THE RIGHT WAY TO DOWNSIZE
Sequestration's here, cuts and changes are in the winds of Washington and the surrounding country. Will it cause firms, contractors, organizations, programs and agencies to downsize, reorganize, or eliminate positions? No one knows for sure, but it's hard to imagine that it won't be likely for some, especially in the DC area.
Are people, firms and agencies worried? "Every government contractor I speak to is putting a contingency plan together," says Gary Cluff, founder of Project S.A.V.E., a free networking group for area employment professionals and job seekers.
Downsizings happen all the time. I've had a career working with firms and organizations that merged, dissolved, reduced, reorganized or just developed new products or services that needed a different talent mix or skill set than the one they had. I've seen it done well, and I've seen - and heard about - it being done poorly. Unfortunately, it's too often done poorly, especially if we look at longer-term effects.
A 2008 article in The Economist that discussed "Idea: Downsizing," referenced an American Management Association survey of 1000 companies on the effects of downsizing. "Only 48% of those that had cut jobs... said their profits went up afterwards," the survey reported. The Economist's "Idea: Downsizing," article also cited an earlier special report in Business Week on the changing structure of the workplace that warned, "the great risk of downsizing was that it simply resulted in fewer people working harder. It did little to change the way we work...."
But that doesn't have to be. There are firms, organizations and agencies that reorganize, refocus and recommit through a reduction-in-force to the benefit of its employees and stakeholders. How do they do it?
Management guru Peter Drucker has written numerous articles about downsizing and reductions-in-force including a classic titled "Really Reinventing Government" in The Atlantic. "The way to get control of costs," Drucker stated, "is not to start by reducing expenditures but to identify the activities that are productive, that should be strengthened, promoted and expanded. Firms, agencies and programs would be wise to ask these questions:
1. "What is (our) mission?"
2. "Is it still the right mission?"
3. "Is is it still worth doing?"
4. "If we were not already doing this, would we now go into it?"
"The overall answer (to the last question)," Drucker added, "...is almost never 'This is fine as it stands; let's keep on.' But in some - indeed a good many - areas the answer is, 'Yes, we would go into it again, but with some changes. We have learned a few things.'"
These thoughts are international, not just about us in America. In a more recent report from the Geneva chapter of the European Baha'I Business Forum (EBBF) titled "What is the 'Responsible Way' to Restructure an Organization?" other useful questions for leaders, managers and employees of organizations going through restructuring were suggested including:
5. "What are the most effective and productive things we do now, and how can we enhance and expand those things?"
6. "Does our basic business/mission need to be redefined?"
7. "Can we enhance effectiveness through mergers, joint ventures or alliances?"
8. "Should we divert ourselves completely of certain businesses, programs or activities?"
9. "Is there a need to rebalance the portfolio of our businesses or services?"
10. "Should the organization divest or outsource certain businesses or activities?"
11. "Have we talked to and listened to the employees who do the work, who are in direct contact with the clients/customers we serve?"
A question we at Morris Associates Inc. always ask top executives who are planning to reduce staff is:
12. "What do you want the organization to look like, what do you want it to do and who will you need to do it AFTER notices are given and the cuts have been made?"
A result of this organizational analysis and soul-searching can be a list, says Drucker, "with activities and programs that should be strengthened at the top, ones that should be abolished at the bottom and between them activities that need to be refocused...."
DOS AND DON'TS FOR DOWNSIZING
A well-managed downsizing/reduction-in-force is planned, prepared, announced, communicated and implemented so needs of all stake holders are met in a way that the organization can move forward quickly and productively as a good place to work that makes its mission a reality.
Do think of a downsizing as a complex project not just a cost reduction.
Do make a complete checklist of actions to be taken.
Do develop a detailed schedule for notification day: who will give notices to whom, where, and what happens then. Also, how, when, and by whom notification will be given to others in and outside the firm or organization who have a need to know.
Do provide notification meeting briefing for managers and supervisors who have to give notices to employees.
Do treat all employees with respect and dignity. Keep in mind departing employees will communicate with others; you don't want them bad-mouthing the firm or organization.
Do plan what will be said to remaining employees after notices are given. It is important for management to have a plan for moving forward and communicate it quickly to those left who will carry out the plan.
Do encourage remaining employees to stay in touch with co-workers who were let go and be supportive. Many terminated employees have said that losing their jobs did not hurt as much as being ignored by former friends and workers after notices were given.
Don't cut everything equally. One of the biggest errors firms and organizations make when they need to make cuts is to spread them evenly across all functions and departments thus making downsizing something surgeons warn against: amputation before diagnosis.
Don't automatically equate "positions eliminated" with "employees terminated." Many organizations that go through RIFs retain needed workers by reassigning them to unfilled and needed positions, then eliminating their old positions. During the 1990s 3M reassigned 3,500 employees to other jobs rather than make those employees redundant. When Ronald Reagan "reorganized" the Federal government several agencies reduced staffing by more than 100 employees each either without terminating anyone, or with only giving actual notices to a small number.
Don't wait passively to see how sequestration and economy works out. Smart managers are considering options and outlining contingency plans now.
Don't use a voluntary a separation program open to all as an alternative to a management-planned reduction-in-force. Some senior executives think a voluntary selection-out process is a more humane way to treat people. It may be for those who take it, but it may not be for those left, or for the good of the organization and the clients and customers it serves. Three examples:
- A Big-3 automaker offered a voluntary separation program expecting 20,000 would take it and hoping 25,000 would. Actual result: 35,000 took the offer.
- An international telecommunications firm offered voluntary cuts many of their best and most-needed technical workers took the offer. Since many of them and their experience were virtually irreplaceable, the firm had to hire them back - as consultants, and that was after they had to pay them generous severance packages.
- An international financial organization offered voluntary separation hoping 300 employees would take it; 500 asked for it, the firm extended it to 400 then had to tell the other 100 they could not get it, thus creating a large group of disgruntled employees.
Keep in mind, when a reduction occurs three groups of employees are affected: Those who go, those who stay and those who have to make the RIF decisions and give the notices. Often the last two groups have more problems and stress that those actually let go. Keep the needs of all three in mind, especially the last two groups since they are the ones who will have to carry on the work of the firm or organizations after notices are given.
For a free copy of Morris Associates Inc.'s Guidelines for Managing a Reduction-In-Force click here.