Monday Musings

The Dreaded News: You are Retrenched

Every Monday morning the team at ConnectX, including an occasional guest, deliberate on a challenges of leadership and culture. These papers represent the output of our weekly discussions. They are sometimes pure musings, but sometimes we cannot resist airing recommendations. Primarily though, we intend to stimulate thought around issues that most leaders will face at some time or other. We welcome your feedback!

19 Oct '18

The Dreaded News: You are Retrenched

Most people define themselves by the job they have; by the company they work for and the title they hold. Friends and family save phone numbers along with the company one works for. The bank links one's identity to that of their employer and individuals join saccos and acquire loans on the strength of their employers.

In the past few years, many of Kenya’s employed populace have been at the receiving end of the dreaded news: “due to the prevailing economic conditions and the continuous streamlining of business processes, we have made the decision to retrench you.” Unfortunately, retrenchment is a part of our current reality and the trend that is unlikely to stop.

According to The Kenya Association of Manufacturers (KAM), 47% of the manufacturers in Kenya have, or are planning to cut jobs. For every current and prospective employee, this is worrying news. The foundation on which an employee’s life is often based could be swept out from under them in an instant sending shockwaves to their families and the people they who depend on them. For prospective employees, this is an extra weight added to the despair they carry.

So why do companies retrench?

The two major reasons companies retrench staff is cost savings & technology. At the end of a financial year, when a company realizes that they have not met their targets, the first thing they look for is a way to cut costs. By cutting costs, a company is able to increase its overall profit. And one of the easiest places to look for cost savings si in cutting jobs.

Technology has had a huge impact on human capital. According to a Harvard study, robots have taken 85% of the 5 million manufacturing jobs in the United States. Technology has also affected major retail outlets with many of them opting to sell their products online. This means all the auxiliary jobs related to a retail store are lost. In the banking industry, software is replacing many of the manual jobs with industry moving towards digital platform.

So what is the effect of retrenchment on the company culture? How can a company limit or eliminate the damage to morale and performance of a retrenchment exercise?

1. Discuss Business Performance
Every company should have a clear dashboard on the company’s performance that is visible to everyone. When a company is under pressure, employees should know. They should be given the chance to adapt their workplace behaviors to address the underperformance – for example, by cutting costs in their functions or finding more efficient ways of doing things.

Employees need to know that retrenching people is the last resort of an organization that cares for its people and that all other avenues have been explored.

2. Foster an Environment of Independence
Forward-looking companies, even those doing very well, take steps to ensure that their people do not slip into “a job for life” culture. They remind their employees that circumstances can change and that, as individuals, they need to prepare for a day when they no longer work for the organization. Some organizations go as far as to run formal sessions where employees are taught the importance of financial discipline, diversifying ones skill base and avoiding over-reliance on ones pay cheque.

3. Listen to and Manage the Rumor Mill
If a company is struggling, it is inevitable that employees will start discussing the possibility of losing their jobs among themselves. This can lead to a decline in productivity, an exodus of talent from the organization or an inability to attract new talent.

Keeping a finger on the pulse of the employee mood and using informal channels to listen to the rumor mill is an important skill for leaders. It enables them to, without making false assurances, address those rumors where possible. For example, jobs may be under threat in one particular function, but there may be panic right across the organization. In such an example, it may be helpful to announce that while a project is underway to seek efficiencies in one function, all other functions are out of scope of this exercise. While this may increase anxiety levels in the function in question, it will alleviate fears elsewhere.

Formal communication of change within the organization is also important. Communication plans should form a key part of any change exercise in order to increase adoption and alleviate fear.

4. Implement a retrenchment exercise quickly and with sensitivity
If a retrenchment becomes inevitable, the exercise needs to be planned very carefully. One way of approaching the issue is as follows:

a) Call a functional meeting to tell employees that some of them will be losing their jobs and that those affected will be told immediately after the meeting.

b) Have one-on-one sessions with those affected, explaining why they have been chosen and what the company will do for them at this difficult time.

c) Once this process is completed, call the function back together and tell them that those affected have now been informed. This will alleviate any fears in those remaining.

d) Communicate to the rest of the organization what has happened, why, and how the departing employees will be assisted. While the details of redundancy packages will not be communicated, remaining employees should understand that the decision was taken reluctantly and that their colleagues were treated with respect.

5. Rebuild the Function or Organization
Depending on the scale of the retrenchment, it may be necessary to conduct organization-wide forums to re-focus the remaining employees, encouraging the view that the worst is over, this is a new beginning and the future is brighter. These sessions should seek to reiterate the company’s culture and focus employees on the challenges ahead.

If the retrenchment is confined to one function, it will often be sufficient for these get-togethers to be in the affected function only.

In conclusion, retrenchment is an unfortunate reality. The best an organization can do when implementing such an exercise is to manage it quickly, demonstrate compassion, isolate any negative cultural impacts, and recover/refocus quickly.

Locate us

Settings

Color Pallets

Versions

Reset