The Hardest Thing A Manager Will Ever Do


Ask a manager or company head about the hardest tasks they’ll tackle in their jobs, and invariably they’ll list as one of them laying off or eliminating employees. It may mean many sleepless nights for them or, worse, constant second-guessing on what they could have done differently and what they still might have to do in the future.

One manager relates her saga. Fran Keeth, president, Shell Chemical L.P., headquartered in Houston, according to a January 20, 2002, article in the New York Times , reported that she threw up in the bathroom after announcing plant closings and firings. She felt it was the worst week of her life. She was working in Shell’s products business, oil and chemicals, as the finance general manager. She had only worked at the job 3 to 4 months, and because of financial problems the company had to reorganize. She and two colleagues were asked to come up with a plan. The plan called for them to reduce staff by 25 percent. Shell had nine operating facilities in the United States, and Keeth and her colleagues spent 1 week going to every location to tell workers personally what was going on.

At each location they told workers that the company was closing the facility or selling it and that nobody would continue to work for Shell. Employees’ reactions ranged from acceptance to shock and anger. She believed the great diversity of reactions was due to the fact that Shell was not good at that time when it came to communicating its financial outlook. Many employees thought the company had a lot of money. People called her names.

At another company, an East Coast compensation director tells how his firm tried to avert layoffs. But the inevitable happened. He found it to be pure hell. “We told employees via e-mail that economic pressures would be overwhelming. We didn’t know how rough. We cried in July it was so hard. We couldn’t get our numbers up, our routines together. It was like recovering from a stroke—very painful, slow, and it hurt. At first the system does a lot of the work. The nonperformers take themselves out. Pressure takes them out. But anytime somebody leaves, you feel the loss. Even the deadwood. It’s the ones with talent who are really tough to lose. But even losing deadwood is tough because you spend a lot of time and money training, teaching, and motivating new hires.”

Laying off employees is never a pleasant task, but it does not have to be acrimonious if companies are upfront and honest about the reasons they are necessary and if they follow all effective procedural rules and legal regulations. The person handling the layoff should try to experience the feelings of the employees receiving the bad news. How this is handled will impact the reputation of the company as an employer. The company should lay off staff in such a way that the employees severed are not embarrassed in front of colleagues when they have to pack up and walk out of their offices and the company with their belongings.

A Massachusetts-based technology company has this prescription for conducting layoffs:

A layoff is done in one day. When it is determined, section managers notify the employee the day of the action. The employee is called aside to an office to minimize the impact on the employee. He’s walked down to an area where HR reviews a severance package with him. This includes outplacement (a person is on site) and someone from the temporary agency who helps the employee find new employment. The employee is then asked to leave that day. The approach is scripted. Some people have never done a layoff before, and they’re uncomfortable about what to say.

Being laid off is somewhat akin to experiencing a serious illness or death. The employee goes through a cycle of grief from depression to anger and needs to work through these emotions at his or her own pace. Moreover, mishandling a layoff can result in huge costs to the company, both tangible and intangible. These may include expensive lawsuits, sabotage and even violence in the workplace among disgruntled employees. An example is a man in Los Angeles who worked at a nuclear power plant. He was laid off and threatened to retaliate. The FBI investigated and found an arsenal of weapons in his possession. Or there’s the story about the commissary in Houston where laid-off employees tainted the food.

To deal with terminated employees in a humane, straightforward, and effective way, consider the following guidelines.

Rule 1: Communicate in a Dignified and Respectful Way

Laying off an employee, whether scripted or not, should be done with tact and dignity to show that the company values its employees in bad times as well as in good times. There was a good reason that the person was hired, so it makes sense to treat people with the same dignity and respect on their way out.

When conducting layoffs, managers should try not to burn bridges. When it’s time to ramp up, the firm may want to rehire some employees who were laid off. This means, in addition to offering a reasonable severance package, not bad-mouthing anyone let go, not doing anything construed as illegal, and always leaving the door open for the future. Several company examples point this up vividly.

One company bungled layoffs. The firm forced employees to resign by taking away phones and demoting them from managers to food service workers. Some were so humiliated that they became physically ill. One man reported that he sat at his desk every day with no workers. The stress was so severe that he had a nervous breakdown. This firm set itself up for expensive lawsuits.

In another example an ERISA specialist and attorney with a major midwestern corporation was told in October that massive layoffs were necessary. But the layoffs weren’t planned until December and weren’t put into effect until March. The time frame took months. The firm finally let the attorney go on a Friday at the end of March, but had not found a replacement law firm to do his work. So they called him the next Monday morning and rehired him for 3 months on a contract basis.

Although he was reluctant to go back at first—his pride had been wounded—he quickly realized the company would pay him more per month for those 3 months than they had paid him the month before. He took the money—and the job.

This is not unusual. People are let go without adequate planning and are brought back as consultants or on a contract basis, often at a higher salary. Some companies have to rehire employees they recently laid off.

