We are faced with cutting our payroll expense due to a decline in revenue.

Dana,

I have had to make these types of announcements and have always believed and been supported by reality, that honesty is the best policy. You should tell your employees exactly where the company stands. This communication, however, should not just include today. It should also talk about your plan to recover - new markets to be entered, new products, new customers, etc. I would suggest that the initial plan be communicated to your management team so that they may continue to re-inforce the message. The CEO should deliver the initial communication as well as periodic updates throughout the recovery period. The CEO should also be highly visible throughout the recovery period. Employees want/need to see that the most senior people are squarely behind the recovery plan and are doing everything possible to speed-up the process. Best of luck.

Cheers,

William

Dana,

I wrote an article on this a couple of years ago. Take a look at this link which will walk you through the process. http://mckenziehr.com/enews/august2008.htm

Let me know if you have additional questions.

I am with William, there is no substitute for honesty. Be as transparent about your process as possible. I think it is good to discuss alternatives if they are real and if your culture is mature enough to support them- like reductions in hours for everyone.
The key is be respectful and treat the people who are impacted with respect publically and privately, everyone is watching.
If you have considered other measures tell them what you considered and my you made your decision.
My other advice is cut as deep as you need ONCE! Nothing is worse than the death of a thousand cuts and rounds of small layoffs. It keeps every one in suspended animation.

The communication of these matters should be carefully crafted for the circumstances. Accuracy is a must. Typically, these communications and their timing is planned in the scope of attorney client privilege and carefully crafted.

Ideally, a single spokesperson should be designated for making public announcements. The announcement of the planned changes or impending changes should be carefully managed to avoid putting out false or misleading information. Meanwhile, the communications for HR should be carefully drafted. Scripting of termination meetings, severance plan documents and waivers, benefit election and other materials need to be reviewed and updated.

The person to conduct the termination meetings also needs to be carefully prepared and trained. They need to know what to say and how to say it. They need to know what to listen for, how to listen to the frustration without affirming its truth or being confrontational, etc. Every effort should be to be straightforward,brief and to the extent possible, non judgmental. When something unpleasant must happen, its typically best to say less rather than more.

Also, specifically with regard to benefits, remember that that the Supreme Court has ruled that when the company or a company official speaks about employee benefits, they take on a fiduciary role. Just think of Mr. Lay and Enron. For this reason, its typically best to get the benefit plans updated as necessary, then write the relevant information in standardized notices rather than trying to give oral representations or responses to questions. Also, whether oral or not, let the designated fiduciary respond rather than spreading the fiduciary risk by having others not formally appointed.

Keep in mind before you go effective that it might be good to check your employment practices, fiduciary liability and other liability insurance coverage. You might need it.

You can find other tips and materials on planning reductions in force or other HR matters on my website at cynthiastamer.com.

Hi Dana,

I agree with William. Here are some additional thoughts.

What are you going to do to make the layoffs moe bearable for the 3? Consider notice period for the 3 and the 7, severance, rehire possibilities, outplacement, references, connections to people you may know who are hiring or may know someone who is? Of course, you have to balance this with your financial situation. If you have to be tight, tell them why.

What are you going to do to encourage the other 7 to stay, other than there may not be a lot of options? William's suggestions are valid. Also consider, if appropriate, sharing financial info about the business to give them confidence to stay. Maybe set a standard when you will bring their full wages back or when you might even reimburse for the loss with a bonus. The 7 will watch what you do with the 3 to decide whether to stay when they have options.

If you are cutting wages for the lower paid, are you cutting wages for the higher paid? If so, do they all know they are sharing the pain?

Be aware of how your wage adjustments may impact compliance with the Fair Labor Standards Act.

Hope this helps.

Marc

Dana, the only thing I would add is, sometimes you can find someone who will provide some assistance in training those employees writing resumes/interviewing skills. I know you're in the Northeast, and I have no contacts to provide.

Here in the NW, I provide the service free of charge for companies who must lay off employees. They provide the room & overhead, I provide the information. It gives employees an answer to the immediate question of "what now?"

Hopefully there are consultants in your area who do the same.

Hi Dana,
I am with William and Bob...
There has to be clear communication and transparency in the whole process. The organisation need to convey this in large gathering (Town hall process) saying that 'We are here today and this will be likely position in the coming months. Here we have plans to bounce back (If the situation is grave, then say so and say that there is no chance of recovery in the coming 10-12 months or so). Tell employees their role and how they can help you to improve the situation. They will come out with so many ideas where they can help you and save money to survive. The layoff should given if it is really must. It is best if you can really avoid it. It is rightly mentioned that the senior leadership should be visible thorughout the process and it should not be seen as HR activity...Avoid sending written communications (only!), but keep on sending mailers and letters about the progress on the situation in the coming months.

One of the things that has always annoyed me about these situations is how poorly companies handle them. Sad faces, notwithstanding, they seem to think that they at the top have a better idea of how to solve the problem than those who will be affected the most.

How wrong they are.

The problem extends far beyond "how to break the news." It is just as important that you consider the people who are left, as those who are laid off.

Let's consider the first part. I think it's a mistake to simply get send out emails or even to hold a company-wide meeting and announce it. The wave of fear that that will generate will cause irreparable damage.

From the start, companies need to involve their staff. People may be ignorant; but they're not stupid. Don't treat them as such. Tell them that a certain percentage of the company's budget (notice I didn't say people) needs to be trimmed. Ask them for their suggestions. This is what consulting your employees is all about. It's not just asking for their opinions; it's involving them directly in the decisions. Even if collectively they come to the same conclusions as those who make the ultimate decision, you will get a lot more cooperation and do far less psychological damage to those who leave and those who remain if you do it this way.

Proper consultation will also help those who remain to cope better, too. When people are laid off, those who keep their jobs go through the mourning process, much the same way as when there's a death in the family. The four steps are denial, anger, acceptance, and then moving on. Everyone who's close enough to the people who have been laid off will go through this process. You need to do all you can to minimize that, and the way that's done is in how you handle the process from start to finish.

Part of denial is guilt. "Why did so-and-so get laid off, and not me? So-and-so was more capable, competent, etc. than I am? Why am I left? What if these lay-offs don't work? Am I next?" Do you really want those who remain to be worrying about these things?

No matter what you do, there will be emotional pain. Your job is to minimize it. This is where you can show that you really care about people. If you make a mess of it, you will lose the confidence and trust of those who are left, and you may never get it back. But, if you involve everyone from the start so that the decisions that are made are willingly endorsed by as many people as possible, you will create bonds with your people that you never imagined possible.

Cheers, Bruce

Bruce Hoag, PhD, CPsychol
Work Psychologist

I agree with all of you:
- be honest
- have a plan
- communication should be consistent at all levels
- do it on a Monday (vs Friday)

And Mark's point "The key is be respectful and treat the people who are impacted with respect publically and privately, everyone is watching." is right on!

The one point I didn't see is that the company should be mindful of how they spend their money after lay-offs... questions will be raised if there is a lavish holiday party, if those that remain get large Christmas bonuses, or if the company continues to hire in other department/areas.

Dana, the employees need to know that they are partners not merely employees. As they share in the company profits, it is expected from them to share in the company losses as well. Life is ups and downs. They have to share in both sides of the coins.

This is very simple question if you think reverse situation. When in your business revenue rise , whether you communicate this honestly, distribute incentives and give rise to employee honestly. If your answer is honestly yes than what is the big deal in opposite circumstance why should you need different plan for communication in this situation. If your answer is not than you should think.