In today’s climate of fear, ‘fitter and leaner’ is often misinterpreted to mean cutting costs – usually by shedding staff. Zara Seager explores the alternatives to redundancy
“In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment,” said Charles Darwin, in The Origin of Species. Many organisations ought to consider this, especially those that believe becoming fitter and leaner means a round of redundancies. This knee-jerk reaction is often a short-term and short-sighted solution.
As past experience suggests, rushing to cut employee numbers without much thought for the future, or what 'fitter' actually means, can and does result in disaster. Not only can it leave an organisation unfit to recover along with the economy, but if it recovers at all, it’s usually at a much higher cost. It’s something that several firms in the last downturn regretted doing, especially when they had to rehire many of the employees they let go at much higher consultancy rates when the economy picked up.
Firms that understand this are seeking innovative alternatives to redundancy to hold onto their talented employees, so they can be ready for the economic upturn. Unsurprisingly, such a strategy goes down much better with staff, who are more likely to be supportive of their organisation when things get tough. According to a UK survey of over 2,500 people carried out by Keep Britain Working, 95% of respondents were prepared to change their work conditions if it helped others to keep their jobs. This included short time working, taking a 3-month unpaid sabbatical, taking extra responsibilities, and even changing their role entirely. However, the survey was very clear that workers expect bosses to make the same sacrifices as themselves.
Alternatives to redundancy
The “Keep Britain Working” initiative allows employers, and employees an opportunity to share ideas on avoiding, or at least reducing, redundancies. On the HR side, ideas include: offering sabbaticals; allowing staff to (voluntarily) reduce hours by one or two days per week; offering job share; retaining staff into new roles; encouraging people to take annual holiday during the quiet period. On the operational side, suggestions include: developing new markets; purchasing distributors, and relocation of head office out of London. The Chartered Institute of Personnel Develoment also suggests: a recruitment freeze; offering early retirement to volunteers, and retraining and redeployment.
There are many examples of people accepting alternative working patterns. For example, alternatives to redundancies have been clearly seen in manufacturing, particularly in the car industry. Companies such as Jaguar, Land Rover and Vauxhall have offered staff sabbaticals at a reduced rate of pay. Other companies shut their factories for a few months and Aston Martin moved staff in their Gaydon base to a three-day week.
City law firms are paying graduates thousands of pounds to defer starting work for a year to balance recruitment and the talent pipeline. Firms such as DLA Piper, Baker & McKenzie are offering trainees at least £5,000 to defer even if that means graduates work for other firms as paralegals during that time. In other professional service sectors, as in the case of KPMG, staff have been asked to volunteer to sign up to a four-day week, or a four to twelve week sabbatical period on 30% pay1.
All about consultation
Of course, organisations cannot simply expect employees to spontaneously accept a pay freeze or cut. The examples above have come from a meeting of minds between executives and employees – both sides acknowledging the severity of the situation, and agreeing a survival strategy that tries to avoid redundancy. By offering individuals options, and including them in the decisions to help reduce redundancies, will not only help you to maintain skilled labour but also reduce costs.
Communication and consultation with individuals are key to get buy-in with solutions, retention of key talent, and even (where a clear connection is made between the action taken and the saving of jobs) maintaining motivation. But why bother with consultations and finding complicated solutions? The answer is simple, it has to be done as there is a legal requirement for a consultation prior to redundancy. Getting it wrong can result in an Employment Tribunal for unfair dismissal, and compensatory awards in excess of £60,0002.
The legal requirement for consultation is to offer employees an opportunity to discuss methods to avoid or minimise the number of redundancies. For the employer who takes this process seriously, this is an excellent opportunity to engage directly with employees (something that might not happen in other circumstances) and listen to, and evaluate, their ideas for reducing the organisation's running costs. It also allows an opportunity to evaluate where the redundancies are planned and determine if the areas and numbers to be cut will leave a viable operation. The length of the consultation process varies. For between 20 and 99 redundancies the consultation period is thirty days, and ninety days for 100-plus. Additional time is required where no trade union is recognised to allow employees to elect representatives, and, at the end of the consultation period there must be time for employees to be informed that they have been selected for redundancy, and for them to appeal against it. So redundancy is not the ‘quick fix’ executives might think.
Flexible, best practice
Organisations that are coming up with alternatives to redundancy are, in fact, using best practice. And should things not improve and they find themselves left with no choice but to make redundancies, at least they will be able to clearly demonstrate that they tried to avoid them, which will certainly help protect them from unfair dismissal claims. For more about how to deal with redundancies, see Chris Legge’s article ‘A Tough Journey’ in our last issue of Topics. The key here is flexibility. Those organisations that want to survive now to thrive later need to generate ideas in consultation with their employees, assess the options, nurture flexibility and improve resilience. Going back to Darwin’s theory of evolution, organisations that are more likely to succeed will be the ones that are able to adapt to the changing environment. It’s not only about being reactive to climate changes, but also preparing for the future.
For more information, contact: Zara.Seager@erconsultants.co.uk
References:
1 Martindale, N. (2009). Redundancy alternatives: a stay of execution. Personneltoday.com
2 Baker, J. (2009). Before the P45. The People Bulletin
Capable of Adapting?
Need to cut costs? Redundancy is not the only answer. By improving your staff capability you can not only save on costs in the long term, but improve the efficiency of your organisation. ER Consultants can help by:
1. Developing the right behaviours for improved business performance
In a tough economic climate it is vital to tackle low performance, weak accountabilities, poor decision-making and low motivation. You can create ownership, build capability and develop the kind of behaviours in your people that will improve your business performance through a wide range of diagnostic and development tools and techniques.
2. Improving the capability of your employees
Are your staff capable of performing to the best of their abilities? Can they perform under pressure? Improving the capability of each member of your staff will improve your chances of survival in the current climate. We have supported many leading private and public sector organisations in identifying and assessing capability for the future.
3. Adjusting organisation structures, processes, or governance
Improvements in business performance can be achieved through changing structures, processes and governance. We can help you to achieve these in ways that build ownership and commitment to the programme and ensure that changes are deep rooted.
4. Building leadership capability to deliver business goals for a fitter future
Creating flexible, capable leadership talent is critical to the successful implementation of any business strategy. We can help you to improve your leadership capability, which will in turn, make your organisation fitter for survival.
5. Effective talent management and succession planning
Regardless of size or sector, the right people doing the right things in the right way is critical to any organisation’s future. This is about assessing what you have, identifying potential; and engaging and encouraging your talent to want to develop, and become the future leaders of your organisation.
