For many HR professionals and leaders, it may seem counterintuitive (or just a waste of money!) to invest in the welfare of departing staff, especially those whom an organisation has targeted to leave for a specific reason.
However, our experience at Trevor-Roberts suggests that when guidance and support is not provided for employees to cope with job loss and managing their transition, costs are significant.
Career transition/outplacement support is an investment that decreases the risk of lost productivity (a hidden cost of organisational change) by ensuring that all affected employees (retrenched and retained) are able to effectively navigate the restructure process.
Who benefits from career transition/outplacement support?
The business case for career transition support encompasses all affected individuals, including:
- Retrenched employees, who are able to work through the emotional aspects of their job loss and find new jobs more quickly using strategies provided throughout the program.
- Remaining employees, seeing that their former coworkers are being taken care of, trust that they will be treated fairly.
- Management, having prevented litigation and feelings distrust from remaining employees, can rest easy knowing that they provided for employees at every step of the way.
How does it benefit organisations?
- Importantly, it actually reduces the cost of downsizing. By investing in outplacement services for affected employees, companies will significantly cut the total costs of a downsizing action by reducing overlooked losses in absenteeism, turnover, and litigation. As companies become more adept at measuring the total costs of their layoff actions, corporate self-interest will increase utilisation of high quality outplacement programs.
- In commercial terms, the provision of career transition support enhances an organisation’s reputation, future talent acquisition and retention, employee engagement and productivity, and the avoidance of direct and indirect separation
- From a financial perspective, it may seem contradictory that investing in the wellbeing of ex-employees will support profits, especially given the reason for downsizing is to improve productivity by cutting costs. Executives and leaders may enquire why they should bother spending more money on affected employees, yet the answer is not as introspective as you might think: Organisations should invest because it helps the overall bottom line—high-quality outplacement minimises the extra costs that come along with downsizing.
Research suggests that, if left unaddressed, the hidden costs of organisational change from both discharged and remaining employees consistently outweigh the savings gained from reductions in personnel. Studies show that absenteeism and turnover among remaining employees increase after downsizing, translating into lost productivity, lower stock prices, and lower profitability. Companies may also face huge costs from crippling litigation due to unfair dismissal claims.
How the process supports HR professionals and leaders
From pre-termination planning, to on-site presence at the day of termination, to follow-up coaching and support throughout the job search process, providers of high-quality outplacement guide clients through the process. More importantly, high-quality outplacement strives to improve the fundamental attitudes of these employees who have had to cope with job loss. With constant encouragement, interviewing practice, and regular one-on-one coaching sessions, career coaches work through clients’ fears and concerns and help them develop important job-finding skills. Clients, having accepted their former employer’s circumstances and decisions, are coached through the process—not only reducing the job search time, but improving the kind of jobs they find and giving them the tools necessary to move ahead in their careers.There are seven key commercial reasons why businesses needs career transition/outplacement support for impacted employees:
- Assists those who are affected to find another job
Outplacement support guides affected employees through the job search process and prepares them for future job changes. Individuals are matched with an individual career coach who serves as a mentor, a sounding board and source of advice and motivation as they move through their job search. With a coach encouraging them, individuals explore their own strengths, “skill” themselves in the job search process (interviews, networking etc), reshape career paths, and move on more successfully to their next positions. They receive assistance to write their CV and cover letter and learn how to update and navigate LinkedIn and the art of networking. They practice and improve interview skills. And as a result, these individuals find equivalent or better jobs—fast.
Other versions of this process include coaching on a transition to retirement, self-employment options and portfolio careers
- Protects your brand
Clients, investors, suppliers and other key stakeholders who see staff displaced in an uncaring manner and then observe those individuals struggle to reinvent themselves may form conclusions about the way the agency involved does business.
A quiet shift to a more transactional relationship with the agency takes place – or is at risk of taking place - rather than one founded on genuine respect.
Documentation becomes more formal (“maybe the person I am dealing with won’t be here tomorrow?”). Generally, we like to do business with people we can trust, and the presence of victims of poorly handled retrenchment decisions raises questions in our minds about those we do business with.
