By Helen Luketic, CHRP

You’ve all heard the rhetoric before of various ways to make your workforce lean in these tough times:  natural attrition, wage cuts, unpaid leaves of absences, introduction of the shorter work week, cutting of overtime and contingent staff, and hiring freezes just to name a few.

After hearing about other corporate messes, everyone now knows that laying off your staff is the last thing you want to do.  Why?  Chances are, you may layoff the wrong staff, have to rehire the good ones or the ones that make you the most money.  You may have to bring that staff back and pay more when times are better.  And, the War for Talent still exists for those specialized roles and for those employees that quite simply have the right stuff.

But what if you’re left without options and you have to lay off some of your workforce?  There are ways to do it, like slashing 10% across the board, getting rid of low performers first, or offering workforce-wide voluntary term packages.  Quite frankly, these options are part of the old school thinking.  Laying off the wrong way can:

·         add to labour costs instead of cutting them

·         lower your stock performance

·         decrease your customer satisfaction

·         lower morale leading to increased turnover and lower revenue, and

·         ultimately create some bad PR for your organization, meaning, when you’re ready to hire again, job seekers will think twice.

Don’t believe it?  The facts are here: Alternatives to Layoffs 

For the first time, you have some significant data and research around you to streamline your workforce without ultimately shooting yourself in the foot.  Get with the program and cut your workforce with both your HR and business smarts.

The Hard Facts

Brilliant, someone out there has done the legwork for you!  There are some academics out there that have researched the effects that layoffs have on an organization and have come up with some conclusions.

When some staff are asked to leave, other staff will leave with them and you don’t know who[1]

Research shows that when you let go of staff, others will voluntarily follow.  Intuitively it makes sense and now you have the data to estimate a) how many employees you should really layoff if others will follow or b) how you will plan retention activities to support the layoffs.

Even a tiny layoff of 0.5 per cent of your workforce can increase your voluntary turnover by 25 per cent!  Here are some estimates of voluntary turnover an average company may see based on the volume of layoffs:

Want to calculate the potential increase in turnover? Get the formula. 
 

Have faith!  HR can lessen voluntary turnover by implementing a smart post-layoff game plan.  Research suggests these activities can help:

• Proactively communicate the reason for layoffs; give employees the avenue to communicate openly with management
• Show you care for your current employees and that you’ve shown compassion for those that have had to leave
• Where alternate employment exists and if your employees have the skills and experience, they are more likely to leave – make the grass seem less green on the other side and give them a reason to stay with your organization

Couple downsizing with restructuring for long-term impact

Just because you’ve cut your workforce, you shouldn’t expect that your organization will magically have more money – you’re not making money because there are some larger issues at play than just having too many employees on the books.

Rightsizing and restructuring must go hand in hand.  Basically, if you’re laying off staff, it’s because your operations are no longer generating enough revenue to cover the costs.  So, why would you cut staff and not reorganize the way you do business? Consider eliminating a department that doesn’t add value or generate sufficient revenue, reduce the department that is not a core service, consolidate a back-office department or streamline processes to gain efficiencies, or introducing new technology to add-value.

Read more about this concept:  Job Cuts Often Fail to Bolster Stocks. 

Segment your staff so you don’t get rid of the wrong people

In 2000, ICBC offered voluntary separation packages – a voluntary layoff if you will – and learned some lessons along the way, including:  communication is key, plan ahead, and reduce staff in the right areas.  The marked sign of true HR professionals – own up to the facts and commit to a better future!   (Original story:  Downsizing by design.)

Consider keeping your sales staff, especially the ones that are bringing in your bread and butter.  Consider who will take on the extra workload if one employee leaves, or if the workload could be made more efficient or even cut out altogether.  Which roles are not unique to your organization and are not core to your operations?  Which roles do you need to maintain for compliance purposes?

Use the research around you for evidence on how you should approach workforce layoffs.

Use the information and data you have within your organization to make solid decisions.

If you choose ignore the information around you, I have an alternate career opportunity I’d like to tell you about – politics.

Are you a keener?  Or just sceptical?

Here are some more handy (and free!) resources for you:

Layoff Missteps

Effective Layoffs:  how and when to do them:
Responsible Restructuring – includes chart showing the voluntary turnover calculation in action

Yahoo! layoff managerial toolkit leaked on the net 

Helen Luketic, CHRP brings more than nine years of HR experience to her current role as HRIS Analyst at Vancity, where she’s assisting the organization implement new HR systems and processes. For her innovative achievements at Vancity, Helen was the recipient of BC HRMA’s 2008 Rising Star Award. In her previous role as Manager, HR Metrics & Research at BC HRMA, she combined her CHRP, B.A. in Economics, HR information systems knowledge and experience in HR metrics to develop the HR Metrics Service and related workshops, presentations and webinars to teach HR professionals about HR metrics and benchmarking.