How to Implement a Reduction in Workforce

May 19, 2020

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Tough times call for wise decisions. Our current economic situation is creating havoc for businesses of all sizes. Owners are bereft as they consider losing loyal employees. Those employees are devastated as they consider an uncertain future. In this informative podcast, Dr. Matt Kerzner and Lisë Stewart, Principal-in-Charge of the Center for Individual and Organizational Performance, tackle this tough subject with compassionate advice and practical activities that any business owner or company leader can undertake to protect the business, operate with integrity and lead with their values.  


Transcript

Lisë Stewart: Hello, everyone. Welcome to the EisnerAmper podcast series brought to you today by the Center for Individual and Organizational Performance. My name is Lisë Stewart and I'm really delighted that you can join us all the way up to say, we're talking about perhaps a rather sad topic today and that's about a reduction in workforce. We know that it's a very hard time for many businesses out there and they're having to make some pretty tough decisions. So I've asked my colleague, Dr. Matt Kerzner, to join us in a conversation about what is a reduction in workforce? How does it work? What are the impacts? What should we be thinking about? So, Matt, thank you very much for joining us today.
Matt Kerzner: Thank you, Lisë. Thank you. It's a pleasure to be with you. Like you said, this is a topic that is just not a pleasant one to have, but very important.

LS: Yeah, I would agree. So well, let's start with a little bit of the unpleasantness. Can you begin by explaining to us what are some of the psychological effects on job loss, on downsizing? How does this impact our businesses, our business owners, employees, et cetera?
MK: Sure, sure. So it's really important to understand the psychological aspects, and studies do show that when people go through a job loss, it really can take both the psychological and the biological toll on individuals and how they really interact. So it's really important to understand some of the signs and symptoms that might be happening for those who are going through it and those who are actually back in the workforce. So some of those we'll call them stressors or things to look out for is depression can sneak in. You could see anxiety disorders. People actually get really tired and can't explain why they're feeling this fatigue and they also can get headaches, body aches, almost like the same feeling of becoming sick, because it really takes an emotional, mental toll when someone is going through this.
LS:Right. I can absolutely understand that. I think it can be very difficult. I think the decision making, seeing our fellow employees perhaps losing their positions, not knowing what the future holds. So tell me, how do you think that business leaders can prepare for this?
MK: Yeah, so it's really important for the business leaders when they're looking at a reduction in force is first of all, they have to understand that they need to be sensitive. It's not something that an employee has done. It's COVID-19 right now, what we're living through. When businesses have an economic impact and they have to make these really tough decisions, owners, employers, leaders of organizations need to come across very humanistic. They have to have this understanding that there's something bigger that's happening right now and it's not one person's fault. So they'd have to understand that when they're going through this exercise.

Leaders, though, when they're preparing for a reduction in force, not only do they to be sympathetic to those that are being impacted and those who are what we call survivors, but when there's going to be a restructuring of the workforce, they actually need to take a step back and they need to understand all the major functions that those who work for him or her do, right? One of the things that we do in the center when we work with our clients, we do that desk plan. Where is everything located? What projects people are working on. So before a leader actually goes forward with a reduction in force, they really have to get a good pulse check of what's going on within their department, what projects people are working on, how do they look at readjusting some of the work, developing an internal and external communication plan or communicating to other employees that aren't going to be impacted, the customers, the vendors.

So they really have to take a step back, A what is the projects and functions that employees are currently working on that will change after the reduction in force, and how are they going to communicate this to those who are still working and who are impacted by those who are leaving?
LS:Yeah, I see. Well then what kinds of materials or tools can an organization provide to help the impacted employees?
MK: First of all, an organization can do a few things. One is make sure that they have all of their documentation ready to be given to the employee that's going to be impacted, right? This is what is the separation date? Is it going to be that moment that they're communicated to, or is there a strategic plan of this reduction in force is going to happen a week from now, two weeks from now. So you need to communicate when is the separation date, that's number one. Also, not only are the employees impacted, but they're going to go home to their spouses, their partners, their children, their parents, and they need to be able to explain what happened. So there needs to be a very clear explanation so the employee is not walking away with gray area of what just happened to me. They need to understand the what and why, what happened and why is it happening.