Many organisations spend significant budgets and resources on positioning their brand externally with their clients and consumers generally. However, a firm’s internal brand is just as important.
Employees who are satisfied with and committed to their roles and their teams will positively demonstrate a department’s brand in the way they represent the department internally, to clients and other external stakeholders.
Supporting departing employees is therefore an important part of maintaining a positive internal employer and consumer brand.
Macfarlan Lane, an organisation that merged with Trevor-Roberts in 2015, undertook research in 2010 into the effectiveness of employer’s management of senior staff exits as rated by former employees, and the impact of their actions on employment brands. (359 middle and senior managers completed a survey posted on the Six Figures website.)
The research found a very low level of satisfaction with their departure experience, with 72% of former staff rated as active detractors unlikely to recommend their employer to family, friends and business colleagues.
Only 6% were active promoters of their former employer. This figure demonstrates that organisations that manage to avoid damaging their employment brand are in the minority.
- Increases the productivity of ‘survivors’
When redundancies occur, the morale of remaining employees usually drops. This can be attributed to higher workloads, unproductive time spent “at the water cooler” discussing the terminations, strong loyalty toward lost colleagues and fear of future job cuts.
Even a 1% drop in productivity can have significant impacts on the bottom line of a firm and the effectiveness of an organisation. A program which positively impacts the wellbeing of leavers and their ability to find new employment will improve morale. The result is more discretionary effort from ‘survivors’.
- Reduces employee turnover & attrition costs
The cost of turnover can be enormous, as it encompasses pre-separation costs (the employee pursuing the job hunt while at work), separation costs (exit interviews, administrative costs and payouts), vacancy costs (hiring a temporary substitute), recruitment costs (advertising, interviewing, deliberation time), and finally training and orientation costs (instruction manuals, mentoring, decreased productivity at first). As turnover increases after downsizing due to job insecurity, stress, decreased company loyalty, and decreased job satisfaction, these costs skyrocket.
Increased absenteeism is a response to the perceived unfair treatment of former coworkers and the low morale amongst remaining employees. The onsite presence of career transition/outplacement providers on the day of a redundancy announcement and assisting former employees to find jobs faster serves to relieve the worries of surviving employees, typically reducing high absenteeism rates.
When rumours of redundancy start, shock waves hit remaining employees and prompt them to start looking elsewhere. A study of Fortune 100 companies in the Academy of Management Journal showed that it didn’t take much downsizing to send the survivors running for the door.
Layoffs targeting just 1% of the workforce preceded, on average, a 31% increase in turnover. This can translate into significant costs for an organisation, with some studies showing the cost of replacing employees can be anywhere between 3 and 10 times their annual salary.
Turnover is often highest among those whom employers least wish to lose. Appropriate support for those leaving calms the flight of talented employees.
- Controls future recruitment costs
When a large investment bank was obliged to retrench several hundred investment bankers a few years ago and then used a very “thin” career transition service – several hundred investment bankers formed very poor opinions about the firm.
Many would have resolved to only ever return if a much higher salary premium to the market would be on the table, and their view was widely disseminated through the market. Thus, for this firm to attract good people in the future, it will need to pay above market salaries in order to compensate for the employment risk and their own highly transactional culture – or it will be obliged to lower hiring standards of future recruits.
- Reduces the likelihood and cost of legal action
Employees who feel the company has treated them unfairly are increasingly likely to settle their grievance via legal action. An effective career transition/outplacement service can reduce perceptions of mistreatment and decrease the likelihood of a tribunal from 8 % to 2.8%1. Pre-termination planning ensures that companies carry out the downsizing in an open and straightforward way, so both terminated and remaining employees feel informed and treated with respect. Moreover, career coaches present onsite on the day of termination immediately help employees cope with the job loss, so that their last impression of the company is more positive.
- Improves productivity of leaders
Redundancies naturally coincide with increased tension and pressure on a business. Good support can alleviate stress and time pressure, leaving leaders better able to manage the remaining team and concentrate on the future effectiveness of the organisation.
1 Economic Perspectives, 2005, Q2 “Return on investment of high quality outplacement programme, Connor & Co, UK.