- 10 March, 2003 13:56
You know how to hire and retain, but do you know how to let people go?
Dealing with staff can be the toughest job for any CIO. Performance appraisals are part of every manager's role, and as a consequence there can hardly be any CIO who has not had to advise, castigate and probably terminate the employment of at least one staff member. And often with little formal training or preparation in the finer points of human resources management.
What then of dealing harshly with employees when it is not their fault? Whether through mergers, acquisitions, outsourcing arrangements, cost reductions, business restructure, decline or collapse, in the current environment, redundancies, retrenchments and mass terminations are not uncommon, and often are reported at unprecedented scales. Retrenchments of thousands of staff are regular fodder for the media. But behind every headline there are countless real-life human stories, of hardship, anger, confusion and bitterness.
This affects all departments of an organisation, including IT, and many CIOs themselves have been retrenched. And while being thus dismissed does not perhaps carry the stigma of personal failure that it once might have done, it remains an unpleasant and unwished activity - on both sides.
It's also important to remember that there's more to retrenchment costs than those being brought to the bottom line. Doing terminations right has a commercial benefit, and protecting your organisation's "brand" has to be considered a major issue when retrenching or sacking numbers of employees.
After all, would you want to work for a company with a bad reputation when it comes to redundancies? A firm that seems to have no concern for the wellbeing of individual workers? The sort of organisation that lays off large numbers of people the day before Christmas? The industry grapevine is a very efficient communicator of bad news, and any story of callous behaviour or ill-treatment of employees travels fast.
"You can have all the best facilities and entitlements, such as bonuses, creche, leave, study, and so on, to make yourself the most attractive employer, and then pull it all down if you treat people badly, with disrespect," says Mark Burnicle, the national business development manager, people and development, for recruitment firm Robert Walters.
There can be no worse planning, and none more demotivating to staff, than when the media release the details of job losses to the public before the company has had a chance to tell employees.
"The workplace becomes a battlefield," says Brad Swebeck, an independent legal IR specialist. "With rumour of impending doom, the silent strike is put into place by employees and loss of productivity follows, not to mention the possible theft or destruction of intellectual property and confidential information, usually to competitors who relish the predicament of the company concerned.
"Resumes hit the market at a furious rate. The employer is all but dead in the water for about three weeks. This is enough time for the market to write the company off and for nervous investors to follow suit by dumping stock," he says.
"You have to face it, do it and move on," one CIO says. "Most companies have learned to tell the truth up front," he claims, although it seems at times that there are still enough out there who would rather the truth went quietly away.
How then do CIOs deal with the hardest job? What do you need to know and do, and how do you avoid making a difficult situation even worse for all concerned? Ultimately, if you do it correctly, you will not have trouble keeping your best people or attracting staff for all departments in the future.
Knowing how to fire correctly is important-to those who stay as well as those who go
Reactions to retrenchments and mass terminations can vary dramatically. "Only a small per cent of employees take the separation process really poorly," says John Cullity, chief general manager IT for Allianz Australia. Nevertheless, the reactions can sometimes be surprising.
When Web site and multimedia design company Spike (Australia) went bust, there was little prospect of the staff receiving any of their entitlements. Administrators Ferrier Hodgson were called in, and the options they put forward were either to close the company down immediately, or to keep it going and attempt to find a buyer. The staff agreed to try the latter, and despite a gloomy prognosis, spirits remained high, even until the final closure when all efforts to find a buyer proved in vain. Before one meeting where the administrators were to deliver their not always upbeat predictions, the staff passed the time by engaging in a Mexican wave around and around the meeting room. The administrators were surprised, to say the least.
"It certainly goes against the grain," says Graeme Campbell, a director of Ferrier Hodgson with 25 years experience in the industry. "It's not the norm to see people prepared to carry on the way they did at Spike knowing that they probably won't be paid. Normally when we come in the place is in decline, which means both the business and the staff."
When Spike finally closed the doors, the staff went off to a local pub for a wake. They have since held ex-employee reunions, which perhaps suggests that when everyone is in the same boat, spirits tend to be higher.
