What HR Won't Tell You About Employee Layoffs, Downsizing, and Reductions in Force
Learn What HR Isn't Telling You
All Too Similar: Being Downsized and Getting Dumped
Having your job downsized is a lot like being dumped by a long-time love interest. You try to deny the initial rumblings of trouble, of gnawing discontent. They grow into larger signs of instability.
There are burgeoning red flags that attract outsiders' attention. Word on the street is: You're a short-timer. Can this relationship be saved?
Your partner seems so far away, somehow too busy for you. Communication is scant and strained. Answers leave you with more questions. Finally, you have the dreaded "talk" and through halting words, the news hits you hard.
Struggling to catch your breath, you wonder, "Was it something I did? When did you first know? What will I do now?" You rally your support system. There is blame and grief. You sign legal papers, divide property, leave others behind. It's not how you imagined this relationship would end.
Getting dumped is all the same, whether it's by an employer or a lover. They say, "All's fair in love and war," and "It's only business," but packing up and starting over sure hurts like hell.
Reader Experience Poll
Have you ever been laid off, downsized, found to be redundant, "riffed" or had your job eliminated?
Empty Cubicle: She Doesn't Work Here Anymore
Trust Is A Very Fragile Thing
As a former HR employee for two Fortune 500 companies as well as other organizations, I've never experienced job elimination myself. However, over the years I have survived multiple voluntary and involuntary layoffs and have seen countless co-workers and friends suffer job displacement.
I've also been part of the HR team that restructured and redesigned the workforce, resulting in family breadwinners losing their jobs. Additionally, I've investigated the internal workplace complaints that can follow such job losses.
Trust is a very fragile thing and can take an extraordinary time to heal. Attempting to restore it both immediately and several years after layoffs is exceedingly difficult. It's like trying to soothe someone's broken leg using band-aids.
Too often, workers assume their jobs are secure. Instead of denying your own vulnerability to layoffs, isn't it better to at least know the warning signs that a Reduction In Force (RIF) could be imminent? Forewarned is forearmed.
Based on my HR experience, here are 10 things that HR won't tell you about downsizing.
Expecting to Take a Hike? Put on Those Walking Boots
1. Executives and key employees knew about layoffs well in advance.
Barring a sudden jolt to the company such as the loss of a major contract, the need for workforce reductions hardly catches company decision makers by surprise. My own experience in HR is that key executives had a year or more warning that job cuts would be necessary. Serious strategic planning began up to six months in advance.
As a result, in the year leading up to mass layoffs, management became more aggressive in enforcing discipline. Thus, if employees facing discipline were "on the fence" between discharge and keeping their job, they were fired. Ultimately, this saved the company from paying out severance later on.
2. The Company may not have fully considered alternative cost-cutting strategies.
When a company faces a temporary economic downturn, a variety of cost savings measures are available (see table below). Although unpleasant, such alternatives are often not well explored, however. It's too easy to think "headcount reduction" as a top-of-list solution.
In some cases, layoffs can favorably impact a company's stock price, albeit more in the short-run. But the human reality is that those heads are connected to real people and families. Perhaps yours?
Get back in the game! This book provides the inside scoop on job interviewing, and I recommend it to people in my inner circle who are in search of work. Don't let your resume end up in the black hole with all the others. Even if you're not on the layoff list, you need to stay competitive.
Alternatives to Downsizing
Has the company considered these options?
Or even these?
Cut temporary staff
Reduce work hours (for hourly paid employees)
Offer voluntary retirement packages
Implement work furloughs (with or without incentives)
Reduce business travel
Cut expensive/unnecessary perks
Raise employee contributions to benefit plans
Postpone or eliminate bonuses
3. Decision makers perceive RIFs as an opportunity to "clean house" of whiners, poor performers, and problem employees.
Long before a layoff, HR and other decision makers can often project that certain employees will be on the list for downsizing. If you cause management that much of a problem, chances are good that you'll find yourself "riffed," even if the Powers That Be must stand on their heads to make it happen.
Employees perceived as troublemakers—that is, the whiners, poor performers, and those who have crossed the wrong executive—typically receive more aggressive performance management in the form of documented performance warnings and Performance Improvement Plans (PIPs) in the time leading up to the announced downsizing.
