Reducing the staff head count in a business is never a pleasant task - on either side of the desk.
However, it is often a fact of life in business.
Down-sizing Staff is a very emotionally charged activity and requires a good understanding of the relevant legislation so that you do not find yourself in hot water.
Reasons for Redundancy
Some of the things that lead to redundancies include:
- Cost reduction: is a common reason for redundancy as Staff are typically 50-70% of a business' Overhead Costs.
- Surplus staff after merger/acquisition.
- Plant/office shutdown.
Keep the Right People on the Bus
Jim Collins, in his well-known "Good to Great" books, uses this term to refer to having appropriate people ready to work on your business.
He argues that it is more important to have the right people, before you start on a business or project overhaul, than it is to try and get them as you are part way through the overhaul.
There should be no doubt in your mind that you are embarking on quite a difficult task.
Staff will quickly divide into 3 groups:
- Those against you.
- Those largely indifferent.
- Those in favour of what you are trying to do (probably not many in this case).
Early on, you should take something of a mental stock-take on the personnel that you have available to you and roughly categorise them into these three groups.
We also write more on this topic in our Change Management article.
Broad Cuts First in a Redundancy Plan
If you have specialist administrative positions, for example, Legal, Human Resources, Accounting, IT, Finance, in a small organisation, they could be made redundant and replaced with outsourcing services.
These jobs might be thought of as “unproductive” in that adding more or removing these staff does not have a direct impact on production which is the determinant of Profit.
Who Goes, Who Stays in a Redundancy Plan
As part of your re-sizing process you will have decided that you need a certain number of, for example, sales people. To choose which sales people to keep, we want to perform an 80/20 analysis on them.
The first step is to determine some method of scoring an individual’s contribution. This might be on several different criteria such as wage, skills, flexibility, attitude and location. With several people, this can become very complex very quickly.
Attitude/Skill Matrix Staff Analysis
A comparatively straight forward approach is to put people in a cell on a 4 cell matrix.
On the left-hand side is Attitude - first row is positive; second row is negative.
In the columns is Skill - first column is high; second column is low.
You can quickly place people into one of these cells.
1. Positive attitude, high skill
2. Positive attitude, low skill
3. Negative attitude, high skill
4. Negative attitude, low skill
A successful manager would aim to have all Staff that they retain in Cell 1 insofar as possible and Cell 2 if necessary.
Weights and Score Analysis of Staff
For a more "scientific” approach, we suggest that you build a Weights and Scores Matrix (see Weights and Scores article).
Form of the Matrix:
- Left hand side: selection criteria and importance weight.
- Top: each person.
- Body: scores for each person.
- Multiply: scores x weights = rank for each person's contribution to the business.
You would begin by retaining the highest scoring individuals up to the point where you have the number of staff you believe you will need.
Study Your Organisation Chart
A study of a Management/Organisation chart of your existing organisation can be an enlightening way to see where Managers can be removed.
There is a Management concept called the "Span of Control".
This argues that people should typically have at least 8 direct reports and, in some organisations, many more.
If your organisation chart shows many Managers with fewer than 8 direct reports you could:
- Merge several direct reports for each manager under one manager.
- Eliminate positions by combining their roles.
Read more in our Streamlining Organisation Charts article.
How Deep do we Cut in a Redundancy Plan
Parkinson's Law (see Parkinson's Law article) tells us that "work will expand to fill the time available".
- Work is being done by staff that doesn't add a great deal of value to the business.
- Reducing the number of staff will take out some of this hidden surplus capacity.
Managing the Redundancy Process
Letting people go is a very difficult exercise.
- Larger organisation: the HR Department advises and assists with the process.
- Smaller organisation: consider hiring specialist talent to do this. They are likely to be:
Better at it because they do it for a living.
Able to save the distraction of your other management resources in a one-off exercise.
Able to reduce the psychic damage on the managers that you are retaining from having to let people go.
Aware of the necessary legislation and follow that correctly.
Watch The Video Now
Richard Branson speaks with Eric Schurenberg about "Putting Your Staff 1st, Customers 2nd & Shareholders 3rd".
Watch this 3 minute video
on the link below
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