Dr Madeleine Petzer advises on ten actions to take to try to avoid job losses
Redundancies and restructures are nothing new. The strategy of reducing headcount to reduce organisational costs is familiar to many organisations. Prior to the outbreak of Covid-19 in the UK, many organisations, including William Hill, Centrica and Jaguar Land Rover, had already announced large scale redundancy plans. Unfortunately, with the coronavirus pandemic outbreak and the negative impact on our economy, we are faced with mass redundancies across the globe. These are unprecedented times, that require specific measures to safeguard jobs, where possible.
Following the outbreak of coronavirus, the airline industry was the first to announce redundancies. Flybe went into administration and Norwegian Air stated that more than 7,500 employees may lose their jobs. Virgin Airlines asked staff to consider voluntary redundancies. The outbreak is also impacting the hospitality industry and thousands of service staff face job losses. The end is far from sight and we should expect a snowball impact on job reductions. The UK government’s economic support package will make a huge difference but for some organisations, the pain of this situation is inevitable and business closure may be the only option available.
But there are strong arguments for employers to mitigate redundancies where possible, not just due to this pandemic, but in general. If they can, they not only serve society better, but can also support the longer-term interests of their organisations.
Do not underestimate the negative impact of redundancies
Findings on the success of redundancies mostly demonstrate that headcount reduction as a method to improve organisational performance, productivity or cost competitiveness tends not to achieve these aims, highlighting a gap between actual results and intentions. Research indicates that most companies that implement redundancies as a cost-cutting exercise fail to reap economic success.
Redundancy programmes have a negative impact on the entire workforce. Those affected include the survivors (employees who remain in the business), the victims (the employees who leave) and redundancy envoys (those who assume responsibility for activities such as the strategy, planning, process, implementation, communication and consultations associated with the redundancy programme).
Redundancy envoys describe the process of implementing redundancies as a rollercoaster of emotions, including shock, horror, anger, sadness and guilt. There is strong evidence to demonstrate that the impact of implementing redundancies is profound, leading to serious negative implications for redundancy envoys and subsequently, the organisation.
The best solution is to explore what other options are available before considering redundancies.
Practical interventions to consider
Redundancies may not always be preventable, but there are undoubtedly actions that should be considered to limit or even avoid them.
1. Do not panic and overreact
Many organisations suffer financial difficulties. At first instance, it is important to have a thorough understanding of the reasons behind the financial challenges. Of course, in the current situation, the reason is obvious.
Redundancies can be very expensive to an organisation, especially if it offers enhanced packages. Consider the following questions: Is the situation short-lived? What are the chances of recovery? If recovery is possible, when is it going to realise? How are your competitors coping and adapting?
Ensure you have comprehensive market research to inform the decision-making process. The worst decision to adopt is to make critical employees redundant. You will need them when the crisis is over. Consider the implications of losing employees with valuable skillsets that are already very challenging to find and retain. If rash decisions are made, how feasible would it be for you to hire talented employees back? Would they join a company that has a reputation for redundancies and that may appear to have lost credibility in the business world?
Another reason to not overreact or implement redundancies hastily is that once you make someone redundant, you cannot fill their vacancy for six months in accordance with employment law. This ratifies the point that the implementation of redundancies is a long-term strategy. If you are thinking of redundancies, consider the reality that you will be without that role for a minimum of at least 12 months. The consultation process itself could take three months, depending on the scale of the redundancy programme, before you even get to the stage of exiting the employee. Carefully consider if the redundancy costs and potential recruitment cost to replace the person in future, combined with the disruption and negative impact, balance out against the potential costs-savings. If not, it probably is not worth considering the redundancy.
We do not know how long this pandemic will impact our economy, but employers should be making contingency plans for the short and medium terms to protect the organisation and its people.
2. Adapt your product or service line
Think about how you can adapt your service or products to meet demand in a different way to generate income through alternative means. A workshop or discussion group usually works best to facilitate these brainstorming sessions.
With the current coronavirus pandemic, many food service organisations face a reduction in their customer base due to limited social contact. However, people will get fed up with cooking all the time or perhaps may not want to leave their homes to go and get food. What about responding to the market needs and demands by offering a catering service that provides home delivery? Give service staff the opportunity to deliver meals and chefs and food preparation staff can be maintained instead of simply shutting the doors.
Another option to reduce redundancies is to only address a closure in the area of business that is not producing results. For example, if there is a specific product line that is not selling but affecting the overall profit and loss of the business, address the manufacture of that product only. It may have a small, short-lived impact to save the organisation overall.
3. Exhaust all other measures of saving costs
Organisations can be creative when it comes to saving costs when the going gets tough. Some examples I have come across include the reduction in non-essential travel, a reduction in company vehicles, and introducing recycling schemes to generate a financial return. If a redundancy programme is the last resort, the management team will gain far more understanding and buy-in if they can demonstrate they took other measures to reduce costs and that reducing headcount was truly the last option available.
The government’s announcement of support package for businesses is a major opportunity to be taken. It is unclear how employers will respond to the various incentives that it provides, but there is no doubt that it can be used to help people keep their jobs and stem the impending rise of unemployment.
4. Open communication and consultation with employees
It is easy to fall into the trap of letting senior management make all the tough decisions on how to address a business’s financial problems. However, a better approach is to be transparent with business challenges and share the dilemmas that may i