In most cases, however, retrenchments and terminations affect only a proportion of the staff, and rather than an all-in-together attitude, you instantly create distinctions and division.
Classic depictions of individual reaction to termination describe a "grief curve" comprising three stages: an "ending" (including shock, denial, fear, grief and stress), a "neutral zone" (including ambiguity, mixed signals, discomfort and mixed motivation) and, hopefully, a "new beginning" (including control, risk taking, acting, planning and finding purpose). Robert Walters' Burnicle says this depiction is particularly true for men, who are generally less inclined to discuss what they are feeling. They paint themselves into an emotional corner by putting the best face on what in reality may be a bad situation.
But not all reactions follow the classic grief curve. There's the normally placid person who suddenly becomes violent, the potential suicide and what Burnicle refers to as "the deer in the headlights" reaction - someone who is so unprepared and surprised that they just literally sit there staring in a daze. "You're not even sure if they've heard what you've said. You have to say it again to make sure they understand," Burnicle says.
While some disgruntled employees may take revenge through acts of sabotage, the more common experience is dealing with the feeling of abandonment most people feel upon being sacked, and their reactions can be very upsetting. Burnicle recalls having to spend several hours, in his role as outplacement consultant, with one of his clients' employees until the person felt composed enough to face colleagues out in the office. With others he has had to do follow-up phone calls in the evening when they got home and again the following morning. "Some people have a lot of other problems in their lives that you don't know about, and being retrenched is just the final straw," he says. "It might be a low probability, but suicide attempts by some people must be a consideration."
A few with tougher hides see a silver lining in the dark cloud of retrenchment and even black humour. Burnicle cites one fellow who had undergone a number of retrenchments. According to Burnicle, he was so inured to the process that he had had plaques placed around his property, such as "The Company X Swimming Pool" and "The Company Y Extension", declaring for all to see his gratefulness for the payouts received. "It's all about re-establishing self-confidence," Burnicle says.
But termination doesn't end when the employee cleans out his or her desk. A sacking or retrenchment can cause traumatic disruption in a department or organisation. Managers often overlook their own feelings and the feelings of the employees who are still around. Survivors might well feel a mixture of grief and guilt: a "why them and not me?" mind-set.
Charles Drummond, divisional manager, information systems for AM Corporation, says IT managers generally handle retrenchment well, "but we don't handle those who are left. We focus on those who are leaving and forget about those who remain." These survivors, he says, can be seriously "demotivated" and they manifest it in a number of ways.
Many people have an increased sense of vulnerability, as in who's next? They think: if the boss can sack the others so easily, they can get me too. On the other hand, some survivors are upset that they were not chosen. Indeed, they would prefer to go. They want to leave and would welcome the payout money as a financial buffer while they find a new position. And then there is embarrassment. Colleagues find it difficult dealing on a day-to-day basis with someone who is earmarked to go - do you commiserate, do you act normal, do you leave them out of social functions, can you be cheerful around someone who is going?
It's important for CIOs and other executives to let the people who remain know everything is going to be OK. This step is easy to overlook, yet neglecting it can really destroy the fabric of your organisation.
See You in Court
Retrenchments are not only emotionally charged, but are also a legal minefield
Paul Brown, a partner with Baker & McKenzie and an expert in industrial relations (IR) legal issues, says that generally, while most organisations handle retrenchments well, "a cursory look at the judgments of the Industrial Relations Commission and unfair contracts jurisdiction courts shows that there are still plenty of employers who get both the retrenchment process and the financial considerations wrong.
"The legal requirements are quite complex," Brown says. "In some states, procedure is important, whereas financial outcomes are relatively modest; in other states, getting the money right seems to be most important." The IT sector, in particular, he says, has had a number of cases that have received some prominence. Primarily this notoriety has swung on the "financial expectations of individuals and lawyers".
Swebeck says: "Loss of jobs because of corporate cost-cutting will need to be handled differently from job losses flowing from a merger, sale of business or outsourcing of function. In the latter circumstances, there will be a need to consider whether the legal system will operate to transfer employment conditions from one employer to the other, and the implementation of a sophisticated integration plan, which covers people, process, systems and HR.
