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In recent newsletters, we have discussed the challenges businesses face at the front end of the employment process: how to sort through hundreds of applications to find the best candidates and how to structure the interviews of those candidates so they are fair and effective. In this newsletter one of our associates, Jeff Thommes, talks about handling a situation that is both difficult and awkward — the exit interview with a departing employee of a troubled business.

This is, of course, a situation we all would like to avoid but we see reminders of its recurrence week after week. About a month ago, for example, management of Delaware's largest newspaper laid off 28 of its editorial and advertising employees. Jeff's article offers helpful suggestions for navigating this delicate process, and he also points to one of its benefits — the opportunity it provides the struggling business to learn from its departing employees what it might be able to do better.

We hope you find these ideas helpful, and we encourage you to forward this newsletter to anyone you think might find this information valuable.

As always, your comments are welcome, and we look forward to hearing from you.

Sincerely,
Tom Beane, President CMC CIRA

To conduct exit interviews properly:

Standardize the process, with separate meetings to discuss administrative (severance, benefits, etc.) and work issues.

Make the departing employee feel comfortable, and ensure confidentiality in all discussions.

When conducting multiple interviews, look for recurring themes that suggest areas where the business should consider change.

Keep the employees’ supervisors and top management informed of all significant findings.

Treat departing employees with dignity. It will help preserve the standing of your business in the community.

When valued employees leave a business, most companies have some sort of ritual sendoff. Perhaps it's an office party, or lunch with the boss.

It's not always that way for companies that are struggling, and such celebrations could strike a discordant note when downsizing or restructuring prompts the departure.

In these situations, another step in the departure process, the exit interview, can become even more difficult.

Companies that take exit interviews seriously use them to determine areas where the business can improve its procedures, to gather information about employee characteristics that can be helpful in recruiting new employees, and to give departing employees a positive feeling for the company as they transition into their new life.

Those objectives are relatively easy to achieve when a company is running smoothly but become a challenge during a downsizing or restructuring. After all, businesses become distressed when leaders fail to plan, cannot operate efficiently and fail to react quickly to challenges. A management that can't run a business well isn't likely to handle the exit process well either.

Often the departures are emotional, as any remaining positive relationships become frayed, as managers realize they delayed too long in conveying the bad news, as employees struggle to understand why their job, and not someone else’s, is being cut, as everyone wonders what might have been done differently to have prevented this outcome.

It could have been done better, but how?

First, good communication between management and employees becomes more crucial in bad times than when things are going well. If everyone has an understanding of the problems the business is facing, it becomes less of a shock for employees to accept the reality that some jobs, including their own, might be eliminated.

Second, just as companies improve their hiring by standardizing their preliminary screening and the interview process, so should they standardize procedures for managing exit interviews.

The procedure typically has two parts: a discussion about the employee’s experience with the company and a meeting to discuss retirement or severance packages, insurance and any services provided as part of the separation. In larger companies, specialists in the human resources department handle these interviews, but that is not always the case.

With smaller companies, it is sometimes more productive for a supervisor, preferably a supervisor one level above the employee's manager, to handle the discussion about the employee's experiences. Another option is to entrust this task to a mentor or coach who has the respect of the departing employee.

While those options are the most common, in a distressed business I strongly recommend that the company's top leadership participate as well. A valued employee whose services are being terminated deserves some direct acknowledgement that failings in management led to this situation. READ MORE

To view additional articles, please go to:
http://www.beaneassociates.com/news/newsletter/

Situation: A large domestic automobile dealership with multiple locations in the tri-state area was in a significant out of trust position.

Result: The secured lender hired Beane Associates to be a consistent on-site presence to review and monitor the out of trust position. This daily (eventually weekly) auditing of the books and records resulted in stabilizing and maintaining a fully “in trust” dealer floor plan. The dealer re-engineered itself and eventually centralized in a single profitable location.

Situation: The company provided supplemental electrical services and relied on “event billing” when energy grids go down during severe storms. The company experienced a series of unseasonably mild periods and was dealing with restructures, ownership and personnel transitions and severe working capital limitations.

Result: Beane Associates reviewed cash flow projections and compiled data that identified improvement opportunities and alternate creditor buyout methods. By following these recommendations, the company established cash improvements to sustain operations while reducing debt and re-establishing management credibility. This gave the business time to relieve the current creditor and secure funding from another financial institution.

Situation: A marble and tile fabricator was caught in the economic downturn. A major client filed for Chapter 11 protection that severely impacted revenues and cash while wiping out 35 percent of the company’s expected collectible receivables.

Result: Beane Associates was retained to work with the owner as he attempted to restructure and realign operations to fit the new economy and revenue base. We assisted the company with building and implementing a rolling 13-week cash budget, restructuring the organization and strategically realigning assets and sales to meet new market conditions.

Situation: A family-owned manufacturer of products directed to the education industry experienced continuing declining sales and was unable to repay its lender. The company was hindered by outdated technology and its largest customer starting a competing business.

Result: The lender retained Beane Associates to assist and monitor the wind-down of the business. The wind-down lasted two months with strict adherence to the approved budget. Additional cash discovered in previously non-disclosed bank accounts and the sale of intellectual property resulted in returns to the bank exceeding the initial estimate by 40 percent.

Situation: A contractor of self-storage units with a large construction loan in default and an expiring forbearance agreement was no longer servicing its debt. The secured creditor insisted that cash needed to be tracked in order to enter into a revised forbearance agreement.

Result: Beane Associates was hired by the secured lender to review and compile a true cash flow. We were able to determine availability of cash for debt reduction. The secured lender used this information to institute a second forbearance agreement.

Situation: A fencing contractor was unable to maintain debt payments. With a foreclosure imminent, the contractor filed a Chapter 7 bankruptcy. Significant account receivables and inventory remained.

Result: Beane Associates was hired to liquidate and monitor the remaining assets. Beane Associates aggressively sought collections of the receivables. These immediate collection efforts netted a return on receivables in excess of 30 percent. Remaining inventory was sold to a competing contractor. With the sales of these assets and the final sale of the real estate, the secured lender received a full recovery.