CEO Info-Bits: When You Have to Cut Staff

You have explored all your other options to cut costs and now you have to reduce your staff. How?

Basics:

• Define the real problem
• Develop your plan and processes
• Get your employment lawyer involved
• Train your managers
• Implement quickly

Step 1: Define the problem: who and how many?

Too often the numbers are just a 'wag' based on dollars or percentages. This way lies trouble now and in the future. Smarter organizations look at their current and future needs.

• Review operations and functions. What are you doing that is no longer profitable enough, or unrelated to your core needs, or required for your future plans?
• Cutting an entire function, unit, or department is a smart beginning as it is easier to do, offers long-term savings, and reduces risks.
• Consider de-layering. Do you really need a CFO, Controller, Director of Finance, and Accounting Manager? Often, during growth and good times, organizations add staff to solve short-term problems. When you de-layer, you open up your organization. Just be sure you start your cutting at or near the top layer.
• Focus on positions, not individuals in making cuts. Getting rid of 'deadwood' appeals to many executives; but, unless there are strong records of performance problems and attempts to resolve such, you can create more problems than you solve.
• Review your future talent needs. Are there individuals you will need to retain due to their skills and knowledge based on planned initiatives, growth or succession factors?
• Increase your use of consultants, temporary staff, part-time employees, and outsourcing. Used in conjunction with a smart plan, these resources allow you to reduce your expenditures on non-core staff. But realize that you will have to have effective management for this to work.

Step 2. Develop your plan and processes

One of the more critical aspects of any staff reduction program is to do it effectively and quickly. Organization rumors destroy productivity and morale otherwise.

• Who will be involved in defining the plan? What role will each play? What aspects of long-range talent management or future growth will you consider? How does the organization culture influence your options? What is your time-line?
• Who makes final decisions on each person to be let go? Who will review all selections, their personnel records, and attributes to ensure you are not making mistakes that could hinder your future plans or increase risks? Who will ensure legal compliance?
• What will you offer those whose employment is being terminated? Will you give them pay in lieu of notice? Severance? Outplacement counseling? Internal opportunities for other jobs? Do a career fair for other employers? There are a lot of options to consider and you need to make these decisions in advance.

One of the riskier things employers do is to ignore any existing policies or precedents - what are yours? Another is to manipulate the process so that some employees are treated differently for no apparent reason.

Step 3. Get your employment attorney involved.

Whether you want to spend the money or not, involving your employment attorney in the planning process is a wise investment. It will help ensure you have covered all relevant issues, addressed any potential legal risks, and mitigated those you can.

Step 4. Train your managers

Once you know who will be involved, you need to train their managers on what to do and say to make the process as fair and humane as possible. And managers need to be coached on how to help those who remain work through their issues and move forward again.

Locations should be chosen carefully, a plan for people to depart and return for personal effects devised, and notice to others defined. Communications and IT access must be addressed. If needed, additional security may be arranged for the day of the event. Managers need to know all of this and what to do in case of unusual behavior, threats, or breakdowns.

Step 5. Implement Quickly

Once you have a plan, a final list of employees being let go, and your employment lawyer's review, MOVE! Do the terminations as soon as possible and complete all on the same day.

The termination meetings should be brief and final and include written letter of termination and any benefit materials or outplacement assistance details. Each person needs to know that the decision is final, so include that in both the notification discussion and in writing.

Each individual who is treated with fairness and respect is less likely to become a legal risk or negatively impact your organization's reputation. And how you actually handle the whole process tells your remaining employees a big story, so make it as positive as you can.

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