By John Marsh
1 April 2011
Staff cuts are inevitable throughout the public sector. But research shows that the way redundancies are undertaken has a greater effect on employees than the job losses themselves. John Marsh explains how to prune sensitively
Be it central or local government, the health service or the police, we are entering uncharted terrain. The next year is not going to be easy and, for many, job losses are inevitable. So it will be more important than ever to ensure that redundancies are handled well and senior managers work together as much as possible.
According to the Office for Budget Responsibility, 600,000 jobs are to be lost from the public sector. The Chartered Institute of Personnel and Development forecasts 725,000. And there has certainly been a steady stream of job cut announcements since the 2010 spending settlement. These include around 1,000 posts going in Greater Manchester Police and in health trusts such as Pennine Acute Hospitals and St George’s Healthcare; 1,500 in Liverpool City Council and 11,000 in the armed forces.
One thing is sure – in light of the toughest spending package in a generation, it is incumbent on all those working in the public sector to strike a balance between living within squeezed budgets, protecting essential services, and managing job losses as smoothly as possible.
Redundancy programmes are a major change to any organisation. These management development pages have given useful guidance over previous months on leading in difficult times and motivating staff. But there are also some specific guidelines to follow to ensure that redundancies are handled successfully. The ten main ones are listed below.
1 Get a grip on your workforce data
Crazy though it may seem, only a minority of organisations can truly claim to have a single version of the truth on numbers. Often, for example, the list of budgeted posts sits on finance systems while the details of actual staff in post sit on human resource department systems – and never the two do meet. Organisations need to translate reduced budgets into headcount numbers and understand the impact on various staff groups, as well as being on top of vacancy rates, attrition and skills mix. Getting a handle on data is the top priority.
2 Ensure you have good project management and accountability
Every redundancy programme needs good project management. One way is to set up a senior-level workforce governance board to oversee redundancies, vacancy management and restructuring. This typically consists of finance, human resources and operational leads. Project management is required as successful redundancy programmes have many interdependencies that need to be co-ordinated across a number of functions.
3 Make sure payroll and pension data are up to date
A major part of any redundancy programme is having accurate and timely estimates of what departing staff will be paid and the effects on their pension. Most public sector organisations are considering voluntary severance programmes, which lead to many more enquiries from staff than the number eventually made redundant. Often, thousands of estimates are required. If handled badly this can cause reputation damage and upset to individuals. Are your payroll and pension data complete and accurate and is your pension service geared up to provide timely estimates?
4 Cost and budget for all aspects of redundancy
There can be a tendency to just budget for the redundancy payment itself but there are other costs to consider. Will there be payment in lieu of notice? Is help and transition support to be provided to those leaving? Will the HR department need to train managers to restructure and select staff for new roles or for redundancy? The department might also need some additional project support as capacity can be stretched helping line managers, revising policies and processes, consulting with trade unions and running redeployment support for surplus staff.
5 Understand the legalities
It is important to separate the law on redundancy from internal policies and processes. Work with HR to understand the legal requirements around 30-day or 90-day consultation, what restructuring is possible during the consultation and how selection of staff should take place. A combination of the law and internal consultation policies means it can take five to six months before staff being made redundant leave the organisation.
6 Communicate and engage with the workforce and trade unions
It is difficult to over-communicate in these times. Understand your channels
of communication, tailor messages for managers, staff and unions and be as open and as timely as possible. A survey by HR think-tank the Roffey Park Institute has confirmed that the way an organisation handles redundancies has a greater effect on employees than the job losses themselves. The public sector fared worse in the survey with only 34% of managers reporting a well-managed redundancy process. While there is pressure to cut costs quickly, you must build in time to inform and consult staff effectively.
7 Lead by example
There are many ways in which senior finance executives can lead by example, particularly by taking your share of the job cuts and turning this into an opportunity to create a high-quality finance function. This is the time to review all finance processes, consolidate services and skill up staff. You should also be a leader of change in setting out a clear vision for the future; talking – and listening – to staff; and collaborating with other service and functional heads.
8 Watch behaviour at board level
In stressful times, finance, HR and operational directors need to work together. It is amazing how quickly staff pick up on tensions in the board room, see this rightly as a lack of leadership and adopt entrenched positions within their own functions. The worst types of behaviour are: service areas acting in their own interests rather than the organisation’s and expecting others to take the hit; finger-pointing over whose responsibility it is to provide workforce data; and finance being impatient over the time it takes to manage redundancies while HR becomes defensive.
9 Treat people as individuals
It might seem obvious but senior managers under pressure can forget the human impact of redundancies. Face-to-face meetings with teams and individuals are vital and, indeed, legally required, and managers need to be supported in this endless round of meetings.
10 Look to the future and retain your talent
Understandably, much of the focus during times of redundancy is on those leaving. Yet most staff will be retained and will want to know what the future holds for them. You should build on and sustain face-to-face engagement with staff and not halt it after restructuring. There should also be a bigger emphasis on investing in skills. Finally, check that you are doing everything to retain your talent. Your best people might volunteer for redundancy confident that they will be employable elsewhere. And some people that you do not want to go will leave. So emulate private sector practice and stay in touch. Good people can return having benefited from a change of role.
John Marsh is a director at Ernst & Young and a former group human resources director at the Home Office
