Managing Outflow

Layoffs
HR’s “Unspoken Challenge”

Roles of HR:
• Attract
• Motivate
• Retain
• REDEPLOY
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)

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
– >50% of companies rehire employees as
consultants
– Loss of human capital
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)
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)

Distinguishing Symptoms, Problems,
Causes, Solutions
• The symptom may be low profitability
• What’s the underlying problem?
– excessive costs?
– inadequate revenue?
• What’s the cause(s)?
• What are potential solutions?
What’s 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”
Alternatives to Layoffs
• Wage/Hiring Freezes
• Attrition
• Voluntary retirements
• Redesign/reengineering/redeployment
A Three-Step Approach to Layoffs
• Restructuring
• Reselection
• Deselection
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
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)
A Three-Step Approach to Layoffs
• Restructuring
• Reselection
– New job descriptions, new performance
attributes
– Internal recruitment/selection/placement
• Deselection
Deselection
“Companies have become so proficient
at the science of layoffs that many have
forgotten there’s an art to it” (Boyle, 2001)
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?
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
Critical Implementation Issues:
Timing the Announcement
Keys to Successful Layoffs
• Clear communication
– Early indications of problem
– Explain business justification—clarify it’s
not employees’ fault
– Articulate new vision/direction
– Timetable and rationale for terminations
– Don’t forget the community
Keys to Successful Layoffs
• Treat employees with dignity
– Personal delivery of bad news
– Acknowledge feelings, but don’t be
defensive or make promises
• Provide support for those being laid off
– Outplacement, training
– Use of company resources for job search
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
Keys to Successful Layoffs

• Plan for lowered efficiency in short term

• Retaining critical people
– Clear vision for success
– “Golden handcuffs”
– “Stick With Us” Bonuses