Planning for Reductions in Force
Updated: May 10, 2018
I recently wrote an article regarding keeping key employees. In that article I asserted that even in a soft economy astute management needed to focus on key talent retention. The other side of that coin is how to manage reductions in your workforce, or “RIFs” when you are facing significant shortages in your business plan. As many business owners feel, and most economists are saying, we are in what looks and smells like a recession. Now, more than ever it is time to work on your business, not just in it. .
5 strategies to respond to tougher times instead of reacting:
Increase, do not decrease your marketing budget
Look for new markets and opportunities
Revise your expense budget, looking carefully at owner’s expenditures
Revise your sales projections
Review your overall cost structure
It is part of the fifth strategy that any RIF should be considered. Payroll is often the largest expense in a company so naturally it bears the greatest scrutiny. The decision to reduce force, just like hiring, is a critical process that can make or break your company. It must be planned and excused flawlessly.
There are 8 steps in the process to be followed:
Step 1: Prepare a SWOT for each employee. This is a matrix of Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are often observable and should be documented in your formal performance appraisals. These are skills, behaviors and values that each employee can control. Opportunities and Threats are not within their control, but should be considered as well. For example, is there an opportunity to expand the responsibility of an employee in the event another is terminated? Likewise, will the RIF remove a resource an employee was relying on and is therefore a threat to their continued success? This inventory of your workforce gives you an assessment for the third step.
Step 2: Review and update your functional organization charts. This document lists the key functions of your company and who is responsible for them regardless of reporting relationships. After you have completed step 3, update this chart to see the impact on your processes and the “survivors”.
Step 3: Conduct a “Lifeboat” Exercise. Just as the name implies you now have to determine who gets a seat in the new boat. A more positive way to do this is to look at who you would hire first in starting up your company. Rank your employees from top to bottom with this thought in mind. The SWOTs you completed in step one are your guide. Within this process review your ranking for any potentially discriminatory impacts. IS there a bias regarding age, gender or race in y our ranking. If so, look at your criteria and the SWOTs carefully. The outcome here is used to update the Chart you built in Step 2.
Step 4: Establish a communications plan. This can be accomplished by listing all the stakeholders down the left-hand column of a spreadsheet. The stakeholder list should include top company leaders, managers/supervisors, Targeted Employees, Surviving Employees, Vendors, Customers, Key Network Contacts, and the press. Key messages or points of communication should be listed across the top of the page and includes who, what, when, where, and how of the decision. In the intersecting cell on the spreadsheet put the date and time of the communication, who is delivering and how the point is going to be delivered. Once this is in place it should be followed carefully.
Step 5: Prepare for the discussion. Have a sequenced list of who is going to be contacted, by whom and when. For the communicators, prepare a script and a checklist of items to be covered. The script should be brief, to the point and include specifics regarding severance, last day of work, last day paid through and eligibility regarding unemployment insurance, rehire status and if any references are offered. (Note: in Utah wages are due within 48 hours of the termination and I recommend you have the last check already prepared for this meeting) Ensure and Medical insurance COBRA or retirement information is included. The list should include items to be collected such as a list of passwords, outstanding tasks, commitments and appointments, keys, credit cards or other company property.
Step 6: Conduct the layoffs with precision. Remember, the highest priority is to maintain the dignity of the employee. Block out the time without interruptions. Managers must communicate personally, not by email, memo, voicemail or through third parties. Have a second member of management present if possible. Have a box of tissues available. Follow the script and checklist. Be empathetic but do not get into bargaining. Ensure any network access is stopped. Arrange a time in the evening or the weekend for the employee to clean out their personal effects if appropriate. Wrap up the discussion in 10 minutes or less.
Step 7: Take care of the survivors. This is the most commonly overlooked step. A RIF can be traumatic and leave the remaining employees experiencing a grief like feeling and a fear that the will be more. Of course, you have kept your most valued performers, so communicate this point strongly. Reinforce their worthiness and potential so their sense of belonging is strengthened. In some cases, it is important that your top performers are contacted in confidence prior to those being let go.
Step 8: Get it over with and get back to business starting with your communication matrix.
Russell Lookadoo is the HR Guy for small businesses. His firm, HRchitecture, specializes in helping business leaders accomplish their goals by effectively using their teams. Russell brings over three decades of experience designing Human Resources solutions that achieve business strategies in varied organizations ranging from a small manufacturer to the nation’s second largest bank. Russell holds the Senior Professional in Human Resources designation from the Society of Human Resources Management and earned the Certified Compensation Professional designation from World at Work. Russell attended the University of North Carolina on the prestigious Morehead-Cain Scholarship and graduated with a Bachelor’s in Industrial Relations. Visit his website at www.theHRGuy.biz