How to Manage Through Recession and Redundancy: Building on Past Lessons
Dr Noeleen Doherty
An examination of how best to handle redundancies based on tried and tested good practice
Downsizing, rightsizing, de-staffing and redundancy became part of everyday lexicon during the 1990’s when organisational change was endemic and of a nature and speed never experienced. Such change resulted in a major shift in organisational structure and philosophy as redundancy became a central plank in many company’s survival strategies. Lay-offs were the norm even for managerial populations who had previously largely been unaffected by job loss. This meant that the shock of redundancy and often repeated episodes of redundancy became a reality for many. Redundancy provoked an emotional rollercoaster of shock, disbelief, anger and resentment for those who expected to have a continuous and upward career trajectory
During this time of upheaval, managing the exit of people from an organisation gained recognition both within theories of HRM and in practice. The humane management of redundancy became embodied in standards promoted by the Chartered Institute of Personnel and Development (CIPD, 1991, 1996). This included recognizing that redundancy can be one of the most traumatic events an employee may experience. It was recommended that organisations develop a strategic approach to try and avoid, reduce or limit the occurrence of redundancy. Where redundancy was necessary, good practice included the provision of help and assistance to those leaving. This was often achieved by the use of outplacement; structured programmes for those leaving the company which include counselling and skills training to help them re-orient to the job market. Outplacement provision became a normative policy to address redundancy management.
Not only does outplacement purport to ease the passage of employees out of the organisation but is seen as a means of mediating the potentially detrimental effects of change on those employees remaining – the so-called survivors. Those “lucky” to retain their jobs have been shown to suffer from `Survivors syndrome' – the reaction to the loss of colleagues, the need to work harder and put in longer hours to fulfil the tasks of departed colleagues. Survivors can display decreased motivation, decreased morale and increased stress, symptoms exacerbated when they perceive the situation to be handled unfairly. The use of outplacement was supposed to mitigate perceptions of unfair treatment.
A different psychological contract
As a result of these changes, one of the most fundamental outcomes was the apparent erosion of the very fabric of the traditional employment relationship. Many companies were no longer able to offer security of employment in return for loyalty and commitment. Rather the deal changed as did the psychological contract (the invisible glue which binds the individual and the organisation together). Employees were offered opportunities for development, responsibility and autonomy as opposed to the guarantee of a job or career. The balance had been upset and the rules of the game completely rewritten which created an era of survival values. Research and literature at the time signalled the need to understand and manage the changes to both companies and individuals as distinct processes. Change is situational, the new site, the new boss, the new team roles, the new policy.
Transition is the psychological process people go through to come to terms with the new situation. Distinguishing between `organisational change' and `individual transition' helps an appreciation that people are not only concerned with the survival of the organisation but also with their own ability to navigate the immediate demands for change and a tougher labour market but they are concerned with long term survival in an ever changing environment which offers little security or certainty.
Balancing the needs of the organisational change issues and the personal transitions concerns requires consideration of two sides of the same coin. Thus, interventions need to combine programmes which help to manage change at the organisational level and transition at the individual level, to help those made redundant prepare to re-engage with work in another context and to help survivors to acquire the skills and self-reliance to master their changing environment. The development of such skills in individuals requires different, but integrated tactics, compatible with those which are instituted to manage the cultural, structural and process issues of organisational change.
At the very heart of this process is the need to re-align the employment relationship, through re-negotiation of the psychological contract. In order to expedite this process of re-negotiation people need information about the new vision and future of the organisation but more importantly, information about the new rules of the relationship and how they fit into the future scenario. Achieving equilibrium between the individual and the organisation, requires involving employees through participation, communication and counselling to addresses their personal needs and concerns.
A range of integrated interventions were recommended to help these change processes to fruition. Employee involvement programmes to fulfil the need for information, to instil the new vision and culture of the organisation, to enable and build motivation, commitment and trust. Stress management programmes to manage feelings of insecurity, role ambiguity and career confusion. Counselling, coaching and mentoring to facilitate communication and discussion of individual's aspirations and longer term needs. Career counselling to help retained employees achieve clarity about the different career opportunities available within the organisation and to develop compatible career goals. These were among the raft of good practice measures learned as a result of the workplace traumas of the 1990’s.
What’s different now?
This time things are different in that no jobs seem immune to the spectre of redundancy. Financial services, manufacturing, older workers, public sector workers, even charities are being hit by job losses creating a situation where unemployment in Britain has risen to its highest level since the mid-90s. Economists suggest that a lack of collective consciousness has been partly responsible for the current credit crunch, so too the lessons of redundancy management from the 1990’s appear to have been lost from the collective consciousness of organisations. Managing the impact of the recession appears to have resulted in reflex reactions!
People are concerned with personal survival, jobs, careers, and essentially their own ability to survive in an ever changing environment. Companies need to avoid a short-term reactionary approach to recession and treat individuals with the respect that shows they really are a “most valuable asset”.
Practical issues for individuals
- Maintain employability
- Try to have a fall back reserve of money in case the worst happens
- Take opportunities to update skills
- Think creatively about current skills – how can they apply to other work contexts / situations
Practical issues for organisations
- Avoid a short-term knee-jerk response
- Remember treat those who leave with respect – they can carry the company flag well beyond the down-turn
- Use good practice principles in dealing with necessary loss of people
- Provide support for those leaving but don’t forget the survivors – they will be feeling the pain too and they are the future of the company.
In February 2009 following the surge in redundancies the CIPD and Acas launched a set of guidelines “Managing in Recession”. Ten guidelines are proposed including a call for responsible management so companies take a longer term view and consider reducing employment costs in more creative ways which avoid redundancy. Where redundancy is inevitable sensitive management of the situation is recommended, in order to reduce the impact of redundancy on the individual, and on those remaining in the organisation. (see www.cipd.co.uk)
Noeleen Doherty is Senior Research Fellow at Cranfield University, School of Management.