Redundancies don’t just hurt those leaving. Annie Gregory asks if it’s possible to handle job cuts without embittering the relationship with those still in the workplace
One of the worst things about the latest redundancy announcements is that many have come from companies that initially tried everything to hang on to their people. JCBOs latest cuts are a devastating blow to a workforce which voted last year, with union support, to reduce hours to safeguard jobs. The residue of bitterness is unmistakeable. NissanOs shedding of a quarter of its workforce is doubly painful because, only in December, it was using cuts in production time to train people ready for an expected upturn. Today, even those who kept their jobs are sounding shell-shocked and incredulous.
Pragmatically, manufacturers will be making job cuts for some time to come. The situation is bad; the duty, both morally and practically, is to avoid making it worse than it need be. There will be a recovery – look at what followed the recessions of the 70s, 80s and 90s. Companies with a resentful and untrusting workforce will, however, have a hard fight to take advantage of it. Those who handled the whole business with fairness, dignity and humanity – both for those staying and those leaving – will stand a far better chance. In essence, companies will reap tomorrow what they sow today.
With little experience of making large-scale redundancies, some manufacturers are being badly caught out by the procedures and legal requirements. There has been a 42% rise in claims through employment tribunals in the last year. In the last three months Croner, part of Wolter Kluwer, which provides support and consultancy in employment law, has seen a rise of over 50% in the redundancy claims it handles for employers. According to its employment law expert Gillian Dowling: "It is a common misunderstanding that a redundancy is not a dismissal, perhaps because Obeing made redundantO does not sound as harsh as "being dismissed". Redundancy is a potentially fair reason for dismissal. You have to have a genuine redundancy situation which fits with the statutory definition set out in s139 Employment Rights Act 1996, that there has to be a diminution or a cessation of work. In other words, is the work dropping off? Do you need fewer employees to do the work?" Even if you only want to make a few employees redundant you still have to follow the correct procedures.
She points out that selection criteria for redundancy must be clear (see this month's employment law column, p9). They might include quality of work, time keeping, experience, qualifications and performance. "Employers must demonstrate the true reason for dismissal is that the post, not the person, is no longer required. You must consult individually with the affected employees and be clear as to how you have reached your conclusions. Refer to your appraisal records to ensure that your assessment mirrors earlier evaluations." Employers must also bring any opportunities for alternative work to employees" attention.
Minimising the pain, however, goes beyond fulfilling the legal obligations. "You can't motivate your way back into the black, but the way you treat your people when times are bad has a huge impact," advises Mark Butler, associate director of Napier University Business School and an independent change consultant with The People Organisation. Research from the 90s clearly shows those left behind have an increased risk of mental health problems: "Managers also became suspicious of the environment they are in and passed that on to their staff who, in turn, had more periods of sickness and absence."
He is adamant that deciding who goes must not be an individual exercise. "You have to strike a balance between not creating unnecessary stress while getting solutions with ownership from the staff that stay. Authentic engagement is the key – managers mustnOt enter into the process imagining it's about resolution and discipline. Their thinking processes need to be more creative and open." Companies may try to simplify the whole process through LIFO (last in, first out), but it's the wrong default position: "The people you have brought in are the ones you have tested most recently in the marketplace. Length of service is a consideration but it is also about what skills you need now. You may have the ones needed to continue the business as it was, but not for a turnaround situation."
Butler believes discussions need to start with an honest look at existing productivity and how it can be improved, soliciting the opinions and skills of a wide tranche of the workforce. "It flushes out people who want redundancy, but it also focuses people on how the business can work better. Often managers freeze when they are confronted with the figures, but the workforce doesn't. They may have a lot of deeply felt concerns that – maximises the pool of good ideas rather than just focusing on the redundancy process itself."
This way, when the numbers finally crystallise, employees still feel a part of an open process as opposed to being victims of incompetent or secretive management who never let them throw their ideas into the pot.
"The process of deciding who goes, and telling them, is far too important to be left to HR," says Butler. "They will make it procedural and legalistic but this is about the direct relationships between management and staff. Managers hide behind HR, using it to do the difficult jobs, going along behind them with a shovel." Based in Edinburgh, he has first hand experience of how some of the banks have handled it: often the senior managers who created the problems in the first place are notably absent when the troops are told. "To me, the acid test of getting it right is when the actual discussion about leaving is handled by someone more senior than you expected, like a director or board member." It sends a powerful signal across the organisation that people matter to you.
