Cutting or savings jobs: spare the axe

Radical thinking is required in today’s commercial environment, and what better way than to completely challenge the terms under which we currently employ our staff?

Naturally firms are looking at those parts of their organisation where work has dried up and choosing to make staff redundant from those areas.

Following the last economic downturn back in the 1990s, however, many practices have never actually got ‘back up to’ a full complement of staff, let alone have fat in the teams. Staff and partners are already over stretched on time and activity while there has been a relentless search to develop specialism in practice areas, and by sector.

This in turn has placed a premium on those talented individuals who when recruited, delivered against this ‘superman’ role. So salaries became overheated and the bonus culture unparalleled in rewarding all the wrong activities and behaviours ­ and at what a price ­ which is where we are now.

Demographic issues have not gone away, or the need for reasonable work-life balances. Nor has the demanding client disappeared ­ in fact they have become even more so, and for lower fees.

Reducing costs

Clearly there are a number of practical ways firms are managing to reduce costs, not least by early retirements, closing offices, relocating to cheaper premises (if you can agree the leases), axing services and, of course, attacking the staff lists. The first round of redundancies has seen the under-performers or people whose faces ‘didn’t fit’ being released.

The second and third rounds are cutting deeper into core teams and partners, however, and if you get to the fourth round; this is amputation. By losing staff, your practice is going to lose any capacity you might have had to attack and build business. There has to be a better way of doing things.

Redundancy is not the only option

The danger with the press and media reporting on redundancies, is that apart from this being depressing, it fails to report the alternatives firms are considering. Redundancy should be absolutely the last resort because it:

• immediately impacts heavily on cash flow ­ with no return;
• makes remaining staff have survivor guilt and feel jumpy, constantly looking for the next round of hatchet-swinging ­ and not focusing on servicing your clients;
• knocks staff loyalty, especially Generation X +1, who may not have the survival skills
• gives out all the wrong signals to clients and the market ­ when it might not be necessary, and;
• loads up costs when the up-turn comes and you need to re-recruit, retrain all at a premium.

Seize the chance for a Contractual Interregnum

‘Plans to axe new laws that would increase costs for businesses, including enhanced maternity leave and tougher equality legislation’ are being sought by business secretary Lord Mandelson (as reported in the Times).

In November last year, I suggested we should repeal or at least suspend some of our employment legislation to enable organisations to be more agile, innovative and creative, to keep staff in jobs, and to keep money moving through the economy. What you need to achieve is a cost reduction, a redeployment of some staff and a chance to retain clients, all without committing cultural suicide.

Now is the time for a contractual interregnum, or break from normal contract terms, to cover a two to four year period. This temporarily overrides any existing terms and conditions of employment, pay or benefits, and requires you and your staff to agree to effectively waive elements of employment legislation. It would be seen as an extra-ordinary agreement, reviewed on a regular basis.

It would have to have some key principles in place and typically these should include:

• a fixed period, eg 1, 2, or 3 years
• an agreement that includes all staff, including partners, directors, and executives.
• a fixed review every six or 12 months, undertaken by both sides, using the consultative mechanisms available
• cover flexibility of roles, pay, overtime, etc.,
• a revisit of all benefits and insurances
  

Items that would fall outside this would probably be pensions, or those due to retire during this period. If you had to make redundancies they would be under the old terms and conditions, but if you were dismissing someone, then it could be under the temporary rules. Clearly each organisation needs to work out what options could be open to them, and opening this up to your staff for ideas is an enlightening experience.

Getting agreement, sharing control

Rather than destroying all the good efforts to be communicative with staff over the past decade, this presents organisations with another opportunity to demonstrate that the management board do genuinely respect and consider the opinions of partners and staff.

Regardless of the need for speedy solutions or not, you need to agree dramatic staff cuts or pay and benefit cuts. We are seeing that the choice when offered to teams, results in staff taking the pay cuts.

KPMG asked staff to work four days a week or take a three to six month sabbatical. One firm I know went to their staff and said: ‘I shall have to lose ten of you or you need to agree to a pay cut of 20%’. By five o’clock the managing partner had agreement from all in the team to take the pay cut.

However, the interregnum should be applied to the whole organisation not just an ailing team, and be part of a deeper and thorough cost review.

Sharing the choices with staff will help:

• educate them to the sharp realities of 2009,
• offers them the chance to make choices about their futures (rather than management doing this when maybe you do not know the personal circumstances of all)
• fosters a collegiate environment and a war-like team spirit
• keeps the talent and experience in the practice, building loyalty; and
• enables you to reward delivery/performance in a manner not seen so far.
  

Abusing this process to falsely get rid of staff will be seen through. We all have a responsibility to educate our staff about the realities, but don’t treat them as unthinking adults.

Action for the Spring 2009

And that is the trick, isn’t it? If each part of the economy can keep operating, in some measure, without being greedy, then the house of cards will not completely fall over. It should include an encouragement to get through this economic tribulation, using it to shake out old habits, poor contributors, review practices and so slide into 2010 in different and better shape.

Patricia Wheatley Burt, principal consultant, Trafalgar ­ :The People Business