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Making strategic redundancies

    Envelopes for strategic redundancies

    A badly-managed organisational restructure could profoundly affect your exiting employees, remaining workforce, image and employer brand. Rather than a random cull, ensure your organisation’s redundancy process is strategic and above board. Here are some tips to guide you in planning and implementing strategic redundancies.

    1. Know when to cut

    Obvious signs that it is time to assess staffing levels include financial measurements, such as cashflow and debt levels. If overheads are out of control, it may be time to reduce employee numbers.

    Alternatively, consider which non-core functions could be outsourced. This could improve productivity and cost-effectiveness.

    A less obvious sign will be staff resignations. This can indicate they’re worried about the organisation and are moving to safer jobs. Or perhaps you sense that some employees just don’t have enough work to do anymore.

    If you do decide to act, move quickly and decisively. Don’t ignore a loss-making division or product line.

    2. Decide which roles should go

    A restructure involves the difficult challenge of deciding which roles will be made redundant and which will stay.

    When making strategic redundancies, examine your organisation, and what’s successful and what’s not.

    If you decide to close a whole business division or office, it will be obvious the roles to make redundant. Non-revenue generating staff positions, often in administrative roles, are usually let go first. But beware. Cutting positions such as sales or customer service roles may cause sales to fall, adding to the problem.

    If roles are not obvious, decide which are most important. Identify where you can make cuts to ensure the organisation is structured to survive and move forward in the future, when market conditions improve.

    Avoid cutting too deeply. Instead align the new workforce structure with current and future business objectives. Establish what skills are needed to maintain or strengthen your core business.

    It will be beneficial to the process to analyse each work area, determining its purpose and direction in the context of the overall business. Then conduct an objective review of each position to determine how it contributes to this purpose and direction, and how it fits with other roles. Your objective should be to ensure you achieve a leaner yet stronger business, rather than focusing on a cost-cutting exercise.

    Are restraint clauses still valid when making redundancies? If the restraint is reasonable, a non-compete clause may still be enforceable.

    3. Meet legal obligations

    Organisations require ‘genuine operational reasons’ to make a role redundant. You can’t use redundancy to deal with an individual’s disciplinary issues or to cover up discriminatory behaviour.

    Prepare documentation to back up your claims, including financial reports where necessary. Also remember to meet any obligations under workplace agreements.

    4. Work out notice periods

    Regardless of the notice period an employee is entitled to, you need to decide for how long you want them to remain at work.

    You may have to escort some staff – for example those with access to key data or other crucial records – from the building immediately, to protect those assets. In other cases, you may wish to give the employee a few weeks’ notice to allow them to say their goodbyes.

    If a staff member is to leave immediately, you still need to pay their salary for the full notice period to which they are entitled.

    5. Prepare your messages

    Making someone’s role redundant will be a hard conversation, so prepare some ‘key messages’ in readiness:

    Why the redundancy is happening

    Explain why the role is redundant. Employees should know they haven’t just drawn the short-straw.

    What this means for the employee

    Provide details of their severance package, notice period and any other formalities.

    What happens next

    Explain what is going to happen. For example, if you will provide an outplacement consultant; if they will be escorted from the building; or whether they should take the rest of the day off.

    Read more about preparing for redundancy notification meetings.

    6. Break the news

    Keep the news simple and stick to your script. Take a professional, respectful and compassionate stance. Watch your language.

    Keep things as impersonal as possible. Rather than saying “you’ve been made redundant” say “your role has been made redundant”. This helps emphasise the fact it is a business decision, not a personal one.

    7. Offer outplacement services

    Outplacement services can have a number of benefits to making strategic redundancies.

    • Specialist support can help employees with their career transition. Research has shown that outplacement can assist people to find a new job in half the time it takes someone without support.
    • Employees who receive outplacement support often feel more positive about their former employer. This can reduce the risk of them taking legal action or publicly criticising the organisation.
    • Your remaining workforce and external stakeholders will view you as a considerate and respectful employer. This can protect your reputation as an employer of choice.
    • Offering outplacement can also enhance staff morale and motivation, and improve retention.

    8. Tell other staff

    Inform staff soon after the departing employees have been told the news. If you leave it too long, rumour and speculation could spread.

    Use a similar script to that used in the discussion with the redundant staff member. Explain the reasons for the redundancies, and how they are business and not personal ones.

    Reassure remaining staff members by explaining the departing employees are being properly looked after. These are often not just colleagues, but friends who they care about.

    For more advice about strategic redundancies, please contact Glide Outplacement.