Ways in Which Employees
Can Be Let Go

July 30 2001 - With an increasing number of businesses preparing for more job cuts in the face of continued weakness in the economy there is a need for managers and employees to acquire a better understanding of the different ways of reducing workforce levels, according to global workplace consulting firm Drake Beam Morin (DBM).

"With a continued lagging economy, many companies are finding it more difficult to realize their profit and productivity expectations, and as a result, are now forced into making second and third rounds of cutbacks. This can cause high anxiety and low morale among employees, which in turn, impacts productivity," said Thomas Silveri, president and chief executive officer of DBM.

"Our advice to customers is to make the first staff reduction deep enough so that subsequent cutbacks can be avoided, if possible. Small, multiple reductions keep the organization in turmoil. The 'Chinese Water Torture' technique does not work. The goal is to cause minimal disruption and trauma to the organization and its people," Silveri said.

Three Options for Cutbacks

Bill Hollett, senior vice president and an expert in organizational restructuring strategies with DBM, says that businesses have three primary methods of reducing their workforces:

1. Voluntary Early Retirement - employees nearing the age of retirement are offered incentives to retire early;

2. Voluntary Separation - employees at any age or level can be offered incentives to leave (those eligible to volunteer are determined in advance by the company); and,

3. Involuntary Separation - positions are eliminated, forcing workers to leave at the discretion of the company.

"Unfortunately, most companies today - because they're financially pressured to cut quickly - are reluctant to offer voluntary programs," Hollett said. "Voluntary separation is generally more time consuming and expensive, as employees need to be given more than a month to decide if they want to volunteer." In a July 2001 poll of DBM consultants representing approximately 1000 companies nationwide, four percent said most or all of their customers are presently implementing voluntary programs. Yet when asked to cite their customers' actions 10 to 15 years ago when Wall Street pressure was less severe, 12 percent said that most or all of their customers invested in voluntary separation practices.

"No one likes to be forced into leaving a job," Hollett said. "We therefore encourage companies to implement a voluntary program before resorting to involuntary measures. Workers who are offered a chance to leave on their own accord generally feel more in control of their futures and tend to hold fewer 'hard feelings' toward their employers with respect to the cutbacks."

Voluntary Programs: Incentives and Support are Key

Successful voluntary programs must have two key elements:

* Incentives that employees will regard as being worthwhile
* Support, for example career decision workshops, that can help employees understand the situation and make a decision on a career change.

"In our experience, companies that offer their employees career decision support typically meet and exceed the number of volunteers they expect to receive," Hollett added. "The better employees understand their options, the more comfortable and confident they feel about leaving the organization."

Typical incentives include enhanced severance packages (i.e. cash bonuses, bridging to retirement) and outplacement / career transition support to help employees decide their futures - for example, finding another job, starting their own businesses or pursuing a new career. In the case of early retirement, employees can be offered an extension of health insurance coverage and other benefits.

Involuntary Separation: Selection is Critical

Here DBM issues a word of caution: In selecting which positions to eliminate, do not use your existing performance appraisal system to evaluate employees unless you plan to establish a new system after the cutbacks. "Once an appraisal system is used to determine who should be let go, it's basically tainted," Hollett explained. "To prevent employees from feeling as if their jobs are on the line every time they are evaluated for raises and promotions, it's best to use separate selection criteria during a cutback."

"Forced ranking" is often used to determine involuntary cutbacks, Hollett explains. In this process, managers determine a list of the most critical skills needed among their workers to increase their company's profitability. Employees are then evaluated according to the critical skills criteria.

"Focusing on skill as opposed to performance helps cutbacks to remain directly in line with a company's restructuring goals," Hollett added. "Poor performance should not be a selection factor in restructuring; it's a separate issue that managers should address on a daily basis to ensure their workforce is always operating at the highest level."

The Drake Beam Morin website is at http://www.dbm.com.