It can be the most difficult decision in

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                        Regardless of the economic climate, there comes a time when
                        businesses must part ways with their staff. HRM considers how
                        to make the best of this worst-case scenario

                        By Deepa Balji Jegarajah and Paul Howell

                        I   t can be the most difficult decision in        of strategies to cut wage-related costs, but not

                            business. Letting staff go after what may      actual jobs. These include imposing salary
                        have been years of service represents a loss to    cuts, reducing the working week, and
                        both the worker and the employer. While the        encouraging leave without pay options. Local
                        employee and their family lose a major source      organisations are also taking advantage of
                        of income, there can often be even bigger issues   Government subsidies for training
                        at play. In today’s society, much of a person’s    opportunities in the downturn.
                        identity and self esteem can also be tied up in        But there are cases where even these
                        their job. With such heavy financial and           efforts will not be enough. Short-term cash
                        emotional investment in a position, losing it      saving will not help if there are long-term
                        can be a traumatic experience.                     problems in the target market. Take the US
                             Employers also have to accept losses. They    car industry for example. It has seen a
                        invest time, money and resources in their staff    tremendous reduction in domestic demand as
                        so that they are constantly improving;             environmental concerns weigh heavily on
                        delivering more productivity against total         consumer’s purchasing decisions. That, coupled
                        spending the longer the employment
                        relationship lasts. Letting staff go in order to
                        save on immediate wage costs is an expensive,
                                                                           with the grave financial problems of the three
                                                                           largest car makers, means the current decline is
                                                                           not simply a short-term hiccup.
                                                                                                                              A best-practice approach
                        if sometimes necessary, decision.
                             Most employers are therefore heeding calls
                        from governments and unions to ensure
                                                                               The Singapore economy is also experiencing
                                                                           certain changes. That’s why many unions and
                                                                           training organisations are encouraging workers
                                                                                                                              for the worst-case scenario
                        retrenchments only take place as a last resort.    to shift away from stagnant or shrinking
                        In Singapore, they are employing a wide range      industries, toward new-economy sectors – such

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                             as healthcare and integrated resorts.               plans, but also the retention of those talents             In the same way, firms are not legally
                             Businesses that grew too quickly during the         remaining after the retrenchment.                      required to consult with unions or the              “Treat people the way you
                             boom years that preceded this current                   Employer brands matter more today than             Government before heading down the
                             downturn may also be feeling long-term
                                                                                                                                                                                            would want to be treated in
                                                                                 ever before. That’s because the internet and           retrenchment path. But employers will put
                             pressure to “right-size” their headcounts.          new media options mean current, former and             their brand and reputation at risk if they avoid    similar circumstances”
                                 Lim Swee Say, Secretary-General of              potential employees are all just a mouse-click         the tripartite call to notify the Ministry of
                             Singapore’s National Trades Union Congress,         away from each other. When poor downsizing             Manpower well in advance, de Silva says.
                                                                                                                                                                                            Philip Morgan, chief operating officer,
                             says he expects more job losses before the end of   practices are put forth, the commentary that                                                               Muvee Technologies
                             the year. “If we’re not going to see a strong       takes shape on internet blogs and social               Recent experience
                             rebound for global consumption for this year,       networking sites is immediate and often                “Treat people the way you would want to be
                             (then) the global manufacturing sector may take     damning.                                               treated in similar circumstances,” says Philip
                             some time before we see a full recovery,” he told       “There are blogs specifically devoted to           Morgan, Chief Operating Officer of Muvee
                             journalists recently. “We should not rule out the   retrenchment and this is where your brand              Technologies, a Singapore-based firm creating
                             possibility of a second wave of retrenchments.”     and reputation are made or lost,” says John            automatic video-editing software. “Use good
                                                                                 Read of Hudson’s Talent Management division.           internal communications and the maturity of
                             Protecting the brand                                    HR professionals know this only too well.          the staff as the foundations on which to
                             It may be a fast-acting immediate solution, but         “People are watching,” a head of HR at a US        approach the retrenchment.”
                             that doesn’t mean a retrenchment strategy           investment bank told HRM. “The high achievers              He is speaking with some experience.
                             should ignore long-term goals. There are            or high potential employees will also observe          Muvee was forced to retrench one fifth of its
                             certainly good and bad ways to go about the         the execution strategy of the firm. This is            payroll in August last year. Having failed to
                             task. At most risk whenever staff are let go is     something the banking industry in particular           make the planned impact on key new markets,
                             the lasting employer brand of the organisation      can learn to do with a bit more flair and grace.”      Morgan says the company was left with little
                             involved. This not only affects future hiring                                                              option but to return to basics. “It was a
                                                                                 Keeping the law onside                                 scenario of either we risk losing the entire
                                                                                 It’s also important to ensure the legal side is        business or a few employees and we wanted to
                                                                                 taken care of. The requirements will be                do it sooner rather than later so that our staff
                                                                                 different depending on the jurisdiction the            would be able to find (new) employment.”
                                                                                 employment takes place in, but it is always up             That genuine desire to see staff land on
               Effective separation                                              to employers to be across their responsibilities.      their feet was a key part of the small business’s
                                                                                      Susan de Silva, head of the commercial and        overall retrenchment strategy. Morgan says
             + Most restructuring decisions are about jobs and roles, rather     corporate group at ATMD Bird and Bird,                 the leadership was flexible with the timing of
               than performance. So it’s important to ensure staff and           reminds employers that retrenchment should             staff departures. When one staff member
               employer separate on the best possible terms. Experts say it’s    always be a last resort exercise.                      received a job offer early, he was given grace
               never easy, but the following tips will help to create a smooth        In Singapore, while there are no statutory        and assistance to finish up before the end of
               transition:                                                       requirements to pay redundancy benefits, she           the notice period. Even more flexibly, one
                                                                                 says it is vital for organisations to clear any        retrenched worker was given a small amount
             + Ensure you understand the legal rights and responsibilities of
                                                                                 contracted payments. “Employers must ensure            of extra time in the job to cover the gap before
               both parties;
                                                                                 that employees are paid all their contractual          his new appointment.
             + Plan where, when and how you are going to deliver the             entitlements such as salary in lieu of notice (if          The firm also went to great lengths to help
               message; avoid the phone and avoid scheduling meetings for        notice is not given), encashment of annual             staff find new employment. All managers
               Monday mornings, Friday evenings or before a public holiday;      leave and other contractual benefits,” she says.       were told to milk every industry contact to
                                                                                      In addition, de Silva advises clients to follow   ensure retrenched staff had as many as
             + Document the separation package details in writing;               the recently-released Tripartite Guidelines on         options as possible. “Our CEO generously
             + Be consistent in all messages;                                    Managing Excess Manpower. These call for               reached a business contact he didn’t
                                                                                 severance payments for workers who are                 personally know when one of our staff said
             + Prepare responses to possible staff reactions.                    retrenched after at least three years’ service.        she wanted to work for a particular gaming
                                                                                 She says employers should consider paying two          company,” Morgan says. “She has since been
                                                                                 to four weeks’ salary for every year of service.       hired by them.”

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