Engagement goes for a six during lay-offs

Q. What are the short and long term effects of lay-offs?

A. The No.1 short-term impact of a lay-off is engagement in the organisation. Suddenly, the engagement levels drop. When the communication is not handled well, it leads to a lot of commotion, confusion and a lack of trust. If the employees are not made to understand the rationale behind the decision, it will have a serious impact on how people are looking at things. The trust level goes down and if you haven’t communicated well, then you end up losing the talent you don’t really want to lose. From a mid- to long-term perspective, one of the most important aspects of getting the engagement back on track is ensuring that the brand doesn’t get eroded and that productivity doesn’t go down. There is a certain level of insecurity among your High Potentials and other employees and if they are not aware of the rationale behind the decision, then they tend to start looking out.

Q. If a company is planning to downsize, what is the way in which it should go about it?

A. I think the most important part about your decision to downsize is actually the reason behind downsizing. What is the reason why you decided to downsize? Is it being led by internal or external challenge? An internal challenge would be like a certain line of business not doing well or a lack of right leadership. If it is internal, then the ability of the leadership to communicate to the organisation about why they are downsizing is important. If it is only a certain part of your business that is getting affected, then you need to communicate to everybody that not all the businesses will get impacted. I think transparency is the most important aspect around managing lay-offs successfully. It is important that you communicate right, but it is also important that you don’t under or over communicate. Once you have decided to lay-off, the next part is who to lay-off, which is also a very important step. Normally, when organisations decide that it wants to reduce the headcount cost by a certain percentage, they go on a downsizing spree. Many a time you end up letting go of people who are actually building the business for you or they are people who could have added value to some other parts of the business.

Q. Once the performance appraisals are done, organisations let go at least 2-5 per cent of their workforce. How do you distinguish that from downsizing majorly?

A. Not all organisations actually let go of 2-5 per cent of their employees. All organisations talk about the normalization and the bell curve. But the reality is for 70 per cent of the companies, the bulk of the staff is in the middle. Performance based lay-offs happen regularly and is part of the performance management process. In a downturn, you would not have too many people to lay-off as a result of these internal movements. If it is already there in the system, the additional cost that you might have borne because of them will not be there in the first place. Most organisations today are not doing it as well as it needs to be done in terms of letting go of people on performance. Everybody shies away from laying-off people, including performance based. When push comes to shove, then people do it. It results in you not being able to appreciate your high performers to the extent you want to. You start operating under the law of averages. So, it is very different from performance-based downsizing.

Q. Do companies really treat their workforce as being smart and mature enough to handle an issue like downsizing? Do lay-offs affect employer branding?

A. I’m not sure if they view it as employees not having the maturity. The view is more about how the market will see me. How will it impact my business, vendors and clients? A lot of organisations keep it hush-hush because they claim it leads to erosion of their brand. We are in a reality where the expectation that the organisation will not go for restructuring or lay-offs is slightly difficult. People realise that a lot of factors that influence the business are external. What causes a lot of disappointment to the employees is when they can see the writing on the wall, but the business was not agile enough to react to it. The result: You have to do a restructuring exercise which has become mammoth in size. Employees then start viewing organisations with a certain bias. If the organisation can’t treat the core stakeholder, which is the employee, well then there is a certain amount of disillusionment in the way it may treat its customers and vendors, which is where the brand gets eroded. The ability of the organisation to convert your balance employees into your brand ambassadors becomes your most important element.

Q. How does downsizing affect the working culture of a company? How does it affect the rest of the employees?

A. The test of culture or the impact of culture is the test of the value system of the leadership. From a working culture perspective, employees will view it as bias. Soon, politics will start creeping in and everybody will ask “are u able to work with X individual is he able to handle you well? I think if you follow a good process, it doesn’t impact the organistion. So two things are important here: One is following the process and understanding the rationale and the second is communicating as much as you can helps you to ensure that you come out of it absolutely clear. The company’s working culture is modeled around the value system and the integrity of its leaders, which gets displayed rather than the company’s working culture. It is a manifestation of an individual’s value. If multiple leaders behave in a biased manner, it will affect the future culture of the organsiation.

