Alternatives to downsizing


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Learning resource produced by Humantalents International based on a Training programme conducted by Jayadeva de Silva (SriLanka)

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Alternatives to downsizing

  1. 1. humantalents When the going is tough, HR has to Challenge the Challenges Jayadeva de Silva.M.Sc, MBIM, FIPM, FITD “When two sides come together with a common goal, complementing each other’s strength, inspiring self belief, nothing is impossible to achieve - hand in hand”. In today’s arena the most common word we come across are Recession, Slowdown, Downturn, Depression etc. Be it any media or magazine, they might differentiate themselves as Fashion media, News or Cricket but they all have common news which guides us towards the common conclusion of Slowdown. In common we get confused and mix the two terms “Slowdown and Recession”. This confusion affects the entire market and makes the situation even worse, because we start saving and in whole, the economy really tumbles and this ripple effect of not consuming lands up in recession. Let’s have the clear understanding between these two words: Recession and Slowdown. The U.S. based National Bureau of Economic Research (NBER) defines a recession more specifically as "A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." So we can say our action and non understanding of words can lead to Economic Depression, the worst condition one can ever imagine. A recession is often defined as two fiscal quarters – six months – of negative growth. A slowdown is just characterized by slowed economic growth, but growth nonetheless. During the period of Recession and/or Downsizing, HR plays an important role to make the industry sustain and the entire economy flourish. During these days, HR people sometimes even take the harsh decision of reducing the numbers and land up at downsizing. The word “DOWNSIZING” is even taken as “RIGHTSIZING, OPTIMIZING, OR REDUCING”. But we may not know or ignore the fact that “Neither the bad situation nor the good conditions lasts long”. After a year we may have to recruit the more number than what we removed at that time we will not be in position to meet the targets and end up incurring higher costs in terms or recruitment, training and cultural fitment. Downsizing is reducing the number of employees on the operating payroll. Some users distinguish downsizing from a layoff, with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may later be rehired. Jayadeva de Silva 077 7272295 1
  2. 2. humantalents Rightsizing is downsizing in the belief that an enterprise really should operate with fewer people. Dumbsizing is downsizing that, in retrospect, failed to achieve the desired effect. But the greatest challenge we have is of being worthy. The doings and/or actions need to be in a dignified manner so that we can resume our position fast when condition is back to normal. So the challenge we are facing is “Downsizing in a dignified way”. Though many of my friends may opt for completely different opinion and say there is no dignity in doing that. But my position is what ever we do or act we do wisely and in a dignified manner. Downsizing is the act of reducing the number of employees within a company in order to decrease costs and increase efficiency, with the ultimate goal of greater profitability. Downsized companies either continue the same work functions with fewer employees or they decrease the scope of company wide activities. Business use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people. Downsizing is always painful. It is painful for employees who lose their source of income. Companies also find it painful because of the combination of admitting to declining business or poor management. They also risk losing valuable employees to competitors. Minimizing the impact of downsizing requires innovative and future-oriented thoughts and practices. Just walking into the plant and firing half of your people is never wise. It may save payroll, but it may eliminate the ability to manufacture your product. So we strive to find new and innovative way to make it dignified. So, it is being suggested to do the Downsizing as a step-wise process. There are following Steps that an organization needs to follow while going for Downsizing: Step 1: Revised Leave Structure for all Employees An organization needs to look into the leave days that an individual employee in entitled for. The extra cushion related to leave also need to be reviewed and reduced. This will help in reducing the liability of the organization. Make the leave rules as flexible as possible to work in a manner that we can call any day a working or holiday. Jayadeva de Silva 077 7272295 2
