Do you think layoffs are strange way of dealing with cost-cutting or re-organisation?
NK There are various kinds of layoffs. While the obvious trigger for a layoff can be a re-organization, no two organizations go about this in exactly the same way. What would be "strange" here? Here one can talk about two aspects - the manner in which it has been done and a sound business case for doing it. In the first category perhaps, laying off good talented people and informing them and the world around, that they have been relieved on "performance grounds" is like adding insult to the injury.
We have seen many such cases in India during the 2008 recession and even as we speak. A leading e-retail firm, axed 100s of jobs as part of their so called "austerity measures" this year. However, the press was informed that the employees were relieved for non - performance. I think investors get to hear a different story and the world, in general - just the opposite. This is indeed a very unusual way of dealing with layoffs.
This brings to the second point - most Managers and CFOs typically overestimate the savings they will achieve on account of such measures. CFOs can give us employee costs to the last rupee, but they can't measure the value of employee contribution, which creates a bias toward cutting. A recession cycle usually last 12-18 months, after which demand picks up, so it's pretty common for a company to have to start hiring about a year or so after its big layoff, undoing the savings it began realising just 6-8 months earlier (assuming a typical 3 - 6 months' worth of severance pay). So let me state at the onset that layoffs are no longer a default response to cost cutting or re-organisation.
What is the biggest challenge in conducting layoffs?
NK Communication is the biggest barrier in handling layoffs. For one, consistent and authentic communication is far more respectable than speaking in many voices about the event. A loss of a job has a major psychological cost for the individual and the family. Owners of various small and medium businesses in India understand this cost far better than many poster boys of the industry - which is why, they are extremely sensitive to downsizing. I have come across many untrained HR Leaders who tend to templatize this process just like they do most of their other projects. So checklists and FAQs take precedence over spending quality time to understand and discuss about the needs of the employees being laid off. Layoffs are a very much emotional process and only trained select individuals should be entrusted with the task. I recall when the first signs of downturn hit IT in 2002, there were hardly many senior business leaders who had the knowledge of conducting the layoff conversations. I took on myself to lead the way and in the process trained few of them.
Communication back to the survivors - "employees not affected" is equally crucial. One of the research found that downsizing a workforce by 1% leads to a 31% increase in voluntary turnover the next year. Layoffs apparently tend to cause a feeling that they have lost control, workplace morale takes a beating because the fate of their peers sends a message - that hard work and good performance do not guarantee their jobs. Hence a sustained communication and connect with the remaining employees is paramount.
Are there alternatives to layoffs? Can organisations think of some creative ways to downsize without letting the employees lose their jobs?
NK One does hear about some attempts being made to look for alternatives - both in global arena and back at home. But for me it all begins with asking the "Why" of the actions? What metrics should the organisation use to determine whether layoffs were effective or not effective? Like any other good strategy, an effective workforce change strategy should include goals against which success can be measured.
Hence before we look at alternatives, a disciplined hiring strategy is key. Hiring freely during good times and then cutting jobs in downturns, cannot be a smart strategy.
Furloughs, both unpaid or partially compensated leaves have been a widely accepted practice. This may depend on local labour legislations though. I remember when I was in Hewlett Packard, the practice of furlough during the Christmas month was so deeply cemented in the culture that the Global CHRO would announce it as early as in March, urging the company employees to plan for it in advance. Over the years this practice alone had led to substantial cost savings for the company.
The much talked about Nokia's Bridge program not withstanding Re - skilling is another alternative which prepares the talent for future. Developing quality improvements initiatives, scrap reduction programs, R&D projects, and maintenance of plant and machinery are some other ways to utilise the bad times.
The owners of Reliable Enterprises (a Nashik based manufacturer of auto-components with plants across India and the US) held on to 100s of employees when it was near certain their jobs would be lost to the last recession. As the company has implemented various best practices like 5S, Kaizen, GMP, TQM and so on, over many years, these employees were conversant with the same. So, a separate entity was formed and these employees were advised to offer consultancy and training services to small and medium businesses in these areas. Nobody lost their job here - on the contrary they were asked to diversify their skills without worrying about their monthly pay checks.
Whose call is it anyway? Does HR have a say in the layoff process?
NK Yes and No. The Business side takes the first call but HR can challenge the same. In many cases, HR folks would know what is going to hit their employees in advance, if they were plugged into the finance, sales and operations side of the business. Major decisions don't happen in one day - various triggers and alarms go off before finance begins to look at headcount closely. So, I strongly believe that HR still has room to change a decision, if it can act proactively and quickly.
As an HR manager - what has been the most difficult decision that you have ever made in a layoff process?
NK During one of the IT downturns around 2002-2003, while I was implementing a token restructuring exercise, I had to encounter an employee who had distributed his "wedding card" to many of us, just a week ago. The guy was going on a leave to get married. As one can guess it was a difficult moment. The conversation went off way beyond the stipulated time. I vividly remember his Project Manager who was sitting alongside with me, also broke down during the meeting. I saw somehow managed to make him absorb the consequences of the company's stated decision. In hindsight more than that difficult conversation, my proactive follow up in ensuring that he gets re-employed was far more satisfying. He has done well, married to the same girl he had planned, albeit a month late.
What is the role of HR in meeting employee expectations - of those who are being asked to go and of those who remains but may lose faith in the organisation?
NK There are various things that need to be done. Timing and sequence helps tremendously. For one, we need to handhold both sets of employees. Perhaps, those who stay back need more attention. There are numerous studies to show that whatever gains business make from handing out pink slips is quickly offset by major losses in productivity and efficiency that follow a mass layoff. This is because organizations do not think much of what happens to those who are left behind. These people are left to fend for themselves - perhaps, the Organization thinks these employees should be grateful for their jobs and continue working with the same level of engagement.
Market shifts, new technologies and disruptions caused by competitions can require companies to do major restructuring. However, HR professionals always need to show the way of how the process is effectively handled - in the most humane and respectful manner possible. The ensuing changes on a personal level must be supported for as long as is necessary to ensure that the departing employees find a satisfactory solution in terms of standard of living, stability, family life and self - esteem.
Do you think a dreaded thing like layoff can be dealt with positivity or optimism?
NK At the end of the day, both employees and HR dread layoffs. But done right, you can help employees digest the termination in a positive way. If employees are in the loop and trust the management's decisions, they would be more open to swallowing any bitter pill.
Sometime, employees want something as basic as a place to sit in for a month, after termination. One company had a senior executive continue working in the same building even after he was relieved. Apparently, his wife was a cancer patient and he felt he needed some time to break the news to her.