Written by
Changeboard Team

Published
14 Apr 2011

Under pressure to make headcount decisions?

14 Apr 2011 • by Changeboard Team

Explore all alternatives - avoid quick decisions

In the current economic climate, the subject of managing staff in uncertain times may well be close (or even too close) to the heart.

In some circumstances, redundancies may be necessary but this is not always the case. They can have long-term consequences for what might be a short-term problem. If you cut back too quickly, this may leave you short-staffed when business does pick up.

Staff morale and retention can also be badly dented. On the upswing there will be the costs of recruitment together with the management time necessary to interview and train new staff. 

New employees take time to settle in and get used to your ways of working and systems. The need to fill vacancies quickly can sometimes be allowed to take priority over getting the best candidates. This cannot help but create longer-term problems. These are not things to do without exploring the alternatives.

Avoiding job losses - legalities

In some circumstances, businesses can actually use the situation to build on relationships with customers and key stakeholders. Offering your customers the opportunity to have one or more of your staff there on paid secondments does not reduce your wage bill but it can help your staff widen their own skills, help the business acquire a more in-depth understanding of its customers and strengthen the business relationship with that customer which may pay dividends when the market unfreezes.

Employees may agree to take part-paid or unpaid sabbaticals. This may re-engage dissatisfied staff and allow them the opportunity to widen their personal skills which may in turn benefit the business. Employees may be willing to “share the pain” with colleagues of achieving necessary costs savings by taking unpaid leave, so people feel that everyone is working together to avoid job losses.

Employees may also be open to job share arrangements as an alternative to redundancy or to a temporary reduction in salary, hours or benefits. Imposing these steps can be a breach of contract but sometimes people will agree - if you don’t ask, you will never find out if these measures could work for your business both in the short and long term. Put as a proposal rather than a fait accompli, this should not give grounds for legal complaint.

Value your employees

Communication is key to managing downsizing so as to provide a clear and consistent message throughout the process. Even tough decisions are more palatable if there is a clear rationale for them. It will also reduce the impact of inaccurate rumours and hopefully illustrates that the cuts are part of a carefully considered and reluctant decision, as opposed just to management panicking.

All levels of the staff (including management) should be seen to be involved and affected so as to try and reduce staff alienation and a “them and us” mentality.  Effecting redundancies when management are still getting bonuses or travelling First Class is an invitation to trouble from remaining staff, so look at expenses first. Getting employees’ buy-in by asking for suggestions for cost reductions can result in innovative solutions, though inevitably also suggestions less favourable to the incumbent management.

Don’t forget the importance of carrying your staff with you – you will get more out of your staff if they believe themselves valued as individuals. Small gestures of please and thank you cost you nothing but will take management a long way – equally, however, a stressed or dismissive response from inside the senior management may quickly fester and lead to your staff wondering whether the grass is in fact greener elsewhere. Remember also the collective consultation rules if 20 or more employees are at risk.

Looking after the welfare of retained employees

Where businesses make headcount reductions, can you assume that the staff who have kept their jobs are happy, fully motivated and committed to the business? Not to put too fine a point on it, no. You should not underestimate the negative impact of being involved in a redundancy exercise on retained staff. They will have had the uncertainty of not knowing whether they are being selected for redundancy and may feel resentment towards the business for this. They may have lost work colleagues that they respected and were loyal to, and lost faith in the business which let them go. They may have suffered pay-cuts or a greatly increased workload during the harder times and be desperate to leave as soon as the market perks up again.

Treating the leavers without due dignity or reasonable financial consideration will also have a negative impact on the stayers. They are merely grateful to have a job but you will not keep these staff with you when opportunities begin to open up elsewhere. Thought should be given as to ways of re-engaging these employees at an early stage so they do not become de-motivated, under-perform and ultimately leave, either at all or in particular to a competitor.

Promoting from within

Cutting training and development is often a short term cost saving measure but may mean that retained staff are not engaged with the business and do not feel valued by it going forward. The more that you can allow them to take study or personal leave at limited cost to you, the better. Similarly, if you do need to recruit in an upturn, be sensitive to retained staff and don’t overlook existing staff who may be interested in promotions or transfers. 

Looking at the long term, you may be able to take advantage where talented individuals have been let go by other organisations (who possibly have been too short term in their approach) and recruit them on competitive packages so as to win the “war on talent” and be prepared for the upturn. Keep an eye on pay differentials between those who are being hired and those already in place – recruiting shiny new staff at material premiums over the existing people will inevitably lead to conflict and an exodus to their next employer.

Protect your business

If you are not sure how quickly it will come or how long the upturn may last or how it may affect your business, consider the use of agency workers so that you are not spending unnecessarily on recruitment (or later severance) if the upturn is not as solid as hoped. However, you should bear in mind that from October 2011 agency workers will be entitled to some of the same terms and conditions (including pay) as permanent employees so again this short term measure may not be one for the long term.

So as to protect the business if any of these retained staff leave, you should consider now whether your business is properly protected by reviewing post-termination restrictions (including confidential information provisions) in employment contracts. Though it may cost you, it may be wise to look at introducing some form of golden handcuffs to lock the bright stars into your business and add muscle to the post-termination provisions.