Q. Auto and media sectors have been the hardest hit in terms of lay-offs. Do you see more happening in the future given the current economic scenario?

A. I think there are other sectors which are even harder hit: Infrastructure, telecom and BFSI. In the white collar space, infrastructure is the worst hit, followed by media, telecom and BFSI. The challenge is that they have been the sunshine sectors for a very long time. People have grown very rapidly. Suddenly, when the sector is not doing great, we are facing a challenge. People in these sectors were also better paid. When the talent situation came, the average salary at a certain level and above was comparatively higher but for them to move across sectors definitely necessitated that they look at the pay packages. In 2008-09, IT and ITeS sectors were going through similar situations. There are a lot of internal and external factors that are at play which is making life difficult for people in these sectors. In any sector, companies hit a peak and then start consolidating in the near term. Unless the consolidation happens, it will be very difficult and the opportunity will get fragmented. Earlier, every five to six years a company/sector would reinvent itself. These days that has reduced to three to four years as the cycle of change has become faster, which is why we have to be very agile and thinking ahead. It is not just enough that you are ahead in the curve; you have to be ahead of the curve. Downturn, restructuring have become a part and parcel of developed economies. For developing economies, these are the perils.

Q. What is the future for temporary workforce in the auto industry?

A. Companies are trying to reduce their dependency on temp workforce. We almost thought unionization had gone. The increased pressure has come back from unions, the role of IR has come under a lot of pressure. Managing the union relationship has become the most important aspect of a business today. IR practices that were successful in the 80s and 90s will not be so successful now. It is a different generation of workforce even for blue collars. The economic conditions too have changed and the dependence and the expectations from the workforce are very different. The current generation does not give importance to loyalty as the older generation did. Thanks to good schemes from the government, job security is no more on the mind. Becoming obsolete is not something they are worried about. There is a regionalistaion of power as they are from locations we are. Temp workforce will not become obsolete, it may be marginalized. But we definitely need to change the way we are dealing with the temp workforce and what the organisations are thinking in terms of managing them.

Q. Do you think HR managers are equipped to deal with the changing role of IR as they don’t seem to be trained for that?

A. At B-schools, they stopped teaching IR because they thought that HR had become redundant. Are we looking at the blue collar workforce differently? Are we even thinking along the lines of a multi-generational workforce for the blue collar? We have very experienced hands in the industry who can give you tips on how they have managed it in the past. If you are going to implement that, it may or may not work because earlier you were dealing with the fathers and now the sons are very different.

Q. Countries like the US, Austria, Portugal, France and Germany have laws that leave the employee with unemployment benefits or adequate compensation from the companies when laid off. Do you think it is time that India introduced such a caveat in its laws?

A. We are a developing economy and hence completely epitomizing what developed economies have done can make us go under the table. We should think along those lines, but to what degree it should be done is something that the government should not spoon-feed. A lot of the organisations are doing downsizing as it is a business need and a part of the decision is political and social. It will help if the organisation does have a downsizing policy in place, but putting a mandate on the kind of compensation will become extremely challenging for our economy. We are not yet ready for that. We can think of certain norms and that needs a lot of deliberation. For blue collars, the Workforce Compensation Act talks about, there are certain norms that are laid out. What’s in it for white collars is not mentioned. It could become a good starting point but we need to enable the environment for organisations to work successfully.

Organisations should stop viewing career transitions as outplacement. If you are helping an employee get a job, but is that all? A lot of companies spend a lot of time and energy trying to get the employees jobs, but it smells of guilt. What needs to be done is help the person manage this change; losing a job is often stigmatized in India. Help a person to learn how to fish rather than feeding him the fish – that should be the focus of the organisation.