While any talk of 'recession' is of significant concern to mortgage lenders, it is redundancy – the other ‘R’ word associated with it – that turns employees and managers cold.
So far, in excess of 20,000 jobs in the financial services sector have been lost in the United States, and over 2,000 job cuts have already been made redundant in the Australian financial services sector. In the past few months demand for Chandler Macleod’s outplacement services has increased by 100% and looks set to continue. I expect another 2,000 to 5,000 job losses will occur across the financial services and other sectors in Australia over the next 12 months.
In our field of work, we are seeing first hand financial services companies taking steps to reduce costs by restructuring and making positions redundant. This is happening not only among fringe financial services organisations, but also banks, stock broking firms and other financial advisory organisations.
However, the financial sector will not be the only industry to feel the impact of the current economic downturn. With Australians spending less and budgeting more due to rising interest rates, food prices and petrol prices, pressure will likely be felt next by:
• Retailers in luxury goods
• Suppliers to the housing industry
• Housing construction
• Airlines and travel
Consequences of mismanagement
The anticipated increase in job losses raises a number of issues to consider, as the consequences of mismanaging the redundancy process are grave. The way an employee is treated is vitally important, as there is considerable potential to cause major damage to a company’s reputation. Alternatively, if the process is managed well, the damage and hurt can be minimised, with the door left open to future contact.
In addressing this topic, my main warning to organisations is that employees have long memories. To give an example, I know of one individual who had not been treated well by his or her employer who was still fuming two and a half years later and probably for good reasons. Others can recite the termination meeting they had word for word ten years down the track, so every step of the process and every word spoken should be well considered.
Organisations should never underestimate the impact these situations have on an individual’s career aspirations, personal finances, self–esteem and personal life.
When redundancies go wrong
Also, unlike any other event in a person’s career (where past behaviour is usually an indication of future behaviour), when a redundancy occurs one can never gauge how a person will react. From our experience, employees often react in the complete opposite way than was anticipated. For example, when managers believe a person will react badly to the news, they are often shocked and upset but generally OK. On the flip side, when managers think the person will cope well with the situation, the opposite usually occurs, with emotional outbursts, highly distressed reactions and in some cases the results can be disastrous.
Another consequence of mismanaged redundancy or restructuring processes is that it can make attracting new talent for other roles very difficult. When people exiting are not treated appropriately they will talk negatively about the company to anyone who will listen. Negative publicity can quickly sweep through an industry like a tornado causing potential talent to steer clear. After all, if a company has not treated people right on their way out, then how do they treat people while they are employed?
Mistreatment of exiting employees can often stem from an employer or manager’s lack of awareness of or sympathy for the employees’ difficulties that they will face once they have been shown the door.
Not everyone will be “snapped up”
Australia’s low unemployment rate has given many employers the illusion that everyone impacted will be snapped up, however this is not always the case. For example, semi–skilled workers (call centre operators, manufacturing, food preparation, processing etc) will find positions are some of the most competitive for them to secure. Middle and senior managers, typically, take months to secure the right role, which is not an indication of their talent, but rather it reflects their selectivity in ensuring the role fits with their career objectives. Executives, directors and specialist positions are far less frequently available.
Across the board, the typical “fill time” of a role has extended to 81 days compared to 36 days four years ago, meaning employees who are made redundant will typically take longer to secure a new role than they might have done in the past. Also, in certain industries there is no skills shortage.
Therefore, organisations should be careful not to underestimate the impact of redundancies by making assumptions about employees’ ability to find new roles elsewhere. Besides, even if a new role is easily found, that does not necessarily erase the bad taste left in an employee’s mouth if they are not treated well.
Steps to minimise damage
Chandler Macleod recommends that organisations undertake a number of steps to minimise damage or disruption to a company’s business, to maintain employee morale and to minimise harm to employees who are about to lose their jobs.
Organisations should:
• Provide support to executives and managers throughout the change process as they manage their employees (i.e. reactions and risks)
• Provide support and advice to employees facing redundancy to help them consider their options (i.e. provide an independent person they can talk to about their issues and concerns)
• Provide professional, independent and objective service from skilled career coaches to assist people in managing the change and finding future employment or alternative careers
Benefits to all concerned
If the process in managed well, it is a win–win for organisations and their employees and provides the following benefits:
Organisations:
• Systematic process resulting in a smooth transition
• Less stress on the accountable manager
• Maintenance of productivity and morale of remaining staff
• Minimisation of undesirable consequences
• Human resources are freed up to concentrate on running the business
• Post separation problems can be managed effectively
• A more positive image of the company is perceived by remaining staff, the community and marketplace.
Employees:
• The trauma of job loss is minimised
• Assistance is provided to re–evaluate personal goals and skills to develop a new career plan
• The development of positive attitudes and behaviours to take advantage of new opportunities
• Acquisition of practical job search skills, developing career strategies, changing careers, self employment possibilities empower the individual enabling them to move through the process in a positive and constructive light
• Effective management of the career process.
Times of redundancy are difficult time for everyone and employers need to understand that they are not the only ones who are feeling pressure from the downturn. Their employees are also feeling the effects at home. Making sure that the outplacement process is managed properly will ensure the best possible outcome for both the company and the exiting employee.
David Reynolds is executive general manager of Chandler Macleod Consulting.
