Reductions in Force (RIF) usually come at a time when companies can least afford distraction. Operations become significantly harder as you work through the process of notifying workers, supporting current employees, and finding ways to compensate for staffing changes throughout your organization. These changes will take a significant amount of management bandwidth and a thoughtful and well-implemented RIF strategy.

Downsizing your workforce may be the most viable solution to counteract decreased revenues and difficult economic challenges, but should never be a “knee jerk” reaction. To ensure that your company will get through the process unscathed, we’ve compiled a set of Best Practices and considerations in conducting a Reduction in Force. These include:

• Get HR Involved at the Beginning
• Explore Alternatives to Layoffs
• Consider ALL the Stakeholders
• Mitigate Legal Risks
• Don’t Focus Solely on the Short Term

Tip One: Get HR Involved at the Beginning

A successful workforce reduction process requires careful and early planning. Companies that get through the process with minimal difficulties utilize their Human Resources team as a trusted advisor. Work with your HR department early to develop systematic processes that identify company-wide, department, and individual criteria that will be used for the RIF.

Timely HR advice and guidance will help you navigate the process to avoid legal knots, financial loss and other undesirable outcomes. Your implementation plan should at a minimum answer these questions:

• What is the business justification for the RIF?
• Are jobs to be redefined or eliminated?
• From which areas and positions will we cut? (Strive for objectivity.)
• Based on what criteria? (Prioritize selection factors.)
• In what timeframe?
• How many employees will be displaced?
• Is retention until a scheduled date important?
• What RIF benefits can and should be provided?

Your plan should also include training for those who will conduct the layoffs, including guidelines for employee discussions and clear, concise steps for the layoff meetings. Management should also institute periodic staffing level evaluations.

Tip Two: Explore Alternatives

Determine whether a voluntary resignation program is a viable alternative to implementing involuntary layoffs. Consider alternative approaches (or a combination thereof), such as: hiring freezes, transfers, job sharing or reduced hours, reduced pay or salary freezes, early retirement incentives, furloughs, sabbaticals or mandatory vacations.

Factors influencing the success of voluntary attrition programs include time constraints, business conditions and the availability of sufficient incentives for program participation. You can retain discretion to deny resignation requests from mission-critical employees under certain circumstances.

If you can cut back without instituting layoffs, you should do so; this will minimize the start-up costs once things are back on track.

Tip Three: Consider ALL the Stakeholders

RIFs impact every employee, regardless of whether they leave or stay. Be sure to provide remaining employees with strategies to help them confront the challenges these reductions may present. Provide clear and consistent information that will redirect their fears back to commitment to the company and continued productivity.

Be sensitive and supportive to retained employees, who will be facing issues such as: diminished job security, increased workload, different work assignments, changes in organizational priorities, departure of long-term employees who were knowledgeable about operations, loss of managers who once defined the organization’s character, and loss of colleagues. Measures to take in securing this goal are:

• Communicate honestly, thoroughly, and frequently with employees, customers/clients, and community/media regarding new direction and goals and how leadership will work toward a successful future.
• Both good and bad behaviors can appear during downsizing as employees adjust to their new reality. Managers need to model the standards that are acceptable and inform employees of behavior that is not desirable.
• Move quickly to implement the new organization model and train remaining employees on any new processes.
• Inform and train remaining employees on their new job responsibilities so that they feel confident and secure in their new company roles.
• Implement a total rewards program during downsizing to give your company a competitive edge and retain its key employees. (Examples include learning opportunities, work-life programs to assist employees in balancing new workloads and adapting to the new culture.)

Carefully navigating through these areas will help to ensure that disruption to your business is minimal.

Tip Four: Mitigate Legal Risks

Workforce reductions, business unit closures and salary cuts are the unfortunate realities of today’s economic climate. If you fail to comply with complex federal and state regulations governing these cutbacks you could find yourself in the midst of litigation, offsetting any initial savings you hope achieve with the RIF.

When determining which employees should be laid off, skills, work record and seniority should be considered and matched against the requirements of the post-layoff organization. Review any employment agreements, as well as existing termination policies and procedures that would be applicable to a layoff. Adherence to federal and state regulations such as the Worker Adjustment and Retraining Notification (WARN) Act and Age Discrimination in Employment Act (ADEA) are imperative. Important questions to ask include:

• Who will determine positions for elimination or consolidation?
• Who will select employees for layoff? What criteria will be used for layoff decisions?
• Will the layoff breach express or implied employment contracts, the covenant of good faith and fair dealing, employee handbooks, labor contracts, or past practices?
• Will the layoff impact persons whose pension or retiree health benefits are about to vest? Will it raise other public policy concerns?
• Will the layoff affect workers on maternity, family, medical, or other leaves?
• Will the layoff have a statistically significant adverse impact on protected group members?
• Is there a need to reemphasize preexisting confidentiality or trade secret agreements with terminating employees?

Any final decisions should be made by your executive team with review and feedback from the legal and human resource departments.

Tip Five: Don’t Focus Solely on the Short Term, Look Ahead

Maintain perspective, focus on your company’s current crisis but be prepared for a rebound. If you are able to preserve talent during difficult economic times, you will be better positioned for the recovery than those that have adopted a knee-jerk approach to job cuts as a way of slashing costs for short-term gains. You do not want to overreact in a way that causes a substantive reduction in competencies, and in turn fundamentally impinges on your future.

Many companies fail to realize that they have a tremendous long-term capital investment in their employees. While wages and benefits clearly are an expense item on the budget, they should be thought of more as payments on the capital of employee skill and dedication. The same care, thought and rigorous analysis should be given to decisions on the capital invested in employees as would be to a factory or a production line. A factory can be reopened, or a production line restarted, much more easily than employees trust in their management or faith in the company’s vision can be restored after a layoff.¹

Positive handing of such a serious matter by management and your HR department will go a long way to instill future confidence in your company by remaining employees.

Seek Advice When Needed …

Regardless of where you obtain your news, all sources remain consistent – we are in a recession and are unlikely to come out of it in 2009. Currently, 98 percent of American cities are experiencing higher unemployment, with the rates still climbing² and moderate economic growth not forecasted until 2010³.

Remember that you have a partner in Helios HR; our experts can conduct the heavy lifting in managing your reduction in force. Let us free your time to focus on your remaining workforce and strategic initiatives to build and strengthen your company’s foundation for the future.

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1}Alternatives to Layoffs, F. John Reh, About.com
²CNN
³Bureau of Labor Statistics