  3. 3. humantalents Step 2: Reduction in the different component of pay packages which falls under variable pay. HR should take an initiative regarding this issue. HR people need to make people aware about the issue, the business scenario and give clear guidance to cut Performance based pay. You always can support your view point by saying that, if an organization is not performing, how can an employee sustain or demand or perform? Because it is the employee’s performance and contribution that in a major way results into Organization’s profit or loss besides various other factors. Step 3: Identify the Non-value added activities and Resources HR needs to identify the Non Value adding activities and resources in the organization which involves Human Resource also. The identified activities and resources need to be given proper attention & then either reallocate them or they need to be eliminated. In such a scenario what we need to contribute is in terms of Value Propositions just not a few pennies. Step 4: Threats to Employee Emotional Engagement Manpower is the most sensitive issue for any organization. The manpower of each department should be properly studied and then the identification of the manpower is done, which can be removed from the organization and will not affect the production & working of the organization, rather overall manpower productivity needs to be improved. As objective of this reduction in manpower is to gain some profit as by now organization does not have cash in hand to even pay for salary so we take the list of people with whom we do not have much of legal or policy liabilities left with. So generally contractual or newer manpower are shown the way out. -The priority practiced for the identification of the manpower is “LIFO” (Last in First Out). During this period HR needs to be on toe as they have to console as well as coach the Human Resources who are moving out and to keep up the morale of existing manpower. As due to this particular action most of the people start feeling insecure and most of the time get involved in some non value added activities. -However, LIFO has also to be in parallel looked at with “Chronic Absentees”. Over a stipulated period of time, the cases of chronic absenteeism mush be identified and such cases also should be considered while downsizing measured are followed. -In addition to LIFO, Chronic Absentees yet another yardstick should be the scores of “PMS (Performance Management System)” either for the preceding year or at least for previous three years. -Further in LIFO, Chronic Absentees, PMS scores is not just enough the “Deadwoods” and those who have displayed loyalty but fits into the adherence Jayadeva de Silva 077 7272295 3
  4. 4. humantalents of Peter’s Principle must also be identified and such are the cases which needs prioritized handling. With due respect to the HR fraternity and all practicing HR professionals we need to introspect and redefine HR strategies pragmatically aligning it with the need of the business and the need of the hour and be at the centre stage as business partner, business advisor, business mentor and business care taker or else the HR profession and its professionals shall come under scanner. Never forget the H (Human) aspect in HR. When the going is tough, it is a must for HR profession and its professionals to “Challenge the Challenges” and the only remedy is just not mere “Downsizing” however “downsizing the dignified way” as stated above. Make your Organization a High Performing Organization, A great place to work for and a company that country is proud of. Role of HR When the Ship (Organization) is in turbulence zone HR can put its categorical best in ensuring that a single sailor guides the Ship & the Rudder is set accordingly so that it can sail or bail the boat out successfully. HR needs to be very powerful in such situations because they not only have to maintain the People Motivation level but has to increase it using non-monetary tools. There are certain points that HR can opt for in such a situation where people are insecure about their job. HR and HR professionals in no way can change the direction of the wind but for bailing out the organization can set sails in the same direction. In the worst cum worse scenario too Don’t be afraid of opposition – remember a kite rises against the wind, not with the wind. "The important thing in life is not the TRIUMPH, but the FIGHT; the essential thing is not to have WON, but to have FOUGHT well" HR can pay attention to develop the people on key skills and enhance competencies because in the time of crisis brilliantly trained people fight the situation relatively better. Machine efficiency can be enhanced to 100% while the human potential can be exploited beyond 100%,which can bring back the organization not only in the mainstream but competitively ahead as well. "One cannot discover new oceans unless he has courage to lose sight of the shore". HR can/HR should/HR has to: -Play an active role in refrain the Top Talent from falling out of the company bandwagon, as these people need an extra care in the turbulent times. Bring all training programs In-House for their engagement is a must. -Since the star performers also get punished with not being rewarded for their Jayadeva de Silva 077 7272295 4
  5. 5. humantalents performance and the downsizing spree add to their nervousness. They start feeling insecure at the workplace and tend to look for a Greener Pastures leaving the organization at loss. HR can act as a “Caring Mother” at this stage. -Get people aligned & developed to fight with this critical situation. In the moments of crisis the muscles must be toned up so that they can consistently fight with the situation and burn fat. -Develop people on Cross Functional skills so that the top performers in Department with surplus manpower can be transferred to the Department Which are either inadequately staffed or can replace the non-performers from that Department This may strike a balance in retaining talents and getting rid of the dead woods. -Help the organization to raise the people performance bar, as this is the time where the best performance can be extracted from people to turnaround the company’s performance. People, who are unable to cope up with such performance pressure will leave the company while the people who stays back