If there's going to be a severance that's going to be given, then there should be a separation document or a separation agreement, which usually spells out all of the information that the employee needs to understand, and if there's going to be compensation, that's going to be given to the employee for signing this document and any other pertinent information regarding when their last paycheck's going to be, when are they going to receive any of the benefit information like COBRA information to keep their health insurance going if they choose to. So there's some really important, not only documents, but processes that the employer should walk through to make sure that the employee is walking away with his or her information that they're going to need so they don't need to reach back to the company to get information that they're lacking.
LS:Right. So they have like a whole package of information. So it sounds like what you're saying is that this packet of information should help them to communicate to perhaps their family, family members and others. It should help them to understand about whatever their benefits are, what those arrangements are, and it sounds like you're also saying that it can sometimes maybe help them to understand what their options are going forward besides just COBRA, maybe other resources that they could reach out to and so on. So kind of like what I would see is maybe like a resource document or coaching for lack of a better word.
MK: One of the things that we provide when we work with our clients that are going through something like this is almost like a toolkit, and what this toolkit has is both information that the employer needs to have and then the information that's going to go to the employee. Here's a perfect example. Employees are going to want to know where do they need to go to if they're going to file for unemployment. So having all the government websites available for the employees is really important. So they don't have to go find it themselves. They can reach out. I always like to say, "If there's a checklist of items for the employee and a packet ready to go for them, that's going to be super helpful."

Also, putting some frequently asked questions together so everybody is answering the questions the same way. So all employees that are impacted, it doesn't matter what department they're in, everybody's being communicated the same. So there should be a communication plan and a packet that the employee has that they're walking away with all the information that they need.
LS:Right. So Matt, I'm wondering from a strategic perspective, I would imagine that as a business owner is trying to figure out how to do this and they're trying to understand maybe what the organization needs to look like, right, in the future so that they know, well, maybe these people are a little bit more expendable and perhaps these people are really vital, if there's any chance of the business to be able to rebuild. Am I understanding that correctly that a business owner really needs to take some time to think about the long range potential or plans for the business to the degree that he or she can and then really make those decisions, right? Or am I on the right track?
MK: You hit the bullseye, Lisë. Leaders of the organization, they need to review a lot of information before they start making some decisions. Here's just a few. They need to review and develop new organizational charts. So you have to look at your current organizational chart, take all of the impacted employees that are going to be impacted by this reduction in force, we call it a RIF, and then take a look at what the new org chart's going to look like. The worst thing that you can happen is let people go and find out that you've already had a RIF two years ago, I'm just using this as an example, and that person took over other people's positions. So you have to understand current state and future state, and you do that through development of organizational charts.

Another one is you want to review all your core businesses and understand all the opportunities that are existing within the current structure. Are there ways to bring in operation efficiency? Could you look at possibly outsourcing some of the functions before you do a RIF? So you could actually not only save on the human resource side, but not have to replace that function or give it to another person which just adds to their work. Is there a way to outsource that? I use a term called skills inventory, and this is when you take a look at all the different job functions or job positions on an org chart, what are the key skills, knowledge and ability that those jobs need to have, and the employees that are going to stay and not be impacted by the RIF, what skills do they possess that could actually help the department with some of the gaps that might be happening because of this RIF?

Another thing is if you're doing a large scale reduction in force, closing a plant down, let's say for example you have plants in different locations in the country and you need to strategically close things down, you got to think about what is the impact to the local community, right? Local community restaurants, bars, what economic impact might be effected by this reduction in force? They also want to think about the timing of the announcement. Are there initiatives that are happening? Are there deliverables that are really key to the business?

Then the last one that I think is really critical here is what are some of the workplace tensions that could translate because of this RIF? What happens to those who are survivors? How are they going to react? How are they going to respond to this? Could this create additional possible work stoppages or slowdowns because they're just trying to figure out what's next or is this it, is there going to be more? Do a lot of planning, put it down on paper and then try to do this RIF one time and one time right because there's going to be a lot of work that's needed with the existing survivors to keep their morale and engagement up, to keep the vision, mission of the organization going.
LS:That really resonates with some of the experiences that I've had recently in talking to clients. I was speaking to one family owned business who said that they were going to have to do a reduction in workforce and they were so torn because some of the people that they felt like they really needed to let go were family members, and so not only was it going to impact the business, but it was also going to impact the family. But they said the optics of just letting other people go and not having those be the family members just did not sit well with their business ethics. So you come up with a very good point here and that is, there are going to be people who are left behind, the "survivors", and I know that sometimes that can be equally hard. So what would you suggest that business owners do in order to be able to help those who are really left behind in the business to be able to remain motivated and able to do their jobs?
MK: Number one is they need to have open transparent communication. Supervisors or managers should be educated by the leaders of the organization and scripted on. One, first of all, communicate the same language. The worst thing that can happen is people getting mixed messages and they're going to have to connect the dots if they don't get the same message from everybody. That could help the survivor, what I call survivor syndromes here. Because survivors absolutely have concerns. They're going to feel guilty that they survived. Management needs to be able to communicate with them and say, "Listen, we still have our vision to do this. This is because of what is happening now economically to the organization," and reinforce the employees that there's a path forward.

The survivor syndrome symptoms that management and leadership need to look at is, one, lower motivation and morale. There's going to be some reduced loyalty that's going to happen. The survivors are going to be thinking in the back of their mind, is there another one that's going to happen? So there's going to be lower trust and an increase of skepticism that's going to happen. So if there is no transparent communication or if the organization doesn't really work on keeping morale up, keeping employee engagement going, creating new work teams and new processes for people to work on, what's going to happen is motivation and productivity will decrease and people will actually spend time at work looking for jobs.

