It may seem counterintuitive to spend more than what is legally required to support departing employees, especially if the reason for staffing cuts is to reduce costs. So why should an organisation offer outplacement?
Our experience at Trevor-Roberts suggests that when guidance and support is not provided for employees to cope with job loss and manage their transition, the negative impact on the organisation can be significant.
Importantly, while the primary focus for outplacement should be on those individuals who are losing their jobs, the fallout from how redundancies are managed can and does have a far wider impact on the organisation. Providing high quality career transition or outplacement support goes a long way towards mitigating the inherent commercial risks that could end up costing your organisation far more than anticipated.
Apart from it being “the right thing to do”, there are six key commercial reasons why businesses need career transition / outplacement support for employees impacted by job loss.
- Assists employees impacted by job loss to move forward
Outplacement support guides departing employees through the transition process to a successful outcome. Individuals are matched with an dedicated career coach who serves as a mentor, sounding board and source of advice and motivation. With their coach, they explore their strengths and transferable skills, learn about the current job market and job search process, and clarify and move towards their preferred career direction. They receive practical assistance with their resume and job applications, learn how to navigate LinkedIn and best present their profile, plus improve their interviewing and networking skills. And as a result, these individuals find jobs—fast.
The benefit for the company is that is that these individuals are far more likely to be brand ambassadors for your organisation when their exit is managed well, and with respect.
Trevor-Roberts conducted research in 2010 into the effectiveness of employers’ management of senior staff exits as rated by former employees (n = 359), and the impact of their actions on employment brands. The research found a very low level of satisfaction with their departure experience, with 72% of former employees rated as active detractors unlikely to recommend their employer to family, friends and business colleagues. Only 6% were active promoters of their former employer, showing that organisations that manage to avoid damaging their employment brand are in the minority.
- Protects your brand
Clients, investors, suppliers and other key stakeholders who see employees terminated in an uncaring manner may form conclusions about the way the organisation does business, and question how aligned their values are. Most companies invest significant resources on positioning their brand externally, and the perception that lay-offs were handled poorly will quickly erode goodwill.
Internal brand perception is also very important. Remaining employees, seeing that their former co-workers are being taken care of, trust that they will be treated fairly and that their organisation is one that looks after its people.
Supporting departing employees is an important part of maintaining a positive internal employer and consumer brand.
- Increases the productivity of remaining employees
When redundancies occur, the morale of employees who stay 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. The result is a drop in productivity, engagement and discretionary effort, and an increase in absenteeism.
A program which positively impacts the wellbeing of leavers and their ability to find new employment will improve morale, thereby reversing the negative trends described above.
- Reduces employee turnover & attrition costs
The cost of turnover is conservatively estimated at 50% - 200% of an employee’s annual remuneration (Gallup 2019). 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 orientation costs (onboarding, training, mentoring, decreased productivity at first). As turnover increases after downsizing due to job insecurity, stress, decreased company loyalty, and lower job satisfaction, these costs skyrocket.
Turnover is often highest among those whom employers least wish to lose. Appropriate support for those leaving calms the flight of talented employees.
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.
- 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.
Outplacement support encourages people to move forward in their career rather than dwell on a negative time or perceived injustice, making people far less likely to head down the unfair dismissal path. After all, an update on LinkedIn about your new, dream job is a much better outcome for most than a court case!
- Improves productivity of leaders
Redundancy processes naturally coincide with increased tension and pressure on the leaders of the organisation. They have to have the many difficult conversations both with those leaving and those staying while keeping operations going. The process takes a huge toll on both HR and line managers. Knowing their people are being looked after leaves leaders better able to manage the remaining team and concentrate on the future effectiveness of the organisation.
For a confidential conversation about how Trevor-Roberts can support you and your organisation through this process, please call 1300 876 118.
1 Economic Perspectives, 2005, Q2 “Return on investment of high quality outplacement programme, Connor & Co, UK.