However good the advice, nothing can really prepare anyone for the actual process of making or experiencing redundancy. Meet Gary Harvey, site engineering manager for Scottish and Newcastle's Berkshire brewery (part of Heineken). In 2008 the company decided to shut the site. He is part of the management team handling the transition to its eventual closure in early 2010: OWe are in the unusual position of managing our own demise. We are all in the same boat, but that really helps us because we have the same perspective as the workforce."
The gradual and continuous decline of the beer market makes closure inevitable but he and the rest of the team are determined to do it fairly and decently: "This isn't the first time we have had to close a brewery and the company recognises the value of treating people properly, doing everything we can to help them into the next phase of their lives. So, although it is very sad, we have had to get over it fast and focus our attention on two things: how we can manage the brewery properly until the end and how we can best help those people that are leaving – and that includes me."
The team has put huge efforts into getting the process right. Firstly, recognising that some of its people havenOt been in the job market for 25 years, it is using Right Management (part of Manpower) to provide support and outplacement to those preparing to leave. Its services range from practical advice, through one-to-one interviews, to workshops on CV writing, preparation for interviews and a comprehensive job search. Recognising some people want to change tack, the company has also funded a huge range of retraining programmes, including literacy and numeracy training. It has put more than 90 people through ECDL – the European Computer Driving Licence, a Europe-wide qualification that demonstrates competence in computer skills – and it is running workshops in starting up businesses. It has part or fully funded people to qualify as forklift truck drivers, plumbers and even, in one case, as a chiropodist. Some of its electricians needed to qualify in current wiring regulations to find employment in the domestic market so it called upon MCP Consulting and Training for both 17th edition training and cross-training in mechanical to electrical skills, accredited by City and Guilds. It is now considering expanding MCPOs role to train in air conditioning and refrigeration, and inspection and testing of electrical installations. The bulk of the more demanding, 12-day packages is funded at the company's expense, but "we have agreed a contribution from the individual so there is commitment on both sides".
"We have had to be flexible and operate at lower levels of cover to allow our people to get the training they need. On the other hand, employees have covered for each other and sometimes worked more flexibly so that someone in another part of the business can go and do the training. The ethos has been helping you to help yourself. it's not all going to come from the company – a lot of the commitment has to come directly from them." Some will be retiring but of those staying in the job market, the majority have risen to the challenge. "We think they are leaving here much better equipped for their futures. We will know we have succeeded when, in 18 months time, the overwhelming majority of our people are settled in either productive retirement or satisfactorily set up on the next phase of their career. We want them not only to be able to move forward with their lives but also to look back feeling that they have been treated fairly and properly."
Interestingly, despite the shock of the closure announcement, the unions have joined with management to mitigate the damage. "They were concerned about it at both national and local level – as they should have been – but once it became clear that there was no other option, we all rolled our sleeves up," reflects Harvey. "The shop stewards and union convenors have become part of the team in helping us work through it. For example, one of the shop stewards is now working full time co-ordinating the outplacement support."
Production has to continue right up to the closure. "So we created a performance-related bonus which we can all benefit from if we meet our health and safety and production targets," explains Harvey. "It is cost neutral because it is funding itself but we have set measures whereby, if we save money through efficiency, a proportion will go into a closure bonus for employees when they leave. So if we keep the brewery running properly without hurting anybody, it will be to everyone's benefit. My feeling is that the mood of the place is far more positive than it might otherwise have been because we are looking after people properly. Instead of treading water for the final few months, people are working well and, between that, doing meaningful and perhaps challenging retraining."
Why should companies go this far? Harvey offers a real insight: Ovor a period, the volumes of beer we produced here will have to be produced elsewhere. If you're working in one of our other breweries, you'd probably be relieved that it's not your site that's closing and feel your own job was more secure for now. But I think everybody recognises there will be further change. it's important that people across the network know they will be properly looked after. Disappointing though it is to be closing, wouldn't it be awful if we had done the right thing by the business but at more personal cost than necessary?"
I hope everyone contemplating making redundancies takes note of his closing comment: "We have all got to acknowledge that pretty ruthless business decisions have to be made. On a local level, I have done that myself. But it doesn't mean that you can't then deal with an individual as an individual and do your best for them."
Author: Annie Gregory