How to Lay-Off Employees in the best possible way

When companies' profit are hit, staff are usually the first to be axed. This provides quick outcome and helps shape P/L and balance sheet. New employees can often be the first in the firing line. To many (including me), 2008 has been the first time we have ever witnessed the height of corporate lay-offs.

With so many companies opting to reduce expenses by laying off employees, it should be remembered that the same employees have so far taken pride in working for the company and had helped the company achieve new heights at the time of prosperity.
So what can companies do when laying-off these loyal employees.

Is there a better way to terminate so many jobs? Lets discuss -

1. No, there is none.
2. Stop hiring new people externally and move people internally
3. Discourage any over-time work and try to distribute employees to departments with higher level of work requirements. For example, lets discuss one possibilty in current situation. If employees within acquisition have to be layed-off, trying to move these employees to credit control can do a trick. Credit control department would be requiring more employees to manage acquisition risk. The outcome is that the same employee now understands both acquisition and the risk involved in more detail. The same example applies for point 2 as well. (Example for Creditcard Industry)
4. Ask if any employees agree to retire voluntarily (or for a agreed sum of money). This is very effective in containing the size of lay-off in any situation and can reduce stress to existing employees.
5. Until the economic condition improve, try and negotiate with employees a 3 days a week work schedule for half-pay. There are always few who agree to these kind of ideas.
6. If the lay-off is unevitable.
In such cases, base the lay-off decisions on combination of all the below -
- past employee ratings
- on future potential
- employee existing network within and outside the organisation
- on experience (both internal and external)
Do not base it on
- employee's duration in the company
- their current performance only and not potential to the changed flat organisation
7. Without fail, provide impacted employees time (a month or more) to search for a new job outside.
8. Also provide reasonable amount of pay to minimise financial stress to the impacted employees. Employees bank account should be able to hold them until they find a new job.
9. Any reasonable employer should try to help impacted employees find a job and make the transition as smooth as possible. This can be done by connecting recruitment agencies to the impacted employees and paying a small sum to the recruitment agencies for finding a job for the impacted employees. This will motivate the agencies to work harder in finding the job for the impacted employees.

There are many possible ways that companies go about the lay-off process. The best of companies try to minimise the impact to the employees. It is always the employees who turn the company into a sucess story. Unfortunately, there are times when the same employees get themselves in the firing line, but again to make the company profitable.
Success is not when you do things right, but when you do the right things in the right way.

- Raghab R Nepal, July 2008

Note: Example in the blog relates to a common creditcard company but similar approach can be followed for any industries.