There is nothing like a frenzy of corporate downsizing to render the more cynical corporate observers right. Many organisations have been peppering their corporate vision with statements such as "People are our best asset” for some years. However enter the need to shrink, or even close, an operation and such statements are being exposed as throw away tag lines. The scenario where the retrenched employee is tapped on the shoulder, marched to Human Resources and then quick stepped from the building forlornly clutching a cardboard box of personal items, has been an all too familiar occurrence over the past months. Or the media frenzy that followed the announcement by Pacific Brands of the closure of its local clothing manufacturing businesses earlier this year. This triggered a fierce community backlash due to the announcement of 1850 job losses and the symbolism of shutting down local manufacturing.
In a special financial crisis spotlight in May 2009, Harvard Business Review (HBR) interviewed the veteran of many recessions, Kenneth Freeman about this phenomenon. Freeman, a 20 plus senior manager at Corning, former chairman and CEO of Quest Diagnostics and now an executive with investment firm Kohlberg Kravis Roberts, gave some insights from his experiences into the "right way to close an operation”.
"This is a new experience for a whole new generation of leaders. Many managers have never had to shrink their operations or workforces drastically and, as a result they are making a common mistake. They assume that they have to be tough guys who make the decisions and that afterwards they can delegate the implementation to others with one marching order: "Go fast!”
This approach makes no sense. It can destroy shareholder value. In my more than 35 years in turnaround situations, I have come to believe that leaders have to sue "soft hands” as well as "hard hands” to be successful. Yes, they must be decisive – they can't shy away from making the call to close or shrink an operation. But they must also be heavily engaged in ensuring that employees, customers, suppliers and communities are treated with consideration and compassion.
What does using "soft hands” mean? Many of these principles may seem obvious or just plain common sense, but I have long been amazed by how frequently they are ignored.
Treat employees with dignity, fairness and respect – the way you want to be treated.
- Address "What does it mean for me?”
Employees have the right to be treated as adults. They should be told why they are losing their jobs (whether it's because of a drop in demand, changes in technology, or productivity and quality issues), how the closure will affect them (in terms of timing and severance benefits), what you will do to help them land on their feet, and what you will need from them to help customers through the transition.
- Communicate until it hurts.
Studies say that people need to hear a message at least 6 times to internalise it. The shock of the initial announcement will prevent employees from absorbing everything you tell them at that time. After all, their lives are being turned upside down. So follow up with both written and oral communications. Then keep people constantly informed along the way.
A closure or downsizing is not an excuse for leaders to go into hiding. It is an occasion when people need to see their leaders.
If the operation being closed is or downsized is large or historically important to the company, the CEO should make at least one visit. Other executives – the division manager or the head of the business unit- should be visible from beginning to end.
Employees' accomplishments and contributions should be recognised. It is extremely important to follow a general announcement with smaller group discussions led by members of your management team, who should also make themselves available for individual conversations.
Don't assume that all your managers have the necessary communication skills. Work with HR to train them in advance. Serve as a model yourself, coach the managers who need help and ask senior managers who are good communicators to do the same.
· Set the tone.
The leader should take personal responsibility for the organisation's behaviour. Although the CEO of a major corporation obviously can't do all the nitty-gritty stuff himself, he must be engaged and stay abreast of the discussion and implementation process.
· Deliver messages that are consistent and positive but grounded in reality.
To ensure that employees don't let up during and after closure or lay offs, be as positive as possible and give everyone a purpose. By "everyone, I mean those who know they are going to leave, those who know they are going to survive, and those who don't yet know their fate. Explain that the decision is being made for the sake of the overall business, not because the people who are leaving have done a bad job.
· Don't summarily throw people out into the street.
I cringe when I see newspaper photos of newly laid-off employees toting boxes of their personal belongings as they are being escorted off the premises of some company. Remember that the world is a small place and people do not forget.
Concerns about sensitive information are often used as an excuse for such behaviour. I don't buy it. You can protect information and treat people humanely at the same time. You may have to cut their access to sensitive information immediately – which means of course that they will no longer be able to perform their jobs. But you can always give them time to say their goodbyes and retrieve personal material.
· Honour company commitments.
The company's severance policies should be fully explained when a person is hired and included in the employee handbook. The company should feel obligated to adhere to those policies. If any of them are changed, employees should be told at the time – not when they are told they are losing their jobs.
· Treat everyone equitably
Who stays and who goes should be decided on an objective basis. Consider past performance reviews along with externally conducted assessments.
· Help people find jobs.
If conditions warrant it, consider affected employees for opportunities at other locations in your company or offer them contract work. At the very least hold job fairs and help them write effective resumes and learn how to leverage their personal networks.
· Put yourself in their shoes.
How can you know whether employees are being treated with dignity and fairness? Attitude surveys throughout the shutdown or layoff process are one obvious way. In addition regularly ask yourself how you would react to various actions or inactions. Everybody has to have a common platform of understanding. If its not provided you will create chaos and lose a lot more than you gain.”