Rule 2: Carefully Choose the Place and Time to Conduct the Layoff

Choosing the place and time for the termination discussion is a critical factor in the lasting impression made on those who will leave, and it contributes to the quality and dignity of the experience.

The best approach for the place to communicate such news may vary depending on the person, the physical location of the office, and the economic circumstances. Some companies prefer to tackle layoffs in one-on-one sessions, and others prefer to communicate with a group of employees. There are also combinations of approaches. For example, in one case a human resources manager had to eliminate 14 people in one department. He called them together. The head of the division, department head, supervisor, HR director, and top management together presented the rationale and the way the layoffs would be implemented over the next few weeks. Employees then met one on one to deal with specifics. In another case all meetings were held on a one-on-one basis in complete confidentiality. Table 9-1 summarizes the pros and cons of the different approaches

The personal meeting is the most effective way to communicate the bad news of a layoff, if the communicator has the skill and presence of mind to keep the discussion on track and professional. Many companies have human resources or legal staff present to avoid future claims regarding things that were allegedly said in the meeting but disputed later. (This is the reason for a script in some companies.) The presence of such professionals also can ensure that all of the pertinent information is covered in a fair, consistent, and equitable way.

Table 9-1: Alternative Ways to Communicate a Layoff

Approach

Pro

Con

Large Group Meeting

Ability to personally communicate with a large number of people at one time with a consistent message

Lacks one-on-one contact

Small Group
Meeting

Ability to have a more intimate group discussion

Lacks one-on-one contact

Individual

Effective way to communicate

Potential for confrontation or

Meeting

clearly and directly

misspeaking

The more impersonal the setting, the greater the distaste and sense of disrespect felt by affected employees. A combination of the alternatives often works best for an employer. But with additional meetings the issue of timing and advance notice arises. Timing can range from immediate notification with the requirement to leave the premises to providing days to weeks of advance notice. Table 9-2 outlines alternatives for advance notice.

There is no hard-and-fast rule for advance notice timing. A lot depends on the culture of the company, its current situation, and its prior experience. One example is a medical reprocessing company, which gave employees who were laid off 1 to 2 weeks’ severance and the chance to come back when needed. Each supervisor met with those who directly reported to him or her to communicate the changes. The CEO met with small groups to discuss the company status a week later. The HR director discussed how a reduction in staff was required because growth plans had not met expectations. She gave each employee a letter explaining the layoff, said the company would not contest unemployment filings, and included severance explanations and COBRA arrangements.

Table 9-2: Advance Notice for Layoff

Approach

Pro

Con

Immediate Notice Prior to Escort off the Premises

Avoids negative behavior and sabotage

“Surgical separation” of employees

Anger andshame

Employees are less likely to return in the future No sense of closure for an employee

Short -Term Notice —2 Weeks

Advance notice for graceful Exit

Employee has the ability to do some advance planning

Potential negative work environment and productivity

fall off

Uncomfortable environment for everyone

Potential disruptive behavior

Long-Term Notice

Employee has the ability to do advance planning

Magnifying the “cons”of short-term notice

In another case the layoff discussion became the final discussion, as in the case of Danny. The manager escorted the employee to his office to collect his personal items and then from the building with instructions not to return. This harsh treatment is sometimes required when there is concern about sabotage, revenge, or theft of confidential information. It certainly does not enhance a feeling of warmth and caring toward the company.

At the end of the day, a company must choose a method that fits with its culture and its approach to employee relationships. A company that has a close and personal relationship with employees should carefully consider the long-term implications of changing its “face” to employees in a layoff situation.

Rule 3: Be Careful What You Say in a One-on-One Discussion

The main reason companies script the layoff discussion or have professional staff present is to ensure that nothing is said that would haunt the company later. Managers should not make promises they can’t keep, such as hinting at hopes to rehire the employee if it is not the company’s policy. They should not answer questions off-the-cuff if they are unsure of the answers. Finally, managers should, at all costs, avoid confrontations with employees.

There is always the desire to cushion the blow of a layoff, somehow staving off the finality of the event. However, once the company has made its decisions, it is not appropriate in any way to misdirect the employee regarding the harsh reality of the situation. It is best for everyone to accept the situation and move forward.

Rule 4: Abide by Legal and Regulatory Guidelines

There are definite ways to avoid legal and regulatory pitfalls. Before conducting layoffs compile a list of who is to be laid off, secure personal evaluations and other relevant data regarding those on the list, determine final severance packages far in advance, know federal and state regulations and abide by them, and be sure that the criteria used to prepare for the layoffs are uniform throughout the company.

The goal is to have a plan that benefits rather than hurts a company. In turn the company should be fair, open, and honest toward employees to keep its reputation intact and to avoid spending dollars on costly legal battles. A company may need to undertake more work upfront, but the intangible cost savings and the goodwill generated will be enormously worthwhile. There are several potential minefields to bear in mind.