"In my experience, the single most important factor to be properly undertaken by managers when faced with the task of making jobs redundant is communication. Strategic communication of decisions that will end the jobs of employees requires thoughtful preparation. People's livelihoods are at stake. The communication strategy should be focused on different audiences such as employees, their representatives, the media, internal management, investors and, if applicable, the board," Swebeck says.
"While technical requirements must be complied with as part of the management of risk, and particularly legal risk, the failure to adequately prepare and communicate the corporate plan will most likely lead to intense, unfavourable media scrutiny, the commencement of legal proceedings by employees or their unions, and the destruction of ongoing trust between the survivors and management."
Peter Ratcliffe, the CIO of consumer products distributor Hagemeyer Brands Australia, supports this view, using his own company as an example. "We undertook an analysis of an outsourcing proposal 12 months ago as an exercise in assessing ways to reduce costs," he says. "A cost benefit analysis decided against it, but staff were involved in all processes - the communication lines were kept open throughout. Our staff were involved in the final proposal [to remain in-house] put to management. They would have probably moved to an outsourcer if the decision had come down to follow that path. But the important thing is they were part of the whole process."
But that level of employee participation may be the exception rather than the rule.
"I remember one employer who had to implement the dismissal of employees by a drop-dead date 'without fail'," says Swebeck. "Imagine the CEO's shock when he was told by an Industrial Relations Tribunal, on application by a union, that all such plans were off - by way of injunction - until there had been proper communication with employees and their union.
"In another reported case, an employer was ordered by the tribunal to reinstate all the employees it had made redundant because the employer had failed to follow its own procedural guidelines on redundancy," he says.
"There are a lot of misconceptions as to what people are entitled to; people form their own views and adopt stances which inevitably end up in the hands of solicitors," Brown says. Managers, such as CIOs, can find retrenchment issues especially difficult, he says, particularly where there is a more unionised work force where selection criteria for who goes are very important. "It is very difficult to make selection judgments without there being some element of subjective analysis. There is no substitute for the manager making selection decisions but this leaves them in an unfortunate position."
While Brown says he is loath to be seen as a lawyer instantly recommending the use of lawyers, he emphasises that "if the emphasis is on procedure, it's best to call in the experts from the HR or IR department". Ultimately, Brown says, managers must satisfy themselves on three issues: the right selection decision has been made; the payout is fair and equitable; and the process is proper and adhered to. "HR professionals should have this as their stock-in-trade," he says.
Swebeck agrees. "Management should always involve HR - or an organisation with the relevant expertise and experience - in any retrenchment program," he says. "Experience with this situation is critical."
He references the case of a large, Sydney-based media company that was advised by its overseas board that "75 heads" had to go. Local management was dismayed, and sought advice on the various HR and legal issues surrounding the impending dismissals. The project involved weeks of strategic communication and legal planning with all levels of management. The legal aspects of the dismissals were carefully mapped out, including the obtaining of privilege over sensitive documents. A mini due diligence was carried out on all the employment contracts, awards and enterprise agreements.
"While there was no union membership, the communication planning proceeded on the assumption that employees were eligible to join a union, and that one or more of the dismissals might be challenged in the Industrial Relations Commission," says Swebeck. "Retention plans were drawn up to cover the survivors. Outplacement and counselling services were engaged, as were separate financial advisers for each employee to be made redundant. The strategic plan covering all these matters was presented to the overseas board. No claim was made on the company. In fact, many employees expressed their desire to return when 'things picked up'.
"This case is very different from the one involving a manufacturing company that secretly prepared a list of employees to 'go' and communicated the names via e-mail about a week before Christmas. Understandably, the matter ended up in the Industrial Relations Commission and the Anti-Discrimination Tribunal."
When you sack or retrench IS staff, make sure your company doesn't get burned
None of the CIOs contacted for this article said they had experienced sabotage by disgruntled ex-employees, which may be surprising considering the Information Security Research Centre (ISRC) at Queensland University of Technology (QUT) says it is estimated that there is one act of employee sabotage every week in Australia.
