to keep their jobs must be
  willing to cut others when earnings decline.
  They must take money away from those who built
  the company and give it to those who financed it
  (Lewis, 2001)

6
Views of Layoffs

• So far the layoffs seem to be giving
  companies the flexibility they need to maneuver
  through the downturn. The burning question is
  this At what point do layoffs make consumers
  nervous enough to quit spending and bring on a
  recession?
• (White Collar Blues, 2001)

7
Distinguishing Symptoms, Problems, Causes,
Solutions

• The symptom may be low profitability
• Whats the underlying problem?
• excessive costs?
• inadequate revenue?
• Whats the cause(s)?
• What are potential solutions?

8
Whats the Goal?

• To maintain profitability, growth, survival
• NOT to cut costs, reengineer, or lay-off
• Means-End Inversion presenting a potential
  solution as the problem
• How do we effectively layoff 17 of our
  workforce
• vs.
• How do we maintain competitiveness

9
Alternatives to Layoffs

• Wage/Hiring Freezes
• Attrition
• Voluntary retirements
• Redesign/reengineering/redeployment

10
A Three-Step Approach to Layoffs

• Restructuring
• Reselection
• Deselection

11
Strategic Restructuring

• What is/will be the mission of the firm?
• What are the core tasks/competencies?
• What activities truly add value, and what
  activities are peripheral?
• Peripheral activities should be the focus of cost
  reduction
• Eliminate
• Outsource
• Re-design

12
Strategic Restructuring

• Review efficiency of core functions
• Project future demographics and skills
• Take steps to retain key people/skills
• Maintain critical infrastructure
• e.g., many HR functions become more critical
  (e.g., outplacement, training)

13
A Three-Step Approach to Layoffs

• Restructuring
• Reselection
• New job descriptions, new performance attributes
• Internal recruitment/selection/placement
• Deselection

14
Deselection

• Companies have become so proficient at the
  science of layoffs that many have forgotten
  theres an art to it (Boyle, 2001)

15
Critical Implementation Issues

• How many to cut
• Corporate anorexia
• Cut deep the first time
• Where to cut
• Across-the-board cut vs. strategic
• Who to cut
• Seniority performance critical skills
• Communicating the decision
• Group or individual announcements?
• How much explanation?

16
Keys to Successful Layoffs

• Involve all key players
• HR, Finance, Legal, Operations
• Including employee involvement
• Establish objectives and timetable
• Plan for one major cut to meet objectives
• Plan for costs
• Separation packages
• Lowered productivity in short term
• Effect of customer confidence

17
Critical Implementation Issues Timing the
Announcement
18
Keys to Successful Layoffs

• Clear communication
• Early indications of problem
• Explain business justificationclarify its not
  employees fault
• Articulate new vision/direction
• Timetable and rationale for terminations
• Dont forget the community

19
Keys to Successful Layoffs

• Treat employees with dignity
• Personal delivery of bad news
• Acknowledge feelings, but dont be defensive or
  make promises
• Provide support for those being laid off
• Outplacement, training
• Use of company resources for job search

20
Keys to Successful Layoffs

• Consider needs of survivors
• Fair treatment sends critical signal
• Need clear direction and goals
• Reassure about their importance and future
• Allow time for mourning
• Monitor workload and training needs

21
Keys to Successful Layoffs

• Plan for lowered efficiency in short term
• Retaining critical people
• Clear vision for success
• Golden handcuffs
• Stick With Us Bonuses