HPMD Bullet: Downsizing Ethics

HPMD Bullets

BULLET #13
DOWNSIZING ETHICS

Downsizing, consolidation and integration became the norm in the business climate of the 80's and 90's, and has continued unabated. It's often required to become more competitive in the product marketplace as well as the financial marketplace (attracting needed investment). In specific terms, this means that a business' financial ratios (e.g., return on sales) must constantly be competitive with like companies. For example, one of our clients had an objective to achieve 16% return on sales in the next fiscal year. To achieve this they had to consolidate operating departments and eliminate some unnecessary management layers.

"How" a company makes these reductions in force is as important as "what" reductions are made. The following is the list of process objectives we believe companies ought to achieve:

Retain better performers (do not eliminate 1 & 2 rated performers, wherever possible).
Include managers in the decision process (Allow department heads to propose what reductions to make and who to cut to achieve the overall goal; invite the option to propose leave with out pay, salary reductions for managers, or other creative solutions to achieve the dollar target. Choice is critical to handling crises, and don’t underestimate the value in sharing the pain!).
Be honest and candid with employees (tell it like it is, painful or not).
Announce cuts quickly (don't wait weeks after the decisions are made). Do it once, and then announce it's over. Also communicate any reassignments.
Treat exiting employees fairly (provide severance based on service, provide facilities and assistance in preparing resumes and for interviews, provide as much advance notice as possible to allow time to locate another position –the goal is to communicate that people issues matter, even in the case of cutbacks).
Motivate departing employees required to remain for a time period in order to complete the transition (e.g., offer stay-around bonuses).
Provide the business rationale for the cutbacks so employees understand "why".
Offer employees choices wherever possible (relocation, transfer to another division, transfer to other department, time to find an alternative outside position).
Hold vacant replacement slots open for exiting employees to have first shot at these.
Make announcements in person. Hold company meetings during and after the cuts (say what's coming, and then that it's over).
Meet with exiting employees one-on-one or in small groups only. Give managers the option to pass responsibility for these meetings upward (e.g., buck stops at the President).
Provide summary of severance benefits in writing.

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