Any company will do lay-offs sporadically. We have never had a downsizing issue ever, but we have had occasional situations where a big project is completed and then we had to move people. But we found them other roles in the company. I think downsizing should be done humanely. The best thing is to not beat around the bush, but just tell the truth that you have a business problem. In America, they call it a role redundancy rather than people redundancy! People should be told that there is nothing personal about it and it is just a business exigency that caused it.
As a culture, we tend to be very defensive about these issues. There is an anecdote from my stint in my previous company Aptech that I would like to share: We had to ask a US employee to leave and I took on the responsibility personally. I agonized over the decision for over two weeks and finally sat down with him at our training centre in Princeton USA and started talking to him. After sometime he got my message and he asked me “are you saying that I have to leave?” I was like, “yeah. We have to ask you to go.” He replied saying, “Boss you don’t have to ask me to resign. Just fire me and I will leave at 4’O clock today.”
People are intelligent and so you don’t have to beat around the bush and just be transparent about it. I think it is an Indian issue to beat around the bush. So, come to the point, be authentic and say what the reason is and I think you will keep a friend for life. Employees should not feel like they are guessing what your real intent is and it should come out formally and upfront.
Is downsizing a knee-jerk reaction? Well, it depends upon the company. There are some companies that can weather the storm and carry their employees through and this has been traditionally there in Indian culture; many large American companies still do downsizing at the drop of a hat. So it depends on what is the acceptable form of behaviour in a country also. I think in India people tend to be more patient. If downsizing is an issue, they generally redeploy or find other roles. They are not trigger happy in downsizing. Unless of course, there is a genuine reason why companies had to lay-off people.
In that case, do salary cuts work better than retrenchment? Not really! We have never done salary cuts at Zensar and I’m personally against that. It just ensures that the good people leave the organisation very fast and the bad people just linger around. I don’t think companies use productivity as an excuse to downsize. However, it depends on what reasons the company has. If you are overstaffed for whatever reason, then it is more humane to tell the person to go than to point fingers and say nobody wants you.
I don’t think we need a law on downsizing. Rather, we need best practices. There are best practices in every industry and IT has been at the forefront of such initiatives because of which we have very good loyalty from our associates. Organisations need to realise that they need the trust of the employees for the long term and if they are not authentic in the way they deal with such issues, sometimes they lose the trust of their teams, which nobody can afford.
I think the lesson to learn from IT is that the modern firm is one big democracy. The CEO is there only because he is the first among equals. However, it is very important to remember that people are people – they are human beings with feelings and emotions and we should never take that for granted. Hurting someone’s feelings can create a negative view towards the company. I think managing morale is something that most IT companies do pretty well and that is something that other sectors can learn from us. Employee morale is directly related to employee trust. People like the fact that they can believe what the management tells them.
When I joined this organistion in 2001, we had about 150 too many out of a workforce of 700. Literally, after the second week I had to sit with them and tell them there is not enough business for all of them. Since I had many contacts in the industry, I told them that I could help them find a job. But people liked it and said, “At least someone is being authentic and telling us what the problem is.” People like the fact that they can believe what the management tells them. Today Zensar has one of the highest engagement scores and the lowest attrition in the industry, something we are very proud of!
There is a need for counseling and that’s something that American companies do. There is always a trauma, especially in India. Fortunately in our industry, people have not faced the brunt of redundancy and found jobs immediately. But, I would still strongly suggest counseling. It’s part of what I said earlier about the humane way of dealing with the issue.
Downsizing works if it is done properly. So long as you weigh the trade-offs between the long-term effects on employee morale and the short-term effects on the bottom line and you do it judiciously then you have one more tool available to the manager. If India is going to go the American way, then HR leaders need to be trained to deal with a slowing economy.
No organisation takes the lay-off decision without consulting the topmost leaders. Once the decision is taken, the implementation could be by line or by HR or by both. That is why both the HR and line managers need to be trained. Every manager and leader as part of his training should know how to deal with the bad times.
Layoffs in auto sector: The layoffs are not really a knee-jerk reaction as it is not short term. It is a fact that there is not going to be no sudden uptick in demand in the near future. If the factories are going to be idle and production lines are going to be shut down, then companies have really no choice but to layoff. Also, don’t forget that there is also the quarter-on-quarter pressure on publicly listed companies. So, they tend to think short term in terms of how do to avoid bottom lines getting affected.
Temporary workforce is directly proportional to the legal constraints. As industries get formalized, there will be a need for temp workforce. There are companies in the manufacturing sector where over 70 per cent of the employees are temporary or contact staff. I would think it is unhealthy for a company to have over 20 per cent of its workforce as temp workforce. Any hire and fire methodology can potentially lead to unionization and later legislation. Employees can drag you to consumer court as there is a feeling that employees are being unfairly treated. Companies have to be very careful. A sensible partnership will completely help in avoiding such situations.
(As told to Anu Babu Kurian)