Wildcat strikes, negative press, celebrity campaigns, tribunals, pay-outs and lawsuits: redundancy may be inevitable, but it sure isn’t easy, and if it goes wrong you can be sure HR will get the blame. In fact, managing redundancy might be the next worst thing to being made redundant, yet it also gives HR professionals the chance to show what they are made of. Rob Lewis looks at alternatives to the “villainous henchman” role.
“Sorry to inform you that you will not be paid today. Don’t bother ringing the office.” The Accident Group famously sacked 2,500 workers in 2003 by this text message. In 2005 Gate Gourmet locked 600 workers in a canteen and fired them over a megaphone. Last Christmas, pending the closure of its Treorchy factory, and shortly before posting revenue increases of 22 percent, Burberry awarded workers a free scarf and a £30 voucher.
It’s just as well that the Office of National Statistics has been reporting low UK redundancy figures these past few years, because some companies obviously don’t have a clue how to manage the process. So what can HR departments do to make the experience as painless as possible if the axe has to fall?
Angela Baron, organisation and recruiting advisor at the CIPD, is unequivocal in her advice for companies considering redundancies: “Don’t do it,” she remarks.
Baron admits that redundancy decisions rarely originated from HR departments, but adds that if the HR department was better at being able to demonstrate the value of people, the same decisions probably wouldn’t get made. “If organisations understood the true cost of redundancy, or the true contribution of people to the business, I’m not saying they wouldn’t make any redundancies, that’s naive, but they would probably see other options as more attractive,” she comments.
The price paid vs. the cost saved
So what is the true cost of redundancy? In the case of Rupert Murdoch’s News International, which began upgrading its presses last year, a forecast £31.3m in pay-outs. It’s an enormous sum, but even so, it may still be some way off reflecting what redundancy will really cost the company, according to Baron.
“If you make people redundant it shows a cost saving on your balance sheet. But what doesn’t appear on the balance sheet is not just the loss of output from the people that you’re losing, but also the loss of motivation, of performance, the impact on the retention of key staff,” she says. “However much you soften the blow, however much it’s dressed up, it will always make people reassess their position.”
“Your best-qualified and key people are much more likely to get offers elsewhere, so they are the ones the company are going to lose, not the less productive people. Organisations don’t quantify that when they look at the cost-benefit analysis of making redundancies, they only see the benefits in terms of the cost savings.”
Angela Baron, organisation and recruiting advisor, CIPD
Baron admits that sometimes there will be absolutely no option, especially if the business is contracting, but other avenues should be exhausted first. There may be vacancies elsewhere, so retraining might prove more effective. Baron knows of one company that retained effectively redundant employees in a “holding pen” for several months before finding a use for them, because it was more cost-effective than letting them go.
“Forward-looking organisations will be developing the skills they need in the future in the people they employ today,” she says.
It’s something that requires not only long-term planning but continual assessment too, but companies neglecting these duties can find themselves badly wrong-footed. Look at the NHS: after an expensive campaign to attract nurses to the profession, and recruiting from as far abroad as the Philippines, hospitals and trusts up and down the country are now letting some of them go. How long before another recruitment problem raises its head?
“If people can’t be absorbed in other ways there are still ways of managing redundancy well,” says Baron. “And that’s about lots of communication, and real negotiation with people to minimise the impact, and not just going through the motions, because there is legislation about having to do this.”
Providing a parachute
An employer making redundancies is of course faced with several legal obligations, not least amongst them the duty to consult with employee representatives for a period of not less than 30 days (or with redundancies involving over 100 employees, 90 days). Offering other employment as an alternative is not just sound practice, then: if possible, it can be a demonstrable legal duty.
But the employer doesn’t have to stop there, according to Owen Morgan, head of commercial operations at human capital consultants Penna Plc.
Consultancies like Penna can help HR departments provide valuable additional support at times of redundancy, he argues. “We provide ongoing career management to staff that are leaving the business, providing a parachute to people so they don’t just leave with a brown envelope. We can give the person leaving somewhere to go, so they can make a successful transition into a future role.”
This external career guidance, or outplacement, can be done either at site or at the consultancy offices. While it may be something HR departments might attempt to do themselves, Morgan is adamant that the process is best managed out-of-house. “We don’t have any preconceptions in terms of what people want to do. We see an individual and we talk to them about where they want their career to go.”
Most HR departments would probably be far too busy with all the other work that comes with redundancy to try to offer something like this in-house, even if relations between the company and its outgoing employees were amicable and open enough for meaningful discussion. Which isn’t often the case, says Morgan.
Owen Morgan, head of commercial operations, Penna Plc
“Initially, employees’ first reaction can be quite positive – ‘at least I’ve got some clarity’. Then people tend to descend into feelings of bitterness and sometimes anger. Our role is to get people out of that emotional dip and get them focussed on the future.”
Outplacement can limit the trauma of redundancy in numerous ways. Employees get to receive professional and individual attention from a third party, while employers can demonstrate due care and diligence in their statutory consulting period, and at the same time hopefully limit any damaging PR.
Increasingly, HR departments are failing to look at how the external world views the organisation, says Morgan. “It’s the employee value proposition. If an individual leaves with a bitter taste in their mouth that will affect that company’s ability to recruit new staff in the future, and a whole raft of things.”
While a healthy economy means some HR departments have yet to amass much practical experience in holding the poisoned chalice that is collective redundancy, others appear to have been busy doing nothing else. Mike Close is an employment and development manager for Corus Group plc, which like every other company in the British steel industry, has seen continual retrenchment since the 70s.
Close has led the negotiations on a number of plant closures in recent years, but has been involved in redundancies pretty much all of his working life.
“If you want to take one message from me,” he says, “it’s all about being open as early as you can, with trade unions and employees. People recognise the situation they’re in, they recognise you’ve got to drive down cost, and at the end of the day, providing you give people the facts you find that they respond in a positive way.”
Managing redundancy, according to Close, is at base no more than experience in a process. “People might have apprehensions and fears about going into the process, but you’ve just got to approach the thing. Don’t be afraid of it. It’s not your fault. The circumstances are there; you’ve got to deal with it. Deal with it with confidence, but most of all honesty. If you try and take short cuts, or lay the blame somewhere it doesn’t belong, you’ll inevitably get found out.”
Redundancy means negotiations, and as a negotiator, you need people’s trust above all, even if you’re far from neutral. “You’re not an intermediary, or anything like that, you’re in there with the management team,” Close observes.
How else can you deal with a trade union, a worried workforce, and the company’s board all at the same time? Redundancies can place a huge burden on HR, but then potentially they can give HR professionals the chance to carry away a great deal of satisfaction too.