MANAGING REDUNDANCY IN WORKFORCE PLANNING

 

REDUNDANCY

There are various seasons in the lifetime of every business entity, great times bring growth and expansion and tough times are managed with various strategies so the business can avoid the darkest threats of closing up and one of these measures is to reduce the size of the employees through a well thought out plan.

In human resource management, redundancy refers to the process of terminating employees from their employment due to various business reasons, such as poor economic conditions, job categories becoming unnecessary, lack of projects or funds, relocation of business, or discontinuance of business operations.

Redundancies can be either voluntary, where employees choose to leave when offered the option, or compulsory, where the company selects employees to be made redundant, often using techniques like "Last in First Out (LIFO)" to determine who is affected. Here are a few areas to consider as a business leader or a Human Resource practitioner as far managing human resources are concerned.  

 

FACTORS LEADING TO REDUNDANCY

It is challenging and difficult business times that give rise to redundancy – no one considers it when everything is going as planned and revenue is growing. If you think of redundancy, it means you want to give hope to yourself and the business as a leader and devise a new strategy to keep it surviving. It is important to take the right step for the right challenge, wrong approach to resolving challenges deteriorates the situation. Redundancy is a considerable solution to consider when a business is struggling and this should be looked at if the mainline business is not affected – if you still have people interested in your products and are willing to part ways with money for what you produce. Let’s consider a few situations that can lead the mitigatory step of redundancy.  

1.       Reduction in Workforce Demand:

The higher the demand for your products, the higher the number of employees you may need. As soon as demand falls for a considerable period of time, supply will have to be decreased and that is directly to be controlled by the number of people in your production chain – you will have to reduce the number of people at work so you can control how much the firm spends on remunerating employees and keeping the business going.

2.       Introduction of New Systems or Processes:

The introduction of new processes or technologies that renders certain job roles irrelevant can be a cause for redundancies, especially if the tasks performed by employees become unnecessary due to automation or system changes. While new systems can enhance efficiency, they may also lead to job redundancies if the tasks previously performed by employees are no longer required. A business manager must know when to introduce a machine and when to let an employee go – the timing is very important, taking great cognizance of the kind of business.

3.       Economic Recession

Prolonged recession results in high rates of unemployment in a country. During such times, businesses, amongst other things struggle to make ends meet and this will mean a few staff will have to be released to keep the business afloat. These redundancies may be voluntary when employees themselves appreciate how badly the business is running in recent times and decide to resign or may be compulsory if management deems it necessary as a result of its inability to cope. Good strategic management will help you predict how long the recession will last, which will influence how quick to lay off.

4.       Business Closure or Relocation

When a business runs into losses and there is a need for closure of business, employees are laid off or relieved of their duties. Similarly, when the business relocates, the need for laying off certain employees may be necessary since business from the start in a new location may be slow and profits may not be realized quickly.

5.       Change in Business Focus

Economic, sociological or technological factors can cause a business to change focus in order to survive. When the focus of a business diverts from its original plan, the need to lay off certain employees who are not seen as ‘’all round’’ employees is relevant to make way for new employees who are able to drive the new business focus. For instance, a business of advertising that has changed to a manufacturing business will need employees who are knowledgeable in that field so will need to lay off old workers and employ new ones for the new venture.

 

THE PROCESS OF DOWNSIZING

The process of downsizing involves strategic and careful planning to reduce the size of a company’s workforce while managing the associated challenges and implications effectively. Here are the key steps involved in the process of downsizing based on the information from the provided sources:

1. Is Downsizing the Most Effective Response?

When bad times hits any business, it is easier for management to react than to respond. In reaction, less thought is given to the consequences of the decisions being made, the main thing is just to stop the flames for some immediate relief. However, if deep thought and analysis of the situation is carried out logically, it may turn out that with a little patience, the tides will turn and no drastic steps like laying off staff will be necessary. Some of those mitigating strategies could be:

A)      Introduction of shift programs

B)      Pay Cut

C)      Cut in Recreational Budget

D)     Retraining and Redeployment

2. Develop a Well-Thought-Out Transition Plan:

At this point, the best response is redundancy. Before initiating downsizing, it is crucial to have a detailed transition plan in place that focuses on company goals and objectives, outlining what departing and remaining employees can expect from the organization. Analyzing the talent pool to identify key skills needed post-downsizing, assisting remaining employees in acclimating to new roles, and providing tools and HR assistance during the exit process are essential components of a well-thought-out transition plan. Such a general plan must exist in every business which will be reviewed when the time is come.

3.       Work Closely with the Human Resources Team:

Human resources professionals play a vital role in managing downsizing by ensuring compliance with communication rules, developing strategies for managers and leadership, and overseeing the entire workforce reduction process, including severance packages and health benefits. HR support is crucial in implementing creative downsizing plans such as offering early retirement options or voluntary layoffs to mitigate the impact of downsizing on remaining employees and organizational operations.

