Saturday, November 08, 2008

Top 5 Worst Human Resources Practices for Surviving the Bad Economy

Right now we are seeing companies take drastic moves to survive the bad economy. I am probably going to shock a few people by suggesting that some best practices may turn out to be your worst nightmares.

1) Early Retirement. Early retirement is often touted as the panacea for reducing payroll. You allow those nearing retirement to leave with a generous package and reduce your payroll by a significant amount. Unfortunately, in practice things rarely work out as you envision. What happens if your best employees accept the package, take jobs at your competitor and your mediocre seniors say, "No thanks?" I have seen that situation play out and it takes a number of years for a company to recover from this mistake. Luckily for me, I've been at the competitor company who picked up the top talent that "retired" from across the street.

2) Voluntary Severance. This has the same consequences as early retirement only the mistake is more pervasive. With voluntary retirement you can rationalize that the employees will be retiring soon anyways. The performance loss will be limited. With voluntary severance you risk losing large numbers of your best employees (and you pay them for that pleasure!) In an economic downturn, you need your best employees to help you survive. After your voluntary severance when you survey the damage and begin to rebuild you may find that you don't have the necessary troops. You've lost the battle and the war.

3) Hiring Freeze. A hiring freeze is just plain dumb. What are you going to do when key people leave key positions? Similar to retirement and voluntary severance, a hiring freeze takes away your control on the quality of your staff. In bad economic times, it's even more critical that you have great employees doing great jobs.

There is nothing more de-motivational than a hiring freeze. Think about the panic that will be evoked every time someone leaves. In most cases, the 40 hours of work that a departing employee leaves behind doesn't just evaporate. There will also be "exceptions" (read by employees as special treatment) for managers with high influence or critical positions to fill. This destroys any bit of camaraderie that might exist between managers, between departments and between staff. Instead, implement a "hiring scrutiny." Review each position to see if there is a better way to streamline the workflow. Restructure where you can, hire where you must. Which is what you should be doing anyways, isn't it?

4) Not Terminating Dead Wood FIRST. Companies often use "layoffs" in order to terminate the proverbial dead wood - problem employees that have been allowed to stay due to wimpy management. It need not take a RIF for managers to do their job. You do not need to provide outplacement and severance to poor performers. During a previous economic downturn when I was Staffing Manager at a company of about 2000 employees, before we undertook a RIF we conducted a comprehensive review of employee performance. Did we discover many employees who had been on probation and performance improvement plans that had failed to improve? If I may borrow this phrase, "You betcha."

5) Not Being Creative. Get your HR team together for a brainstorming session. What kind of program(s) can you create that will reduce payroll while still maintaining productivity? How about offering 30 hour work weeks? Some form of job sharing? I don't know what the answers will be but I do know that you will be able to come up with some winners.

The bottom line is this: Manage out poor performers, consider creative ideas in scheduling or other areas, and then RIF if you must. Conduct a controlled RIF where you determine which positions stay and which are cut and then select the best employees to fill the remaining positions. Be careful your selections are non-discriminatory, provide appropriate severance and outplacement assistance (which can often be done in-house by your recruiters) and then focus on your survivors.

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