Job losses are everywhere. Some say you're not a real boss until you've had to hand over a P45. But if dismissing someone is hard, being on the receiving end is worse. If redundancies are on the cards, planning and consultation help both sides retain their composure and self-respect, says David Butcher
It's the toughest 10 minutes most managers have to face. You call your victim, the member of your team that you're about to fire, and ask him into your office with a matter-of-fact 'Can I have a quick word?'. Then he's sitting across the desk from you. 'I'm afraid there's no easy way to say this, Bob,' you begin. You force yourself to look him in the eye, but over the next few minutes you steadily demolish his work life, his self-image, maybe his career. You remember his nice wife, the young kids whose pictures are on his desk, the new house he just moved into. And, though you realise this had to be done, that it has been planned and rationalised, you do not at that moment feel good about yourself. Not at all.
If you've never been through it, count yourself lucky. But with the deepening downturn, redundancy programmes that haven't been seen since the early '90s are back in the headlines, and a new generation of managers are having to wield the axe for the first time. Many will flounder, lose their grip and make a complete hash of it. 'It's very, very hard,' warns HR consultant Elaine Rowe. 'You have to face it, sort it, quickly and honestly and with trust. Most people don't mean to screw it up, but it happens.'
The worst of it is that when the likes of Marconi or Motorola, Gap or Marks & Spencer announce a round of layoffs, our first thoughts lie with the victims. For if handing out P45s is a grisly task, getting your cards is worse. It has happened to three people I know well, and they all say the same thing: even if you see it coming, redundancy is still a body blow when it lands.
Here's how an American friend who got laid off a few months ago puts it: 'I knew it was coming down the line and when it finally happened it was almost like a relief, plus I got a ton of money out of it and I could move on. But even so, it's not something you shout about. You don't enjoy going home and telling your kids: 'Hey, guess what, I got canned today.''
So if you find yourself cast in the unenviable role of corporate executioner, how do you make what is inevitably a grim business proceed as smoothly as possible?
Rule 1 is: Fools rush in. Before you start wielding the axe, make sure staff cuts are the only answer, that they won't leave you weaker than when you started. Crawford Gillies, European MD at management consultants Bain & Company, has seen firms reach for the chopper too readily. 'Often companies don't realise the full cost until it's too late,' he says. 'It's incredibly important not to rush into layoffs - the smarter firms are becoming more aware of the cost of losing experience.' So find ways of leaving compulsory redundancies till last - by seeking volunteers or looking at early retirements or by not replacing people who leave. Get creative. US securities broker Charles Schwab, for instance, persuaded workers to take one unpaid day of leave every month as a way of deferring job losses. In Britain, Accenture has started offering its consultants up to one year's 'flexi-leave' on 20% of salary.
'Companies got burned last time round,' says employment lawyer Andrew Hodge, a partner at Wragge & Co. 'When things started picking after the recession, they had the devil's own job in recruiting people.'
From the moment the decision is taken to cut staff - whether by a main board trying to placate the City or a middle manager trying to placate his boss - controlling who knows about it is important. Says Tony Gould, managing director of outplacement specialists DBM: 'It's crucial to make sure the right people know in the right order, which can be difficult in practice. You have to keep the number of people in the know very low indeed, but that gives you problems down the road because there'll be people who feel they should have been told.'
Sometimes senior managers are the worst culprits here. 'Give it three hours after a board meeting and I guarantee the news will leak,' says a cynical Rowe. 'Boards can't shut up. Once the board knows, assume they're all going to tell their number two, and their number two is going to tell theirs. It goes round like wildfire.'
For public firms there's another factor - notifying the stock markets. 'Plcs have to tell the City before trading starts on the business day, and that means people may hear it on the radio on their way to work,' says Gould. 'So you have to set up meetings at the office for the moment people get to work.'
How you then break the news to people will be either a fitting expression of your company's values or an ugly business that will demoralise everyone left behind. Horror stories abound, particularly in the City, of staff being given black bin-bags and told to clear their desk by lunchtime.