Management previously may have been lax about documenting poor performance. However, in advance of a layoff, these employees' errors come under tighter scrutiny. Communication between them and their managers becomes more written than face-to-face. This often provides decision makers with the necessary documentation to set these employees up to for job elimination.
Workload Dwindling? That's a Clue!
4. Companies don't always have a well thought-out layoff process (or they don't consistently follow it).
Ideally, companies must first determine their goal and decision making criteria for layoffs, outline and document a consistent process for achieving it, and seek appropriate reviews with corporate counsel. Failure to do so could mean legal landmines.
In practice, the process can derail when decision makers with a conflict of interest fail to recuse themselves (e.g., those related to impacted employees by blood or marriage or with an undivulged conflict of interest). Similarly, downsizing can go awry when an unexpected result is achieved—a problem employee is retained or a protégé is slated for downsizing. The deadly temptation to "adjust" results can be overwhelming.
At other times, time-pressed managers get sloppy, believing they already have all the answers. They want to rush through the planning phase and skip consultations with attorneys. Such practices threaten to undermine the entire system and undo any potential cost savings a layoff might bring.
Going, Going, Gone
Red Flags: 16 Signs That a Company Layoff Could Be Looming
1. The company is in poor financial health and seems to be "bleeding" money. The stock price plummets over an extended time period.
9. There are frequent closed-door meetings. Outsiders (i.e., lawyers) are present.
2. Activist shareholders become interested in your company (if it's a publicly-traded company).
10. Security presence increases. Security protocol becomes more rigid. (The guard who knows your name actually asks to see your identification.) Moving boxes mysteriously appear.
3. Your company is involved in a merger or acquisition. Your job may be considered redundant, especially if you're employed at the "acquired" company.
11. There is a leadership change. A number of key managers exit. Star performers may find better opportunities, too.
4. The company has employed cost-cutting measures, pay freezes, hiring freezes, pay and benefit cuts, and it has stopped giving raises (or reduced them significantly).
12. Your company consolidates locations, moves to less expensive real estate.
5. Organizational consultants have been called in to identify opportunities for efficiencies. There is talk of "justifying your job" or employees must re-apply for their jobs.
13. Your workload dwindles noticeably. You're assigned a number of tasks way below your skill set.
6. Non-essential budgets have been slashed: travel, training, office supplies, expense accounts, etc.
14. The rumor mill is on overdrive. (Yes, people talk -- even HR, Law, and Accounting.) There are negative press reports about the future of the company.
7. Major functions are outsourced overseas.
15. You're asked for a list of key contacts, projects you're working on, and an explanation of your role in the company.
8. You're in a dying industry or your industry is experiencing a major cyclical downturn.
16. Communications with your manager and others become less frequent, more formal and awkward. You're treated as if you're already gone. (Do they sense something you don't?)
5. Women, minorities and older workers may be impacted at disproportionate rates overall.
Statistics can identify initial evidence of illegal discrimination even in cases when decision makers didn't overtly intend to discriminate. But you know what they say about statistics: There are "lies, damned lies, and statistics." Without getting overly technical here, there are indeed methods that can help protect the sneaky-smart, risk-averse company from tripping those statistical alarms.
Particularly if employment attorneys and industrial/organizational psychologists have not been consulted, legally protected groups may be laid off in greater proportions: females, minorities, and people over age 40. The result is that after a reduction in force, the workforce is often less demographically diverse than its predecessor.
Overwhelmed and Overpowered? You Might Need Back-Up
6. You CAN negotiate your severance package, especially if there is evidence of discrimination or retaliation.
Companies often provide downsized employees with one or two weeks of severance per year of service. Don't assume that's non-negotiable, particularly if you have some legal leverage. For example, do you have evidence of discrimination or retaliation for past complaints? Do you have an ongoing complaint?
Don't even think about negotiating a better deal without talking to an attorney first. Depending on the situation, employees are typically given as much as three weeks, or more to seek consultation. Say that you need time to consider the offer. Don't mention needing an attorney to anyone, then go consult with one on the down-low, because signing a severance agreement means you're giving up certain legal claims. (Personally, I'd opt for an attorney with a flat-fee arrangement.)