4.       Maintain Open and Clear Communications:

Effective two-way communication is essential before, during, and after downsizing to ensure transparency, respect, and understanding among employees. Communicating the rationale behind the layoffs in a humane manner, providing timely updates, and offering a clear realignment strategy for the remaining workforce can help alleviate concerns about job security and maintain employee morale and productivity.

5. Reallocate Job Responsibilities:

After identifying the jobs that need to be performed post-downsizing, HR and senior managers should reshuffle job duties among surviving employees to ensure vital tasks are carried out efficiently. In this process, some employees’ roles are added up the roles of others, some also are moved entirely to other departments where they assume new roles to hold up the running of the firm. Reshuffling job responsibilities involves significant disruption to the employment relationship and should be carefully planned and communicated to avoid unfairness and confusion among employees.

6. Retraining and Adjusting Compensation:

Post-downsizing, organizations may need to consider retraining programs for remaining employees to help them adapt to new roles and responsibilities and contribute effectively to the organization's mission. Adjusting compensation and benefits for surviving employees may be necessary to address concerns about increased workloads and job satisfaction while balancing cost-reduction objectives.

 

PRINCIPLES GOVERNING REDUNDANCIES

If redundancies are carried out haphazardly by the management of any business, although they intend to help the business, it might turn up to worsen the woes of the firm all together if not approached the right way. Employee relations if handled well can make or unmake any organization because of its many legal implications. Let’s consider the following areas:   

1. Contractual Considerations:

First visit the contract between the firm and every employee marked to be laid off. Highlight the importance of having contracts in place to determine the amount to be paid to redundant employees based on the extent of the redundancy. Address breaches of contract, which can influence the employer's decisions regarding redundancy procedures.

2.       Selection Criteria:

Consulting performance management reports is one of the most important documents to visit to determine who stays or leaves in such times. The "last in, first out," approach is not a very constructive option in our estimation because the newest staff may be the best of the firm at this crucial time and such a policy may be retrogressive to any firm to engage.

3. Legal Notice and Payments:

Stress the importance of providing proper legal notice to employees declared redundant, allowing them time to seek new employment. Ensure that continuous employment is not hindered by factors like sick leaves, maternity leaves, or leaves due to disabilities, accidents, or injuries.

4. Compensation and Notice Period:

Employees made redundant are eligible to claim compensation based on their salary history and the number of years spent with the company. The redundancy notice period varies depending on the country and company policies, with the duration increasing based on the employee's tenure with the firm. The business must ensure all debts owed workers to be laid off are settled before they are asked to go home.

 

SOME STORIES LEARN FROM

1. British Airways:

In 2020, British Airways announced the need to cut up to 12,000 jobs from its workforce as part of a downsizing strategy in response to significant business challenges. This downsizing initiative was driven by economic downturns and the impacts of the global pandemic, leading the company to implement layoffs and other workforce reduction measures to improve efficiency and cut costs. The success of this tough process has kept this giant business going.

2. Eastman Kodak:

Eastman Kodak, a multinational company known for its camera-related products, implemented drastic downsizing measures in response to challenges in adapting to the rise of digital photography in the late 1990s and early 2000s. The company initiated several rounds of downsizing, reducing its workforce significantly through layoffs, early retirement offers, and selling off business units to cut costs and realign its operations with the changing market dynamics.

While the downsizing helped Kodak stay afloat for a period, it ultimately filed for bankruptcy in 2012, highlighting the risks of relying solely on downsizing without addressing underlying strategic issues.

3.       IBM:

IBM, a multinational technology company, underwent significant workforce reductions in the past to streamline operations and adjust to changing market demand. The company implemented strategic redundancies to align its workforce with evolving technological trends, optimize efficiency, and remain competitive in the tech industry

4.       General Electric (GE):

General Electric, a renowned conglomerate, has historically engaged in successful redundancies to restructure its business units, reduce costs, and enhance operational effectiveness. GE's strategic downsizing initiatives aimed to realign its workforce with the company's strategic goals, improve profitability, and drive innovation in its core business areas.

5.       Ford Motor Company:

Ford Motor Company, a leading automotive manufacturer, has implemented workforce reductions as part of its restructuring efforts to adapt to changes in the automotive industry and enhance competitiveness. The company's successful redundancies were focused on optimizing production processes, reducing overhead costs, and aligning its workforce with the evolving demands of the automotive market.

 

The determinant of the success of a firm is really how they emerge from the turbulent and threatening times both internally and externally. It is the grit and resilience factors that make the business. On this note we want to encourage every HR practitioner and business owner to anticipate what practical steps to take when such times arise.   

 

30^th March, 2024

THE COLLEGE BUSINESS CONSULT

thecollegebc@gmail.com