So that's something that owners, C-suite, management needs to really understand that productivity is going to be low for a little bit because of this process, but how do we ramp this back up? So I would say within two weeks of the RIF, there needs to be a communication process where management is communicating to the workforce about what happened, why it happened, and reassuring them that there's still a mission and vision for the organization to keep producing.
LS:I totally agree with you. In fact, I think as quickly as that information can get out, it's important as you and I both know from years of experience, when people don't have the full story, they make up the story. So I think it's really key. I completely support this idea of transparent communication. I also think that it's going to be important for business leaders to take a little bit of extra time with their employees, spend some time asking questions, listening to them, giving them a forum by which people can share what's going on in their lives, both at work and outside of work that's going to impact that productivity. It's a tough time. I certainly have appreciated, well, how we here at EisnerAmper, I think our leadership has done a wonderful job making sure that there are many opportunities for all of us to talk about what's going on and to really just feel as if the organization cares.

Certainly, when there's a reduction in workforce that your employers care just to your opening point, I think is vitally important. So tell me, Matt, what are some final thoughts? What are some of the perhaps the final do's or don'ts that you want to make sure that anybody who's considering a reduction in workforce thinks about?
MK: Great way to kind of wrap this up. So when I'm working with leadership and management, I do want them to understand the do's and don'ts. Some of the do's, write down what they want to do, I like to call it scripting themselves, to make sure that they stay on point with the message. You absolutely do want to stick to the script, but more importantly, Lisë, right, you want it to come from your heart, you want it to come from that transparent communication. So once you deliver that message, if you don't deliver it properly or right the first time, people, once they hear that there's RIF, they're going to shut their brains off. They're going to go into that fight or flight mode and they're not going to know what to do. They're going to be in shock. So you want to stick to the script, but speak from your heart.

Another one is you want to be able to support them on behalf of the company and make sure that you're being humanistic and empathetic of the situation. This is not easy for anyone. I was in a situation when I was a VP of HR and I had to sit with the CEO and the COO and had to deliver some of this messages to some of my dearest friends. You have to be human. Put the human in human resources. Also, do share all company updates with all your direct reports so it gives them an opportunity to express themselves and you can express, again, the mission and vision of the company and positively move forward to help them think of the future state. So those are some of the do's.

The don'ts, I already mentioned don't read the script. Also, don't apologize for or try to explain the decision that the company made. If the company made this decision, if the owner made this decision and it was for the economic reasons for survival, then explain that. But don't try to explain why this person was chosen and that person wasn't chosen. Also, don't speak down to the employee or patronize him or her in any way. Listen carefully and respond appropriately to their questions. This is why we put frequently asked questions together so you can answer their questions. If you don't have the answer, tell people you will get back to them. Don't make anything up. Stay to the frequently asked questions and the answers.

Then confidentiality is very important. Don't talk to anybody else that are impacted or not impacted about that individual and what he or she just went through, respect their privacies. Also, don't make light of the situation. Don't have a conversation with any of your peers about this. This is not a joking matter. A RIF is probably one of the hardest activities that managers and employees have to go through. The survivors, even the managers are to have some of the psychological impacts because they had to deliver the message or they now have to deal with how the person is receiving the message. You got to be very careful and you should do a pulse check with your supervisor. So for example, if I was the one doing the reduction in force and I just delivered the message to my team, it's very wise for me to actually speak to my supervisor about my experience.
LS:Right. Wow. That's so helpful, Matt. It's really helpful and obviously it's incredibly important to be compassionate and also try to keep your eye on that future, on the future state of the business. We want to be able to encourage businesses to protect the company and make sure that when the time is right, there's a good strong business for these employees to be able to return to. So I think that's very helpful. Well, thank you. I really appreciate it. I also want to make sure that anybody listening to this podcast knows that we're here to help. Matt's an expert. He's been through this. He has many, many years of experience and we have a great team that works with Matt, ready to be able to support you through some of the most difficult decisions, as you said, Matt, that business owners may ever have to make. So Matt, thank you very much. Thank you everyone who's listening. Know that we're here to help at any time and best of luck with all of the decisions that you have to make going forward. Thank you.

About Lisë Stewart

Lisë Stewart is Principal-in-Charge of EisnerAmper’s Center for Individual and Organizational Performance and the Center for Family Business Excellence within the Private Business Services Practice. Lisë has experience in organizational development, strategic planning and training, and human performance management.

About Matthew Kerzner

Matthew Kerzner is a Director in the Center for Individual and Organizational Performance and the Center for Family Business Excellence. Matt has more than 25 years of experience in organizational development with a specialization in assisting family businesses and closely held businesses.

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