are the one who will really contribute to the turnaround of the company. -Ensure fair evaluation of people performance so that the people who are contributing their best can be adequately rewarded when the company recovers from the current situation. -Play an active role in control of Communication Flow so that Grapevine can be contained and the discouraging news can be prevented from reaching people in general no harm being upfront. -Communication Management is must as a part of Employee Interaction (after drastic & severe actions taken) in order to maintain the morale & faith of the remaining employees. -Pass on the onus of making the organization lean by bringing the line managers in so that the people productivity & operational performance due to “Just Sufficient” people is not affected. -Review its Minor / Low Cost Benefits, which may have, direct impact on the employee morale. They can be given second priority in control so as to maintain the high spirit of people. -Outsourced routine activities can be brought in and be carried out by the remaining people by increasing their job responsibility when the manpower in departments is already reduced. -Contribute to enhance the “Value Addition per Employee” by maximizing employee inputs. Lean, lean & lean should be the buzzword. Quick wins which could impact the Bottom line in all Earnestness Jayadeva de Silva 077 7272295 5
  6. 6. humantalents -Promotions and Increments can be deferred till the condition of the company does improve. -One Time Variable Performance Pay (VPP) for the financial year can be deferred. -Leave structure for all the employees either it is Junior Management or Senior Management need to be revised and reduced. -No encashment of CL (Casual Leave), PL (Privileged leave). -There should be no accumulation of CL, PL, SL (Sick Leave). -The concept of “Compensatory- off” should not be there. If an employee needs to come to office either on Holidays or on week days, he /she should come on his/her own account and company would not be liable for that. - Introduce staggered weekly off days -No overtime should be allowed. -Procurement of the Employee Uniform should be deferred. -There should be no hiring of the taxies. If an employee needs taxi, he/she should prefer to use his/her own vehicle. -Telephone Reimbursement, Mobile Bill Reimbursement, Petrol Reimbursement and all such reimbursement should be temporarily put on hold. -Superannuation Policy should be surrendered for the current Financial Year. -Organization should think on the Mediclaim Policy. -Encourage employees to go “leave without pay”. -Air travel should be a exigency or even rare. -Reduce salary across the board in terms of percentage and a healthy state would be 15-25%. -Expenses whether it is Administrative, Selling or Operational should be done only if the business were to close or else not. -Have/Put a tab on your cash flow Jayadeva de Silva 077 7272295 6
  7. 7. humantalents Conclusion: Most companies opt for downsizing to save money. Before you make a downsizing decision, think of all other possible options to save cost like going paperless, automating a specific task, increasing working hours to be more productive etc. If nothing works and downsizing is a question of life or death for organization - then do it. Make separation process as good and as dignified as possible Protecting Legal Concerns to Design the Layoff. Do not damage your EMPLOYER BRAND. You will soon be re-hiring and then your employer brand will be the biggest asset. Consult your legal department (or your company’s lawyer) before downsizing. The economic crisis is forcing you to separate some employee and there is no way around. No problem! Do it but avoid creating a panic around, in employees, in investors, in market and in country by crying loud about the downsizing. If you are downsizing, do it as quietly as you can. Let your employees separate graciously and let no-body else know that they were the part of downsizing statistics. Double check your downsizing PLAN to ensure that only low-performers or zero value adders are earmarked. Gather data and reports from your performance appraisal software, if you have one. If you do not have one, try to get at least a perfect statistical analysis. Doing an effective performance appraisal before you earmark employees for separation can help you retain your top talent, while letting low performers go. One outsourcing company (that I know) during its hard times (when it lost a major client) had to downsize significant workforce. To manage downsizing, HR created an Employee Separation Department. This department helped employees to look for new job elsewhere, trained them on interviewing skills, forwarded their resumes to HR consultants and helped them complete the exit process painlessly. The result is many employees got another job within 2 months of their separation and no hard feelings for the last organization. Hire or designate an expert who can counsel employees on various issues related to downsizing. Let them know the good reasons for downsizing, keep their morals up and ensure that their spirits are high. Also advise them on how to manage their finance while they are unemployed. The Financial Year 09 has been a year of ups and downs, turmoil, unprecedented events and even the predictions of all Economists went hay-way. Let’s all hope for some improvements in Q4 of FY09 and if the going goes good, don’t forget to say “Peter come back, Peter come back, Peter come back”. * Jayadeva de Silva E mail Tel 077 7272295 Jayadeva de Silva 077 7272295 7