Managing Layoffs

Originally posted on
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Over the past year or so, several early and growth stage start-ups have resorted to massive lay-offs. More often than not such moves have resulted in ugly scenes between the management and the employees; there are instances where disgruntled employees have held top executives hostage. The unpleasant truth is that in the fast evolving technology landscape, business exigencies and performance issues have made mass redundancies a reality. But as these instances show, while mass redundancies may sometimes be the only option left for a company, trimming the workforce is never an easy task.

"Loss of credibility and inability to attract top talent in future are the most important risks an organisation runs into from a people standpoint while announcing mass redundancies," says Dr. Kiranmai Dutt Pendyala, corporate vice-president, human resources, AMD Greater Asia and EMEA.  

Experts suggest lay-offs should be treated as the strategy of the last resort. Important questions need to be addressed first: Have all options been exhausted? Have possible future scenarios been explored? Is the current move the right one for the envisioned future? Has the budget been proportioned in alignment with the strategy? Are there unexplored opportunities or threats to analyse and pursue?

That is because, in a world ruled by Facebook and Twitter, aggrieved employees have multiple avenues to express their angst against perceived wrongdoing by the management and in the process damage the equity of an employer brand. "If not handled sensitively, retrenched employees are likely to say bad things about the company. Companies operating in consumer-facing industries are at greater risk as people are more likely to share negative details regarding various processes and systems followed by the company," points out Mukund Menon, director, HR and communications, International Paper India. "The biggest risk arising out of lay-offs is that fellow workers are watching, they are observing how the management is dealing with their peers. Feelings of insecurity and uncertainty among those not affected by redundancies can lead to the loss of top talent," warns Menon.

So how can corporations plan out a retrenchment process to mitigate the risks involved? More importantly, how should they deal with survivors' guilt - as employees who are retained might live in fear that while they have escaped the shotgun blast this time, they might be hit the next time around?

Balaji Kumar, senior director-HR, MetricStream, says the first step for the management is to ensure that the redundancies are objective and transparent. Managers should spell out the criterion for carrying out such actions. If the purpose behind the move is not defined objectively then the move will create a lot of anxiety among existing employees.

Sunaina Mattoo Khanna, chief people officer and head transformation, Bajaj Capital, says the company uses a "what if analysis" every three years to assess the impact of a process cut or the departure of an employee. What impact will it have on clients, business units, team and overall value add? This exercise is done with the help of group heads so that the management can deploy corrective measures proactively.

The best way to clear the maze of doubt is to communicate with the people. "Constructive messaging with empathy for actions taken, along with transparent communication on the decision taken, helps in handling anxiety arising in such situations," says Pendyala.

Puja Marwaha, CEO, CRY, believes that organisations should openly acknowledge and allow the emotional aspect of redundancies to flow. "It should not shy away from the grief, fear and the anxieties that such an exercise creates. There is often lack of understanding and even anger among the employees at what has happened to their friends and colleagues. This must be acknowledged and proactively worked with for each person."

For Aditya Narayan Mishra, chief executive officer, CIEL HR Services, open communication, detailed planning and rigorous execution to demonstrate the sensitivity and care adopted by the organisation in handling the process are a must. "This is super critical in India than any other country because we do not have any major social security measures by our government."

In addition to open communication and handling employees laid off with sensitivity, organisations need to take visible and practical steps towards rehabilitating employees who have been advised to move on.

Harrish M Bhatia, CEO - 94.3, MyFM, says, "Organisations must understand the employees' needs and be ready to support them through long notice pays, assistance in out-placement etc. At MyFM, in some cases, we have gone ahead and paid people till they found jobs."

Apart from outplacing employees, making provisions for skill upgradation is another key way of helping redundant employees.

"Most of the organisations today are offering employees skill upgrade options so that they can be accommodated within the organisation in different roles. Similarly, organisations are offering part-time consultancy contracts for limited periods even as the employees look for suitable opportunities outside," asserts Sumit Peer, founder and CEO, Aurelius Corporate Solutions.

Also, many organisations are offering extended notice periods, salary and bonus advances and other incentives to exiting employees. All these efforts are aimed at making the entire process less painful and to ensure there are no lost opportunities for those who have to go. For instance, MetricStream has a robust coaching plan in place where career planning and counselling services are offered to employees facing performance issues. Similarly, International Paper India keeps its exiting employees on the company pay-roll for a period of three months and provides them another three months' monetary package as they look for a new job. It also pays employees their annual incentives on a pro-rata basis and pays them gratuity - even if they do not satisfy the designated employment period - if they were asked to go.

Even as companies extend a helping hand to its employees, the emphasis has to be on doing so with dignity and respect because downsizing or restructuring is a traumatic period for the affected employee. More so in the Indian context, points out, Archana Bisht, director, 1 to 1 help, a Bengaluru-based company offering counselling services to corporates. "In countries such as the US a job is not as much a part of an individual's identity as it is back home. In the Indian context, the loss of a job may at times be equal to the loss of identity for a person." Therefore, organisations must extend psychological support to employees who are being asked to move on. Such support to a certain extent cushions the impact of job loss.

Leadership needs to be extremely visible during this period, and, as the HR director in a tech firm points out, "we have gone to the extent of telling people we will take them back at the first given opportunity".

Net net, lay-offs must never be seen as an end in themselves, but rather an unavoidable means to an end. With this in mind, HR needs to deploy a two-pronged strategy - one that focuses on your organisation's final aim, and the other that enables the transition and the ensuing changes.  




EXPERT TAKE: Exercise caution

To begin with, companies should embark on a strategic workforce planning exercise so that situations like mass redundancies are avoided. In case suitable workforce planning has not been done, companies should be heedful of the following:

Make a clear distinction between redundant positions and redundant employees: Know that employees in redundant positions can well and truly contribute elsewhere, given the right training and initial support.

This distinction deserves careful consideration.

Always begin with the end in mind: If the objective is to build a nimble organisation, one has to identify the layers that can be removed. Redundancies across the board may not be required or recommended. Clarity of the end objective for an organisation would help develop appropriate criteria for redundancies.

Communicate effectively and give appropriate notice - While this could vary from company to company, outplacement support should be extended to employees. Communication to retain employees is also very critical. Such employees are equally anxious and would need to be engaged.

Retention plan: For key staff, companies should also develop a retention plan so that they do not lose out on vital talent. This is a typical practice when handling redundancies arising out of M&As.


Shatrunjay Krishna

Director, rewards, talent and communication, Willis Towers Watson