What do the cuts really cost you?

In times like these, all we are hearing about is how many people have lost their jobs in Australia or overseas and we all know someone who has been affected. With rising unemployment rates, there are still organisations who will be making cuts in the future.

How much do these cuts really cost you though?

I know that the aim in reducing staff numbers is to lower costs for the organisation, however I’m not sure that many people take into account the full cost of letting someone go. Of course there is the obvious redundancy payment to take into account, but what about outplacement and support/counselling services, and associated administration costs? These services can be quite expensive per session and the amount of overall administration that goes into laying someone off can be huge depending on how many staff are being made redundant.

Interestingly, CLC published an article this week which featured the graph below from the Chartered Institute of Personnel Development.

The key thing that sticks out for me is the loss of productivity when you downsize your staff. Often we focus on the people who are leaving and we give them as much support as possible because it’s the obvious thing to do. But how well do you manage the ‘survivors’?

These ‘survivors’ can respond in a variety of ways to the changes. Some will be less productive while they deal with negative emotions about the change, you might find an increased amount of absenteeism and others will just leave.

This leads to increased costs in terms of productivity (which impacts the bottom line) and the costs of replacing people can be well into the thousands when you think about advertising, administration, and the training for the new employee.

I’m really interested to know- has your business taken into account the real costs of cutting staff before it happened?

What is change management and what does it mean for employees?

Change management may be defined as ‘the process of continually renewing an organization’s direction, structure, and capabilities to serve the ever-changing needs of external and internal customers’ (Moran and Brightman. 2001).

However, from an employee perspective it usually just means one thing- job losses. In the middle of a recession from the global financial crisis, that’s all people are hearing about each and every day. Everyone knows someone who has lost their jobs and companies are under scrutiny for how much they pay their execs and what they are spending money on. One of the worst examples was that of CEO’s in the US who chartered private jets to ask for bailout money.

The worst case scenario at the moment for an individual is if they are made redundant and must start the search for a new job. The labour market is already saturated with people out of work and baby boomers are feeling vulnerable being close to retirement age, but not close enough to retire. There are also many who had intended to retire, but can’t because their superannuation savings have dwindled. Being out of work is an extremely stressful situation, particularly when it places people under financial pressure.

I’ve been made redundant before and I have to admit that one of the hardest hits is to your self esteem. Sure, everyone worries about money but internally you analyse the situation and wonder why it happened to you, you question if you did anything wrong and sometimes you even feel embarrassed. Western society places a great emphasis on what one does for a living- it’s like your identity. To have that taken away from you on someone else’s terms feels like you’ve lost a part of yourself. I’m glad I’ve been through that experience because hopefully that will make me a better HR professional knowing exactly what it feels like.

However, organizational change doesn’t only affect those who have lost their jobs- take a moment to consider the ‘survivors’ of the event. Change means a different way of doing things and this can cause disruption, concern and angst amongst employees who usually are also saddened by the loss of their colleagues. Its not easy sailing being left behind and many experience some form of ‘role stress’ which is when employees become stressed by ‘role overload (too many tasks given), role ambiguity (not knowing what the job expectations are), and role boundary (caught between conflicting job demands), because the company is pretty much in a state of chaos (Tiong. 2005). There is so much confusion over what is happening whilst also trying to operate ‘business as usual’.

It’s so important to be aware of this for your employees and provide support wherever possible. Remember, everyone is human and will react in different ways. The corporate/scripted speech won’t be the right response in every case so go with your instincts and think how you would like to be treated.