This kind of brutal approach is more commonly used in the US where, in a hire 'em, fire 'em culture, many workers don't even have a contract with their employers. Richard Chaifetz, chairman of Chicago-based consultants ComPsych, has observed the effects of management machismo. 'I've seen companies through the CEO send an e-mail to a massive number of employees saying: 'Today's your last day. Please pack your bags. We've had a downturn in our business and you have been laid off.' How ridiculous that is! They shut down their phones and their e-mails as of five o'clock that day. Boom, they're gone!'
If that sounds like an attractively brisk way to carry out cuts, beware: over here, employment laws limit the ability of firms to take the 'boom, they're gone' route. Even if you're laying off only a handful of employees, failure to give them reasonable advance warning and a chance to make any suggestions of their own could amount to an unfair dismissal. And if you plan to axe 20 or more employees from an establishment in a period of 90 days or less ... not so fast: you're legally obliged to go through a full consultation process with representatives of the workforce.
Don't assume you can fake that either, warns Marina Murray of lawyers Baker & MacKenzie. 'The consultation should be a genuine process,' she says, 'not simply a sham to gloss over a decision already made.'
But even if you're the most honest and respected manager, sitting down for a face-to-face with a staff member you're about to 'let go' will have you in a cold sweat. Are there techniques to make the process go smoothly?
Most of the advice from experts is common sense. Practise the exact words you're going to say in advance.
Arrange to have a witness in the room. Don't beat about the bush; get to the point and make sure the person understands that they really have lost their job. Explain why the decision has been made but don't make excuses or admit to mistakes, and don't get into arguments. Make sure you know the details of an employee's salary, age and how long they've been with the company, then talk through the redundancy package and explain what's taxable and what isn't. Give details of any outplacement services that will be available. And finally, however embarrassed or guilty you feel, don't make bland promises about future consultancy work or taking someone back when things pick up again, unless you mean them.
There are other tricks. Some managers say Thursday morning is a good day to break the news, as it gives remaining staff the chance to discuss the news, absorb it, and come in to start afresh on Monday. Then again, 'a lot of managers do it on Friday because it's the end of the week and they don't have to see their employees for two more days,' says Chaifetz.
Whenever you do it, let the redundant employee take time off to think about things.
Above all, bear in mind that you're not the first manager to don the black hood. Do the thing professionally because it's part of what you're paid for. Don't freeze and then rush headlong into it, or you'll make mistakes and hurt people. 'When you sit down with someone and tell them face-to-face, it isn't easy. But they don't expect it to be easy for you,' says Rowe, who has had to make more than her share of layoffs. 'Some people are very angry, some people are very tearful. I remember telling one girl, who broke down and said her husband had been made redundant the day before. What can you say to that?'
You might tell yourself it could be worse. You could, for instance, be Charlene O'Connor, who was made redundant twice and is now chair of the Scottish Enterprise task force, which helps workers laid off after the closure of the Motorola factory in Bathgate, West Lothian. On 24 April, the US company announced the closure of the plant with the loss of 3,106 jobs. 'If you've worked for a company for 15 years and then that whole community goes, that's harder than a small-scale layoff,' says O'Connor.
'People have built up relationships. It can be very emotional because that support network is gone and people feel bereft.'
To help its workforce cope, the Motorola task force has laid on a careers centre, an internet cafe and a range of public-sector agencies, including employment service, Inland Revenue, benefits agency and further and higher education bodies.
The approach taken by Guinness when it closed a factory in Dundalk, Ireland was less conventional but equally effective. In a smart PR move, the company promised to give each of its 140 laid-off workers a case of beer every week for the next 10 years. Not surprisingly, staff were said to be angry about the closure but happy with the pay-off package, which included free healthcare, children's scholarships and lump sums of up to pounds 110,000, as well as the free beer. Nice work if you can get it - or even if you can't.
But such gestures can backfire if they seem inappropriate. Motorola's well-intended offer of a free mobile phone to all former Bathgate workers met an angry response from 'insulted' trade union leaders and a barrage of mocking press coverage, thus marring an otherwise textbook example of how to handle a big layoff.
