UK: Letting them go quietly.

UK: Letting them go quietly. - Does voluntary redundancy leave a surplus of dead wood?

Last Updated: 31 Aug 2010

Does voluntary redundancy leave a surplus of dead wood?

The news that local councils are thinking of implementing compulsory redundancy programmes because the potential for voluntary redundancy has been exhausted has reinforced old doubts over the efficacy of the latter.

Voluntary redundancy, the critics argue, is inefficient since the company's most talented staff are seduced by the offer of a lump sum, secure in the belief that they can walk into another job before the cash runs out. Similarly, if early retirement packages are generous enough, the firm's grey hairs, that source of corporate memory and wordly wisdom, will probably be reasonably contented at the prospect of life spent on the golf course rather than in meetings. Left with the deadwood, the downsized company's future doesn't look great. So should managers give up the more humane approach to putting people out of work?

The view of a spokesperson for the Banking, Insurance and Finance Union is what one would expect. She says that, 'It is better for someone to choose to leave the employment of a company.' A view that is fine in theory, but more tricky in practice, according to NatWest's Keith Morley, head of human resources, retail banking services. NatWest's retail arm found the voluntary redundancy route so inefficient that in the early 1990s it switched to the compulsory variety. But the culture of retail banking made such a move difficult. 'Regrettably we have had to revert to voluntary redundancies,' he says. The company, which is predicting around 10,000 job losses among its 37,000 staff over the next three to four years, has launched what is in effect a 'targeted' voluntary redundancy scheme - for the time being.

The working culture is an important consideration in considering which type of scheme to plump for, explains Morley. 'You do have to take into account the normal working environment - in investment banking (where he has also worked), for example, compulsory redundancy is more acceptable.' In traditionally safer environments, argues Angela Baron, policy adviser at the Institute of Personnel and Development, the implementation of compulsory redundancies can easily backfire. 'Once you start making (compulsory) redundancies,' she says, 'people start job hunting - and the most able will find jobs first.'

British Aerospace had other reasons for what it claims was a largely voluntary redundancy programme in the early 1990s, when 40,000 of its employees were made redundant (and 30,000 others found themselves on the payroll of different employers). A spokesman makes it plain that a fear of industrial disputes was a major factor. 'Compulsory redundancies are a very high risk strategy - you invite industrial action which might cost you much more,' he says. He goes on to add that for British Aerospace, often a dominant employer in an area, maintaining a good name was also an important consideration.

'We recognised that we were going through a bad patch and that we would come out of it. We knew that a time would come when we would want to recruit again and that you can very quickly get a bad name for yourself.'

Voluntary redundancy only goes so far, argues NatWest's Morley. His company's current scheme can be withdrawn with six months' notice, and is, he says, highly dependent on employees willing to play along. 'While we have a no compulsory redundancy commitment in place, we have said that one option for people is to remain.

But if too many employees want to stay,' he adds, somewhat ominously, 'we will have to reconsider.'

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