Worker Adjustment and Retraining Act (WARN). [1] If a plant closing is imminent that involves layoffs, a federal plant closing law called the Worker Adjustment and Retraining Act (WARN) protects employees from unlawful plant closings and mass layoffs without notice. It requires employers to give at least 60 days notice to affected employees, their representative, and state and local officials. Those covered include employers who have at least 100 full-time workers on staff. A plant closing means a shutdown resulting in unemployment during any 30-day period for 50 or more employees.

Other provisions define an employment loss as an involuntary separation: a layoff exceeding 6 months or a reduction in work hours of more than 50 percent during each month of any 6-month period. WARN also covers what constitutes a mass layoff. This is a reduction in the work force that is not linked to a plant closing and results in an employment loss during any 30-day period for at least 33 percent of the full-time employees or at least 50 full-time employees at a single site in a 30-day period.

If handled incorrectly under WARN, a company can end up owing several hundred thousand dollars in back pay and benefits under the employee benefit plan for the period during the violation. Some states have their own version of WARN. Be sure that legal counsel is aware of the WARN rules that apply.

A company that partially closed a plant in Virginia moved the operations portion of the business to another site in Massachusetts. Employees were impacted by the move, but the company had to give 60-days notice because of the WARN act that affected more than 50 employees. The move was complicated and took place in a number of steps over a year-long period. Some employees immediately moved with the plant, others were laid off, and a third group faced a delayed move almost a year later. There were a number of layoff packages and retention agreements, with the requirement for continuous communication by the company to comply with WARN. (See the last section of this chapter for sample compliance letters.)

Employee Discrimination. The Equal Employment Opportunity Commission (EEOC) protects employees against unlawful discrimination in cases of layoffs and terminations. Claims of discrimination are generally based on a worker showing that he or she was a member of a protected class, had performed at the level of the employer’s legitimate expectations, was discharged or demoted, and others not in the protected class were treated more favorably. The employer must demonstrate a legitimate nondiscriminatory basis for a layoff decision, and it must have clearly established and consistently applied criteria.

Regardless of how many are laid off, the employer needs to use uniform criteria and be able to defend them in making layoff selections. Layoffs that affect one group more than others disproportionately should be seriously scrutinized. It makes sense to take snapshots of the work force and groups that the firm plans to lay off. Then it makes sense to take snapshots again of the groups and people left behind. Does something jump out that’s unusual? If so, the company should go back through the layoff lists to ensure that criteria for the decisions were made fairly and can be defended. If the company conducts a human capital analysis, such as the approach described in Chapter 5, it will have such criteria available. The important point to remember is that your actions should be consistent and based on fairly applied job-based criteria.

Older Workers Benefit Protection Act (OWBPA). This law applies to situations where employers offer severance packages to older workers (age 40 and above), including those who may qualify for early retirement. The OWBPA requires companies to communicate with employees regarding their rights in an open and noncoercive way. When employees are offered these special severance arrangements, it is advisable that they be asked to sign a waiver regarding not filing a future claim on employment discrimination. The OWBPA specifies how this should be done. (See Appendix A and B for Sample Agreements.)

Unions. Federal laws protect unions and their collective bargaining agreements. The employer cannot abrogate a valid contract, and must follow the procedures specified in the contract for layoffs. The employer must bargain with the union over wages, hours, and other terms and conditions of employment. Most collective bargaining agreements require layoffs in reverse seniority, resulting in the inability on the company’s part to retain workers who may have the required skills but less seniority. An employer cannot close one of its plants or lay off employees for the purpose of avoiding dealing with a union.

Rule 5: Immediately Turn Your Attention to the Survivors

The patience of top performing employees who remain after the layoffs could wear thin if an employer announces another layoff, and maybe even another. For the employer, retaining talented survivors is likely to be tougher with each successive work force cut. After a second or third round of layoffs, employees get the picture very clearly, feel more insecure, and may start job hunting by sending out their r sum s and networking with friends or former employers.

Listening to survivors and managers talk provides insight into the trauma they experience, which many do not realize until they’re the ones left behind. Most echo similar thoughts or slight variations on the same advice.

The compensation manager at a Maryland company found the hardest step was deciding what to do with those who survived and deciding whether the company cut deeply enough into its ranks. He had to focus on enthusiasm when telling employees that there is good work here and your contribution is valued. He also told them that work would return.

In Judy Colyn’s experience as human resources manager at Life Cell Corp., leaders maintain the dignity of the employees who are laid off to give the survivors security. They explain why a cut is made and that everything is taken into consideration so it isn’t necessary to cut again in a month or two.

To build credibility after a small or mass layoff or a second or third round of cuts, company leaders should take three steps:

  1. Continue frequent communications regarding progress the company is making.

  2. Support the communications with rewards and recognition for top performers.

  3. Begin rebuilding on the valued knowledge and skill remaining in the company.

[1]Paul Cherner, Partner in Altheimer & Gray’s Labor Law Practice in Chicago, Illinois, contributed to this section.




The Headcount Solution. How to Cut Compensation Costs and Keep Your Best People
The Headcount Solution : How to Cut Compensation Costs and Keep Your Best People
ISBN: 0071402993
EAN: 2147483647
Year: 2002
Pages: 143

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