Layoffs – A Behind the Scenes Look at Reductions in Force
It appears that while there are fewer reductions in force (RIFs) or layoffs these days than say, three years ago, layoffs are still happening and can be quite confusing to the non-HR (ok, probably to most HR people too) employee. I have had the unfortunate experience to be a part of several different layoffs at various companies.
The fear and concern that employee’s face when they “feel” a RIF coming on, is frightening, so I’d like to share a behind the scenes look at what typically happens and how employees are “chosen.” Please note that this is a collection of my own experiences (from a Human Resources perspective), at several companies – not a single one in particular.
The RIF Process
As secretive and scary that an upcoming reduction in force is, there are usually signs that layoffs are coming. Each company is different, but typically when there is a lot of smoke, there is fire. The company’s finances and/or numbers are way off – you should absolutely know and feel if this is the case. There are several secretive meetings with management and Human Resources – I’m talking, several meetings that are more frequent than normal.
Your manager has trouble looking you, or anyone else on the team, in the eye. Or perhaps your job is being shipped to another location. The critical factor here is the financials – if your company is not making enough money to justify and pay employees, it has to decrease costs by letting employees go.
A large-scale RIF usually takes significant time to plan and activate. I’m talking at least a month, longer depending upon the size and scope of the planned layoffs. It is virtually impossible to lay-off employees without careful planning (micro-businesses is an exception to this). Remember: the company wants to lean-out their workforce (to save costs) as much as possible, but also retain their top talent by all means necessary. So what kind of planning is involved?
Behind the Scenes Steps of a Reduction in Force
- Management, along with Human Resources at the top levels, decide which areas of the business can be leaner. It is typically easier to target employees in non-management positions, even though they are usually less “expensive” to the company. Reason being? These positions can be staffed up again later if needed, using contract or temporary employees. If your company does not have a large non-exempt (hourly) workforce that fits this criteria, than this is not a consideration. The most critical examination is if each department can justify to the bottom line, that they are generating enough income to cover their own costs.
- Once the area of the business has been identified, HR takes over the process. First, they speak with managers at the highest levels, asking them somewhat veiled questions about capacity of their employees, staffing needs, where they can flex their workforce, and what type of impact different areas of the business has on the overall productivity of the company. HR then tries to narrow-down the cost/benefits to decrease different departments, to ensure business continuity.
- Then the evaluation process begins. There are many different steps in the evaluation process, which I will review below, but note that the first step is setting one consistent measurement tool and grading system for all positions. This “tool” is used across the board for evaluating all employees within the targeted department. There is not really an industry “standard template” per se, but there are some consistent measurements that are used. Those include: current performance, past performance rating, skill-set grading, and soft-skills (competencies). Depending upon the company, there are other measurement factors: hierarchy, time in role, time at company, business-critical position, and so on.
- The tool is then completed by HR and your managers. The best practice is your management staff completes these evaluations for their employees (usually at the director or VP level, not at the manager-level). HR then adds the historical/current ratings, and each person has an overall score.
- The scores are ranked and the pre-determined level of achievement (for example, anyone scoring 50 and below), draws the proverbial layoff line. But that’s not at all the end of the story!
- Lawyers get involved, heavily, particularly at a publicly traded company and/or if the size of the layoff is significant. They evaluate “the list” to ensure that it is compliant with state and federal employment regulations. Things such as gender, age, minority, disability, leaves of absence, and so on are incorporated into the conversation. Once they take all of these things into consideration and their edits are included, the list is about 98% ready. There are always a few things that pop-up and a name or two added/subtracted for whatever reason.
- The lawyers send the list up to the most senior-management in the company to get their sign-off and approval. Once that has been obtained, the actual RIF is planned.
Some things to know:
- It is almost impossible (I’ve never seen it work), to talk your way off of the list. It truly is out of your manager’s hands once the list has been confirmed.
- You can ask to be “on the list,” but know that if you volunteer for this, you cannot change your mind later. This is a big decision, so be sure to think it through from every angle before approaching your manager or HR with this request.
- Being a top performer does not protect you from being laid-off, but it can help you stay employed at the company, particularly a large one.
- Human Resources does not make the people selection on their own. Management at some level always has a say.
- There are several things that I have not included here, as this is a very complicated process. Things like WARN, notice periods, severance calculations, and much more. This is a “simplified” version of the process to provide an overview to you.