Hagemeyer's Ratcliffe says he personally has not experienced any sabotage, but he does know of one case where an employee who had been reprimanded came back in the evening and set fire to the computer room. "You can't totally protect against sabotage," Ratcliffe says. "You need to put trust in people. If you have open and honest communications, and involve staff in decisions that affect them, you are part way there."
Acts of sabotage can be very invidious when acting on network systems: compromising the network, destroying data or denying services. Disabling Web sites is particularly prevalent. Fewer incidents of large-scale sabotage, such as disabling electronic transaction systems for up to a week, have been noted, but these can cause damage costing in the millions of dollars.
"Most of the incidents are low scale," says associate professor Mark Looi, deputy head of QUT's School of Software Engineering and Data Communications, and a consultant and researcher for the ISRC. "They mainly comprise Web site disablement and hacking, and changed information. In most cases the victims of incidents simply correct the problem, and proceed no further. But sabotage is very much a real concern, especially following retrenchment of staff through downsizing and mergers.
"Perpetrators are always individuals. We are yet to have a case of sabotage by corporates or groups," says Looi. "All of the incidents are vindictive; there is no benefit to the perpetrator outside of inflicting damage. Network administrators and IT managers, if not leaving on good terms, have sufficient access and knowledge to inflict damage." This includes the creation of back-door entries that bypass normal security provisions. These may have been created for a variety of reasons, some legitimate such as doing work from home, and others less benign. "In security audits undertaken by the ISRC, we have detected a back door in 15 to 20 per cent of cases," Looi says.
Preventing such occurrences requires vigilance and adherence to due process. For example, a retrenched person should not have access to the system between the retrenchment and when they leave. "There is no such thing as 100 per cent protection," Looi says, "but you do need to be aware of the types of action possible and be vigilant for up to three months after an employee has left. A properly trained IT support [team] should be able to prevent external attack.
Once the incident has occurred, going to court can be a lengthy process. "There is insufficient precedent, and preparation can be lengthy," Looi says. "However, the courts do seem to be supportive. In the two court cases that I've been involved in, both resulted in convictions.
"There are always ways to assess the identity of perpetrators," he says, although he is coy about details. "Computer forensics has gained momentum over the last 12 months. One thing you do need to particularly understand, however, is don't damage the evidence."
Keep on Running
Continuity and transition are important elements of managing skill resources at all times, regardless of economic circumstances
Unless an organisation is going to go out of the market entirely, as in the case of Spike, it is important that the organisation continues to operate in a manner pertinent to future activities, no matter how many staff are laid off. This is particularly important with core skills, such as management of legacy systems or intrinsic software development.
Normally there will be some warning of large-scale retrenchments, so it is important that during the process of selecting which staff will stay and which will go, due consideration is given to the skills that will be required by the organisation post-staff departure. In many ways, ensuring essential skills are retained after retrenchments is merely normal skills transition but on a shorter time-scale.
In the case of a known staff member who is, say, retiring or generally leaving of their own accord, Hagemeyer's Ratcliffe says: "We manage transition by prioritising the workload of those taking on the new role so they can spend as much time as possible on it. Others take on their previous tasks. One month, the notice given, is normally enough to get someone else trained up. In any case, we try to always cross-train so that we have backups for all skills."
Cheryl Hannah, CIO of the Department of Immigration, and Multicultural and Indigenous Affairs (DIMIA), agrees. She has instituted a system of mentoring where graduates in their second year are teamed up with highly skilled people - such as those about to retire - both to pick up their skills and also to absorb something of the departmental culture. This affects about 10 per cent of her staff. "There's a bit of upward mentoring, too," she says. "Some experienced employees may need refreshing or new skills, so the graduates help them to develop these areas."
Of course, it is not always possible to institute a formal transition process. Available time may be too short (or simply non-existent) and management wary of raising suspicions before the retrenchment announcement.
While not strictly a retrenchment, Hannah's department has experienced tight budget constraints. After working a plan through with her managers, she offered contractors, who make up about half of her approximately 400 staff, standard hours of work of say 35 or 36 hours a week. Before this, contractors would often have worked 60 hours or more a week, and unlike full-time employees they would have been paid for all of them.