Any multinational has to be acutely aware of local employment practice.
As Marks & Spencer discovered when it announced the closure of its European stores without prior consultation earlier this year, they do things differently abroad. Since announcing 4,000 job losses, the hapless retailer has faced employee demonstrations, a legal challenge from unions and public criticism from French prime minister Lionel Jospin - turning a drama into a crisis.
In Germany, dismissals must be 'socially justifiable' under the country's Termination Protection Act; layoffs on the grounds of cost-cutting often fail the test. One former retail executive doesn't mince his words: 'Europe's a bloody nightmare. We had layoffs in Austria, Holland and Belgium and my poor number two went grey trying to deal with it. If you're a multinational, you really have to learn a whole new mindset in each territory. In Ireland, we sacked someone for stealing out of the till and the tribunal said it was unfair because it was the first time he had been caught!'
Many managers might look longingly at the flexible, dynamic US labour market. But its freewheeling ways come with a health warning. 'It's not all roses for employers in the US, because it's such a litigious environment,' says Hodge. Get on the wrong side of an unfair dismissal claim, or a suit for discrimination on the basis of race, sex or disability and there's no limit to compensation claims. 'It's not unusual for juries to award a percentage of the firm's annual turnover as punitive damages,' he warns.
In any case, Chaifetz sees attitudes changing in the US. 'The American way has always been focused on the bottom line, with less emphasis than in Europe on employee welfare and wellbeing,' he says. 'Now we're becoming more focused on that, because we see it affecting performance.'
Nonetheless, you can imagine the bemusement in American boardrooms at a recent Wall Street Journal story reporting that Lee Jong Dae, chairman of insolvent Daewoo, had fallen to his knees before a dismissed factory worker. 'My deepest apologies to you and your family for laying you off,' Lee told the astonished man at a job fair. 'I am determined to find you a job. Please forgive me.' Korea's Confucian business culture takes the view that workers should be treated like family, but it's hard to imagine hardball players such as GE's Jack Welch or Royal Bank of Scotland's Fred 'The Shred' Goodwin going in for self-abasement.
Yet conflict scenarios are really hard to cope with, says Rowe. 'It's like dumping your girlfriend - people go into guilt mode.' So managers need to keep one eye on their own mental state, watching stress levels and working hours, and making sure they're not still stuck at the beginning of the change curve - angry, bitter or in denial, instead of coping with the situation and moving on.
But it's not really like dumping your girlfriend at all. As Tom Hanks tells Meg Ryan in You've Got Mail: 'It's not personal, it's only business.' Being humane is vitally important, but in the end this is capitalism, not soap opera. So don't burst into tears or try to make up and stay friends, or turn the whole process into a melodrama with you as its hero or heroine, or think that an arm around the shoulder can make things right again.
'It's the biggest thing you can do to one of your staff, to take away their livelihood,' says Rowe. 'But you can never get it perfect and you can never make it OK, because someone's losing their job, and that's not OK. It's on these occasions that you realise businesses are there to make money. That's what it's all about.'
PLAN A SOFT LANDING
- Don't send a sudden shockwave through the workforce. Plan layoffs as rigorously as any other project.
- Get employment lawyers and outplacement specialists involved early on. Yes, they cost money, but tribunals cost more.
- If you have to do it, do it quickly. Don't chip away a bit here and a bit there, or staff will start to watch their backs rather than build the business.
- Cut the bullshit: words like 'de-layering' or 're-missioning' don't help anyone.
- Managers who are making layoffs need to handle their own stress, anger and guilt - and that means support from senior executives.
- Your employer brand is worth as much as your consumer brand. You wouldn't piss off your customers, so why do it to employees?
- Take care of key people. If they're critical to your future, tell them so.
- Avoid 'dumbsizing' - cutting headcount without addressing organisational issues. You'll end up overloading fewer workers with the same inefficient processes.
- Beware of empty-desk syndrome, where a structure (or an individual) makes its presence felt after it has been removed. 'We always used to get X to do this' gives it away.
- Manage the survivors. They need to believe in the company again.