Rather than jumping directly into a battle of the attorneys—which you can always do later, right?it's better to get some basic coaching and try to keep negotiations between you and HR. Although the company has no legal obligation to pay displaced employees severance, you don't have to sign the agreement either.
7. If you feel unfairly treated, there may be no independent appeals process.
The Company may not be following the many legal requirements for downsizing, but finding the right party to complain to is the problem. if you're going to challenge the appropriateness of a decision, you'll be hard pressed to find a neutral party in HR. And potential coworker allies may have already signed a severance agreement in which they agree not to disparage or sue your employer.
Normally, you can file an internal complaint with your company if you feel unfairly treated. HR will review your complaint. But in this case, HR is usually involved up to their armpits in both the design of the layoff system and the decision-making sessions. Talk about a conflict of interest! Now whatcha gonna do?
In a particularly egregious example, one corporate executive I knew directed an entire layoff project that downsized about 1,500 salaried employees nationwide. At the same time, he pulled double duty with his "regular job," which consisted of overseeing the Compliance Department. These are the folks who investigated employee complaints of alleged wrongdoing. Complaints about the layoff therefore were filed directly with his department. Perfectly engineered!
You may be left with the choice of getting the best deal you can or taking your chances and venturing on the long tough road of litigation with an uncertain payout.
How Will You Play Your Hand?
8. The Company is betting you probably won't consult an attorney.
Getting downsized can be traumatic and send you into survival mode. You'll probably focus on your emotions and formulating your short-term strategy, like how you're going to meet week-to-week bills.
You may be less concerned about the fine print in your severance agreement. Although the agreement spells out your right to consult an attorney at your own expense, many people don't, and the company is betting you probably won't either.
The agreement may be written in language that seems more "plain English" than "legalese," but that's because they're required to do that! Consider all that you don't know about severance agreements to be a blind spot and proceed accordingly.
Survivor Effects: Missing Work Friends
Survivor Syndrome: The Impacts Of Layoffs On Survivors
Decreased loyalty and trust in management
Higher stress levels
Feelings of guilt and depression
Lower organizational commitment
Higher voluntary turnover and intentions to quit
Greater job insecurity
Lower job satisfaction
Lower levels of productivity
9. Surviving a layoff isn't all it's cracked up to be.
Losing your job isn't the only negative thing that can happen in an RIF. Sometimes, sticking around can be pretty unpleasant, too. Following downsizing, survivors typically experience greater workloads, stress and depression, job insecurity, management mistrust and other reactions. Together, these effects (see table above) are referred to as "survivor syndrome."
Although I've survived each company layoff I've been exposed to, I've found them brutal and emotionally draining. Sure, there's that weird guy who never got along with anyone else and no one knew what he did. Secretly, you're kinda glad to have him disappear, but did they have to march him to the door, close to tears, with boxes of his desk contents piled high? It's enough to make you feel sorry even for him.
I've witnessed the indignity of people having to re-apply for their jobs or getting shuffled to departments that they had previously worked very hard to bid out of. I've silently eye-rolled (it was to myself, wasn't it?) when managers tried to rally the troops with talk about
- "doing more with less,"
- the need to "work smarter" instead of harder
- learning how to "justify your job" every day and
- "creating greater personal value."
Such talk frustrates workers who are already frazzled, especially top performers who weren't exactly sitting on their thumbs pre-layoff. Just as being laid off feels lousy, surviving can really suck, too. It'll take some time or a change of job scenery to bounce back. (That's what I did after two rounds of cuts at the same company.)
It Sucks to Be You, but You'll Get Through This
10. Layoffs probably won't create lasting value.
Downsizing encourages survivors to become
- risk averse
- less innovative
- less productive, and
- less cooperative in information that they share with teammates.
Although businesses may see a temporary boost with labor cost savings, in the long-term, RIFs typically don't create the lasting value that business leaders strive for.
As institutional knowledge walks out of the door, companies sometimes realize their job cuts went too deep. As a result, don't be too surprised if a year or so after that layoff some of those same jobs that were eliminated get re-posted and filled with fresh new faces.
Studies have tracked the performance of downsizing firms versus nondownsizing firms for as long as nine years after a downsizing event. The findings: As a group, the downsizers never outperform the nondownsizers.— Wayne F. Cascio, Ph.D.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Questions & Answers
© 2015 FlourishAnyway