"We needed to maintain our capability and retain their skills. The alternative was lopping off heads and breaking up teams, or cutting the hourly rates. We didn't want to do either," she says. "They've reacted very well, They said it was fair, and while the market is not great they would rather have guaranteed hours than uncertainty. We instituted the change in October , and so far we have had 100 per cent retention."
Hannah has the additional benefit of now being able to put hard figures into her salary spreadsheets. "You have to be serious about maintaining your capability at all times."
Your Most Important Asset
All of these issues - transition, legality, security and continuity - are important to ensure that retrenchments and terminations inflict minimal damage to the organisation.
Ultimately, though, it is important to remember that retrenchments and terminations involve people - those leaving, those staying and those managing the procedure. As such, expectations differ, reactions vary and assessment of the success of the process will range from "unfortunate but fair" to "what a bunch of bastards".
"These days, young people come out of college knowing that at some point in their career they'll be made redundant. The 'job for life' concept is gone. Change is the only constant, particularly in the IT industry," says one CIO. But despite this awareness, and the view of another CIO who believes "a lot of the skills involved in handling terminations and retrenchments are intuitive", there are still plenty of pitfalls that could have serious consequences for all concerned.
"The first time I was retrenched was appalling," says DIMIA's Hannah. "We spent three months in a sort of departure lounge waiting to find out what would happen to us." Other CIOs have shared similar experiences, although most feel that over the last decade the retrenchment process has improved.
"The second time was different," Hannah says. "That time I knew how to handle it. People these days being retrenched take greater control of the process, so it is not so much 'done to you'. These days there is also less stigma and more understanding [in the marketplace] for people who have been retrenched."
"Retrenchment is, unfortunately, a mature process," says Tony Clasquin, CIO for Colonial First State. The fortunate consequence is that an industry has grown up around it to provide a range of services and assistance to uncertain managers. The expertise of third-party outplacement firms can assist a firm of any size in developing and executing plans for employee terminations, particularly in difficult circumstances. In some instances, Burnicle says, these need to be set up months ahead of any retrenchments. "From the moment an organisation is even considering retrenchment, they should be using outplacement help."
As an example, Robert Walters' Burnicle cites an organisation where a number of staff were considered to be potentially violent and it was thought they would react badly to retrenchment. A security officer was employed as an ordinary staff member weeks before the retrenchments so as not to arouse suspicion, and was then on hand to physically remove anyone from the building. "As it turned out, the people we thought might be trouble took the news very well," Burnicle says.
As well as pre-termination planning, outplacement firms will offer employment and, where needed, psychological counselling, assistance in preparing CVs and generally smooth the process for the employees.
As with poorly-handled performance reviews (where one CIO suggests "we're too tactful"), problems can arise in termination situations when managers do not follow a script or due process, and vary their message, often to the confusion of the employee. Such is the case with the hypothetical manager who admits to a departing employee that this is not his idea, and personally he does not agree with it. The employee thinks this is an indication that they will be called back in the future.
"We've had people who have refused to admit that they have really been sacked," Burnicle says. "They never leave the first stage of the grief curve. You have to make sure people's expectations are correct. Managers should be put through some training in how to handle the situation. Many people have training in how to interview someone for a job, but who gets training in how to sack people?"
Importantly, Burnicle says, it should always be made clear that this is all about the role: the role is gone, and the retrenchment should not be taken as a slight on the individual. That way, you protect everyone's interests. If you suggest otherwise, a raft of industrial relations and personal dignity issues arise. Costs of programs, he says, vary from about $50,000 for a senior executive to $4000 to $5000 for workshop groups of 15 people for several days. "If need be, we'll be there five days a week for as long as it takes."
Overall, employers must guard the decision-making process carefully. "The best way to do this, Swebeck says, "is through careful planning and strategic advice in the very early stages of the program. The paper trail must be protected. Employees must be reminded of their obligations of confidentiality and good faith to the company.
