As the global economic downturn continues to bear down on the Australian economy, redundancies are a fact of life for some organisations. HR Leader looks at the latest trends and the role of outplacement in easing the process
A growing number of organisations are tightening their belts
and cutting expenditure and staff costs. Many businesses are looking at measures such as hiring and salary freezes
in a bid to avoid redundancies, however retrenchments are
unavoidable in some of the worst-hit sectors. Recent research has
found that 63 per cent of companies are forecasting redundancies
in the coming 12 months, with an average planned cut in work
force size of 5.5 per cent.
The research, which was conducted by Hewitt Associates,
found that the hardest hit job families are administration – with
61 per cent of organisations planning to make cuts in this area –
followed by sales at 41 per cent.
“Redundancies within the banking, finance and insurance
industries are expected to slow, whilst an upswing in retrench
ments is forecast for the IT and high-tech industries”, says Jairus
Ashworth, reward practice leader with Hewitt in Australia.
The survey also found that 78 per cent of organisations with
a formal redundancy program provide support for outgoing
employees, such as career counselling or outplacement services, and
the majority of these organisations (63 per cent) take steps to
measure the effectiveness of these programs.
“These results show that, whilst redundancies are inevitable
in these difficult economic times, Australian organisations are
looking for ways to minimise job losses and the majority are
doing the right thing by those employees they are forced to
retrench,” Ashworth says.
David Reddin, director of Reddin Transitions, says that com
panies are turning to outplacement partners to help in the total
planning of any downsizing project. No longer is being “pres
ent on the day” and helping a person adapt their skills enough.
Rather, Reddin says, it’s all about equipping the managers to
deliver the bad news, helping with internal communication pro
grams, designing “survivor management” initiatives, and help
ing the organisation remain viable through broader risk
Career transition services are seen as a normal part of any
redundancy or retrenchment program, and companies are gen
erally sensitive to the legal, social, and often moral implica
tions of the actions they are taking, Reddin says. “Sure, some
rubber-stamping takes place – for example, ‘We have a global
contract with xyz company in career transition, so that’s where
“But more and more companies are allowing their affected
people to have some choice based on the premise that they will
be more successful working in an environment, and with a
consultant, that suits them and their needs. Sometimes budget
doesn’t allow this, but certainly this is the case at more senior
levels,” he says.
HR plays a critical role in the process, and the success of any redun
dancy program depends on the planning, according to Reddin.
“HR needs to be intimately involved in who is to go, the mes
sage to be delivered, helping equip line managers deliver the mes
sage in a clear, unequivocal fashion, understanding the risk
management implications of such an exercise and planning how
to minimise that risk,” he says.
“It is typically HR which also monitors the success of any pro
gram, ensuring that the ex-company employees are being looked
after and receiving what they need from their program.”
HR can also help line managers think through risk issues, such
as what happens if a certain team goes, what the impact might be
on customers and key accounts and how to capture the infor
mation that is in the departing employees’ heads.
The other issues they have input into include how to cover the
workload with fewer resources, how to maintain credibility in
clients’ and survivors’ eyes, and what sort of people the company
is going to need to recruit in the future as the world of work con
tinues to change.
“HR brings an intimate knowledge of the company, its cul
ture, its managers’ strengths and weaknesses, where support is
truly needed, and what has to be done from a risk management
perspective to ensure the company can continue delivering,”
Looking after the survivors
Once a company goes into downsizing mode, it is vital that it puts in place a "survivor management" program, according to Reddin.
"As the first wave of people is moved out, the organisation becomes unsettled and often the best people decide they will begin looking for another role. Because they're good, they find one, and often that good one takes another with him or her. The organisation is weakened even further," Reddin says.
"There is research that shows that wholesale downsizing may positively impact the bottom line in the very short term, but that it does weaken organisations in the long term."
The loss of skills, experience and company history all impacts on effectiveness, and that shows on the bottom line within two or three years, according to Reddin. "There are many stories of companies retrenching far too much experience, and then being forced to rehire the same expertise as a consultant only months later at a far greater cost."
The best organisations still have an eye to top talent and quietly use the downturn to identify and capture that talent, he says. When the downturn ends, these companies are equipped for the quick ramp up that is needed to take advantage of changed circumstances.