Business | Opinion
What's the best way to fire employees?
The looming UK recession gives managers the opportunity to achieve infamy through the cack-handed implementation of redundancies.
- By Jonathan Guthrie, Financial Times
- Published: 23:35 August 3, 2008
The looming UK recession gives managers the opportunity to achieve infamy through the cack-handed implementation of redundancies. Standards of worst practice are high. Last year, for example, Robbs, a north-east department store, staged a fire alert in order to gather employees in the car park and give them the collective boot. Relief at escaping incineration was presumably supposed to blot out the shock of unemployment.
KPMG upped the technological ante during a 2001 restructuring by emailing 700 staff with the news they would be made redundant. But the gold standard for brutally dumping workers was set by The Accident Group, the ambulance-chasing claims company set up by Mark Langford. In 2003 it terminated the contracts of 2,500 staff by text message.
The first question for bosses who wish to avoid sharing the opprobrium Langford attracted is whether significant redundancies are even necessary. The lesson of previous downturns is that businesses can overshoot with job cuts. As a result, they stumble into the upswing in poor shape. Redundancies cost a company more than the bald figure for compensation to ex-employees. There are penalties to pay in continuity, morale and reputation too.
Tough trading
The point needs making because a generation of younger managers has no experience of tough trading. It is easy to panic when you lack experience of past slumps. Employment news is unsettling. The housebuilder Barratt has announced 1,000 redundancies and its rival Persimmon has already shed 2,000 jobs. JPMorgan has predicted the City will cut 40,000 staff by the end of next year. The British Chambers of Commerce forecasts unemployment will rise by up to 300,000 over the next 12 months, taking the total to just under 2 million.
However, the BCC economic adviser David Kern says the increase should not be driven by redundancies. Instead, it will result largely from new entrants to the jobs market failing to find employment because fewer new businesses are being created. And even though the economy is expected to flirt with recession this year, it should not plumb the abyss visited in the mid-1980s and early 1990s when unemployment swelled to about 3m.
"In the last serious recession, companies laid off a lot of people and then were caught out by the upturn," says Stephen Radley of the EEF, a manufacturers' body. Unsurprisingly, skilled ex-workers were reluctant to return to employers who had jettisoned them. Another consequence was that holes appeared in corporate chains of command. The bright young managers who could have headed divisions had been "delayered". David Guest, a King's College human resources professor, urges cash-strapped organisations to hang on to their graduate trainees, irksome though their perkily over-talented presence often is to older colleagues.
Redundancies traumatise those who remain, as well as those slung out. A friend whose 20-person department was whittled down over two years to - well, just him - still wears a hunted look. Morale plummets in more than half of businesses that cut jobs.
Human sacrifices
A quoted business may still sometimes need to make human sacrifices to appease the Molochs of the City. Much may then be achieved by dressing up a hiring freeze as an unflinching restructuring. Natural wastage should trim the workforce by 10 to 20 per cent in a year. Voluntary redundancy is the next default, providing management is happy paying its best staff a year's salary to defect to rival organisations.
"There was a lot of publicity for major redundancies in the 1990s," says Mike Emmott of the Chartered Institute of Personnel and Development. "There will be less breast-beating for the benefit of shareholders this time. There is a greater recognition of the reputational damage that redundancies cause."
Media interviews in which weeping ex-employees complain of being "thrown on the scrapheap" do not project an image of a vibrant, go-ahead company. This is why some managers employ outsourcing consultants to pep up the flagging spirits of staff who have just been blasted from the airlock of the mother ship. Michael Moran of Fairplace, whose customers have included JPMorgan and Lloyds TSB, says part of his role is to help former staff "practise their exit statement". He explains he can start with the summation "that was a crap place to work" and finesse it, by degrees, into "I came to the conclusion I needed to move on." That is post-event rationalisation of impressive quality.
Moran's template is the Kubler-Ross Change Curve, a graph of the average redundee's confidence that forges upward after dipping briefly into self-doubt. He has helped redeploy an industrial chemist as an alpaca farmer and an investment banker as a stuntwoman. So he is doing good work. He is also active in one of the UK's few growth industries. Business is up about 30 per cent.
However, even Moran cannot entirely satisfactorily answer the question: "What's the best way to tell someone they're redundant?" One chief executive that I know comes close in eschewing such gutless waffle as "it has been decided ..." and always breaking the news face to face. That takes a certain moral courage. But it lacks drama. So you can be sure that in the current downturn new exponents of maladroit rightsizing will come forward. Redundancy by podcast? Now, there is a thought.
More from Business Opinion
More from Business
Business Editor's choice
-
‘Wrong Way' Krugman
The source of our economic malfunction lies with government-mandated bank regulations
-
Greek exit could make Eurozone stronger
Departure will show limits of bailouts and allow remaining members to act much more like a unit
-
UAE upholds values of free trade
Recently released statistics confirm an established fact, namely that of the UAE embracing the free trade principle in general and imports in particular