"Even in these early stages of the retrenchment program, employers must always think about fair processes being implemented, open and direct communication to employees or their representatives, transparent decision making, objective planning and, notwithstanding the situation, an equitable outcome for all concerned. Employers who disregard such basic principles do so at their own risk," Swebeck says.
Perhaps Clasquin puts it best. It's all about dignity and respect. "Can you walk out of the organisation, look yourself in the eye and ask: 'Have I done absolutely my best?' I'd rather walk out with my head held high," he says.
And that's a statement that should apply equally well to CIOs and their departing employees.
SIDEBAR: "What Do You Mean I'm Fired?"
Few employees are willing to accept termination quietly. Here's how to prepare.
by Matt Villano
Outplacement experts say people typically display one of five reactions to termination: anticipation, disbelief, escape, euphoria or depression. To help prepare for any one of these responses - and to reduce the likelihood of workplace violence - Anita Web Weaver, a regional vice president for operations at Boston-based outplacement company Drake Beam Morin, says it's important to have answers to the questions you may be asked during the termination conversation. Weaver and her colleagues put together a list of these questions and asked staff psychologists to formulate good and appropriate answers.
Why me? Who made the final decision? This decision was based on a number of factors, including individual job skills, work experience, organisational needs, tenure and performance. These decisions are always difficult, but they were reviewed and approved by management.
What recourse do I have? Employees are always free to talk with a higher level of management. However, because management has already carefully reviewed this decision, it is unlikely that the outcome will change.
Can I continue to work for a while? No. We feel that it is in your best interest and the organisation's best interest that you use your time exploring employment opportunities elsewhere.
Can I be rehired? You are eligible for rehire, but the probability of that is unlikely. This is why you should concentrate your efforts on finding employment outside the company.
Are you sure you're letting me go? Can't I speak to someone else about this? Of course you are free to make an appointment to see my supervisor, but I must tell you that he is fully aware of this decision and supports it 100 per cent.
How could you do this to me after so many years? This was a business decision. It was necessary for business reasons.
SIDEBAR: Take No Risks
An ounce of prevention can prevent a pound of cure
by Brad Swebeck, Swebeck Legal
The best practical advice for managers faced with the possibility of large-scale redundancies is for them to identify the legal and practical risks by following a simple check list of items that must be considered. The following is a guide only and must be tempered to meet the circumstances of each case.
- When is a final decision being made about the number of retrenchments?
- Should voluntary redundancy be offered before any forced redundancies?
- Which trade union has coverage (or potential coverage) of employees?
- What award or industrial agreement applies?
- What do the contracts of employment or letters of appointment state?
- What legal jurisdiction will the dismissals occur in?
- Are there any laws that set out the scale of payments to be made?
- What is the corporate HR policy on retrenchment?
- What is the corporate history on retrenchment?
- Is there different treatment for award and non-award employees (if so, is it discriminatory)?
- What are the alternatives to retrenchment?
- What services will be offered to employees (counselling, outplacement)?
- Are there restraints of trade in place?
- What are all the financial obligations to the employees?
- Is HR involved?
- Is the media office involved?
- What will be the practical, industrial implications of downsizing (industrial dispute, boycotts, union campaign, employee pickets, productivity loss, injunctive relief, award extension and so on)?
- What are all the legal implications?
- What is the communication plan?
- Is there an industrial relations strategy?
SIDEBAR: Safe Exits
By taking a few basic precautions, CIOs can reduce the risk of IT sabotage
- Prepare well beforehand.
- Seek the cooperation of the staff - change passwords, sometimes within minutes of retrenchment.
- Be aware of potential conflicts of interest and loyalty which may arise when managers are retrenched.
- If possible, have IT support staff in meeting while person is being retrenched - ensure there is immediate loss of access to minimise the opportunity for sabotage.
- Networks and firewalls need to be designed so that someone with internal knowledge cannot access the system.
- Ensure managers are alert to disaffected employees and, if necessary, make them responsible for the employees' actions.
SIDEBAR: Brand Awareness
Rules to follow for effective redundancy and minimal damage to the organisation's brand
by Mark Burnicle, Robert Walters