The pandemic is causing leaders to navigate a broad range of interconnected issues that span from keeping their employees and customer safe, shoring up cash and liquidity, reorienting operations, and navigating complicated government support programs. Add to this the effects of fluctuating global financial markets, increased competition across multiple sectors, and recent unrest caused by political and social tensions, and it becomes clear why businesses are currently under extreme pressure from all angles.
As a result, many companies are reexamining their operational costs and are considering making some difficult decisions to shore up the balance sheet. These decisions will cause short-term pain but will be deemed necessary by those in charge for the long-term health and overall survival of the company.
One option that will undoubtedly cross the minds of HR personnel and company chiefs is the potential reduction of staff head count. Not only can employee costs often be the highest fixed outlay on company accounts, but advances in technology also may mean these jobs are not even needed any longer.
If you are an HR professional or a company director planning to make redundancies, then first, you have my sympathies. It is never an easy situation to be in, especially knowing that those who are selected may well suffer from resulting emotional distress, and potentially financial hardship, as a direct result of your decision.
Although most Western countries have an aid package in place that subsidises the payroll bill, meaning that any decisions around head count reduction will hopefully not need to be made in a rush, when the time to make the decision does come, it may well be tough—and you owe it to those involved to carry out the task with tact and diplomacy.
Performance Management
Head count decisions should be based on performance management, not “last one in, first out,” despite this often being the reason people are selected. However, if performance management is the reason people are selected for redundancy, make sure specifics on which to measure this decision are in place. Consistent appraisals and objective setting can lead the way to annual rankings, which could drive any head count decisions and provide cast-iron evidence for any decision that is made.
Changing Working Hours
Another option that could be a feasible way of taking the sting out of the decision on the employee’s part is to examine whether any of the employees would consider working on a part-time basis or as a contractor. While the redundancy decision itself will undoubtedly still cause upset, the fact that you are doing all you can—both as an individual and as a company—to take the sting out of the tail by looking at all other options will go a long way toward helping that person. Even if this is not intended as a permanent solution, the fact that you are providing the employee with some time to look at alternative options while still earning an income will mostly be appreciated.
Outsourcing
A practical cost-saving measure that could be examined in place of making redundancies is to look at whether a proportion of back-office functions can be outsourced or potentially merged with a partner or related third party.
Pooling resources like this, especially at a time of rapid technological advancement, may be an option and could help the head count remain as productive as possible.
Communicate Openly and Clearly
Of all the factors to consider when making a reduction in head count, the golden rule should always be to consider what your decision will do to company morale and to colleagues—often close friends—who will be left behind. Changes in staff numbers always have the potential to cause serious unrest, which, if not handled correctly, could cause more damage to the company than not making any changes in the first place. It’s generally best to get any head count reductions done quickly and at once rather than “death by a thousand cuts.”
Therefore, any decisions need to be accompanied by clear communications explaining the reasons behind them and conveying a clear sense of direction about where the company is heading. Senior staff should make themselves available for questions, and whether through one-to-one meetings or by a group forum, the staff remaining should be given the opportunity to ask questions and be part of the overall company dialogue.
Companies are facing more pressures than ever before as we head further into 2021 and beyond. Any reductions in staffing numbers should always be done with the idea that the human cost is often just as important as the financial cost in mind.
Rami Cassis is the Founder and CEO of Parabellum Investments, a family office operating as a global private equity firm focusing on enterprise software, IT, and business services firms across multiple sectors, including pharmaceuticals and banking and finance.