Redundancy Preparation: Selection criteria
Updated: Aug 5, 2019
What exactly is selection criteria? Essentially, it is the criteria that a company uses to decide which employees will be considered for redundancy. Before beginning, you must make sure that you are abiding by local employment laws and regulations, as well as any company standards or norms. This can vary widely from country to country (even within Asia Pacific, the laws are markedly different on this topic), so you should always consult an expert.
It is important to approach this process with a set of guidelines to ensure objectivity, fairness and to help avoid any future claims of discrimination. Companies will often use a selection criteria matrix which encompasses many of the items I’ll discuss below. This document can then be used after the exercise to justify or explain the decision-making process if it is challenged. You can find several examples online, such as this one from the UK.
Redundancy selection discussions are difficult and often fueled by competing interests – regional, global, country specific, business specific, etc. There are so many factors at play that after all of that careful consideration and planning, the final outcome may not make sense to external parties. In my experience, right up until midnight the night before a large-scale redundancy exercise, names will come off and on the “list” for various reasons. That is why it is important to ensure that all of your i’s are dotted and t’s are crossed when determining your selection criteria.
Business performance is probably the single biggest factor that impacts redundancy decisions. An organization will typically conduct a large-scale redundancy exercise for the purpose of cost reduction, so if a particular business area is under-performing, is no longer aligned to the company’s long term goals, or, as is common these days, the work has been automated and replaced by technology, then these employees will be the first ones on your list. Hopefully, this decision will not be too much of a shock to them. They may have gotten the message from senior management in advance (such as via earnings reports or town hall meetings), or they would have seen the decline in their revenues, be aware of the impact of market forces, or they will have already seen some of their teammates leave and those roles replaced by technology.
Often, a strategic decision will be made to close operations in specific countries because they no longer align to the strategy for the region. Examples of this include when a manufacturing company announces the closure of a whole plant or a multi-national decides to exit operations in a specific city or state in the U.S. In these cases, the justification for redundancy is fairly straight-forward and clear (though local legislation may still require union negotiation or government notification). In this case, the other factors that I mention here may not be as relevant.
Poor performers are an obvious place for organizations to look when deciding on the selection criteria. Typically, poorer performers will already be documented in the organization’s performance management process. Hopefully, they will have already received some verbal or written feedback on their performance (i.e. missing key performance targets, conflicts with teammates, underperformance of business area they lead, etc.), so exiting the organization will not be a total surprise. Of course, I am not suggesting that a large-scale redundancy exercise should be used as an excuse to easily and quickly exit poor performers (they should be properly managed through a performance improvement process or similar), but sometimes it can make business sense to include this population.
Unfortunately, there is some truth to that old adage “Last one in, first one out.” If you have been at the organization for a substantially shorter time than most of your team (<1 year, for example), it is reasonable to assume that you are contributing less. The organization may also take a bet that you will be less embedded into the company within that short time frame, so you may have a smoother departure than someone at the organization for a significant amount of time.
Conversely, long tenure can also be a factor (10, 15, 20+ years). If you have reached a career plateau and there is no natural next step for you, a redundancy exercise may be the perfect time for your employer to show you the door. Particularly if you are on an expensive compensation package, then eliminating your position may go a long way to contributing to cost reduction targets.
Depending on the policy of your organization and local legislation, you may have the flexibility to offer a voluntary redundancy. In its simplest form, this would be an open call to all employees with a transparent message: the organization is going to conduct a redundancy exercise and we are asking for volunteers who would like to be made redundant. Such a message may also include details about the timelines and the redundancy package on offer. Asking for volunteers can be a double-edged sword. You may be able to meet your whole cost reduction target with volunteers. If so, great! But, what often happens is that your best employees will raise their hands—the ones who are on your high-potential list or being groomed for future leadership roles—the ones you absolutely don’t want to lose. Those employees are likely the most highly skilled and have the best options externally. Therefore, you need to be prepared with retention strategies for these individuals. If there are poorer performers or employees in underperforming business areas that will be exited, take the opportunity to give them messaging several weeks or months prior to the formal redundancy exercise so that they understand that volunteering will be the best option for them. Another upside to voluntary redundancy is that the packages offered by the organization are often more generous than the packages that are offered later on (as the belt gets tightened through future redundancy rounds).
Spans & Layers
Another thing to consider for your selection criteria matrix is spans and layers. This may be an unfamiliar term, but essentially what is means is, Does the people structure of the organization make sense? If there are 18 managers between the most junior employee and the CEO, that may be onerous and unnecessary. If the structure can be collapsed and simplified, now might be the perfect time to do it. Do you have many parallel silos with junior managers looking after 3-6 employees? Can these be combined, thus saving costs (one less manager) and perhaps creating efficiencies? To do this process effectively, you should look across the whole organization. Are your teams aligned in a way that makes it easy for your clients to get things done? Are there employees in different teams or countries who are essentially performing the same tasks? Although these are often bigger questions for an organization to ask itself, performing a quick analysis of your spans and layers can be helpful in preparing for a large-scale redundancy exercise.
Be careful not to gut specific teams or departments to the extent where they can no longer perform their duties. For example, if a team does a lot of work with Mainland China, they will need employees who speak, read and write Mandarin. If another team contains only one expert on Southeast Asia, this person may need to be retained if this is still a key focus of the business. This is particularly critical for technical skills that cannot be replaced easily—such as a machine learning expert. Consider whether or not there is a succession plan within the team – does another employee have the skills to pick up this work or can they be trained? If the solution does not exist internally, can it be provided externally in an inexpensive way? Although this factor is important, it may be less critical than the ones mentioned above, so I’d suggest layering this in once the other criteria have been decided. It may lead to interesting questions about training, development and succession planning (which is likely a discussion for another time!).
Finally, it makes good business sense to consider whether or not any of your impacted employees could potentially be redeployed to different parts of the organization. This may also be a legal requirement in some countries. If this is the case, your organization may need to provide documented evidence on their efforts to redeploy their employees internally (such as providing a list of open roles, contacting your internal recruitment team, providing CV or application review, etc).
It’s highly likely that some of your impacted employees are solid performers with valuable skill-sets that may be transferable internally. If the individual is open to staying with the organization and to making a career change, HR can help them look for open roles, manage the interview process and if successful, facilitate the transfer to a new team. This has cost-saving benefits to the organization: an open role is quickly filled without hiring someone from the external market (saving a potential recruitment agency fee) and the redeployed employee will have a quicker ramp-up period (reducing costs related to lost productivity). The redeployed employee is able to continue their career with the organization, securing a new opportunity and expanding their skillset. Everyone wins.
The above are just a handful of factors to consider when pulling together your selection criteria for a large-scale redundancy exercise. Additional factors may be more or less critical based on local legislation or company policy. Hopefully, if you are an HR professional faced with the daunting task of executing a large-scale redundancy, this article can help you get things started in a fair and objective way that will lead to the right outcome for your business and your employees.
Once you have put together the initial list of employees using your selection criteria matrix, an additional layer of diligence must be conducted before you can move forward. In next week’s post, I’ll discuss some of the red flags that you should look out for.
Renee Conklin is an HR Leader who writes about talent attraction, employee engagement and the future of work. She is the founder of RC HR Consulting.
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