Effective strategies for organizational downsizing

Organizational downsizing is a challenge for management and also painful for employees especially who are losing their jobs; we have with us Vikram Puri to share his thoughts on some effective strategies for organizational downsizing and how we can make it less painful.

Q-What is Industrial relation to you and how do you see future of IR in India?

Industrial Relations in a broad sense would constitute an environment where there is harmony and partnership between Employers & Employees. In an utopian sense I would look at a bonding in relationship where there is little need for any documented understanding, instead built on the foundation of complete trust and faith. In partnership, IR must cater to the growth and well being of all constituents viz Employer, Employees and Society at large.

In future, I would see a more mature IR scenario and milieu. With the maturity of Trade Unions & its leadership, Management leadership, changing economic scenario and volatility in general, it would require greater synergy and complimentary relationship intra Industry, between Employers and Employees and inter Industry, towards the growth and health of Industry as a whole.

However, it will also require focus amongst HR professionals to hone their people management, union management skills, which unfortunately has taken a back seat due to exponential growth in the Service & Financial sectors and the loss of core IR skills within the HR fraternity ( except manufacturing ) . With the IT sector showing signs of unionization, the future demands for a wakeup call for HR professionals.

Q-In your view what are strategies for successful organizational downsizing?

Organisational optimization covers a wide range of initiatives from productivity improvements, cost management, innovation and creativity. One element is manpower optimization.

While devising such a plan, there must be complete clarity on the Content & Context. Many downsizing have faltered due to the mismatch between Context and Content and implementation malfunction.

A successful approach would involve careful analysis of the possible gains from downsizing; buy in of TU (in case of unionized setup), adequate compensation, management of
anxiety and successful outplacement initiatives.

Q-What are the important steps, companies must follow to downsize effectively?

The approach to successful optimization involves:

  • Complete buy in of Top Management Change
  • Agenda clearly elucidated Constituting a Core Committee
  • Constituting field level Implementation Bodies ( Field Champions)
  • Communication the Change Agenda
  • Documenting Process to Optimization
  • Education of Implementation Bodies
  • Daily MIS on implementation, course monitoring ( incl Legal engagement)

Q- What is layoff and how is it different from retrenchment and termination? In your opinion how to proceed a layoff /termination of an employee (s) in unionized setups?

Lay off & Retrenchment have been defined under the Industrial Disputes Act 1947 under Chapters V A & V B. Layoff has been defined as “failure, refusal, or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or breakdown of machinery or for any other reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.” This comes alongwith attendant conditions.

Retrenchment means “the termination by the employer of the service of a workman for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action”. This does not include cases of superannuation, voluntary retirement, or termination of service on the grounds of continued ill health. The provisions call for permission depends on employee strength in the organization.

For each such case there are no general approaches. Circumstances and situations, peculiar to an organization will need to be revisited alongwith legal provisions prior to determining and executing either a layoff or retrenchment.

Termination is as per provisions of Appointment Order and Standing Orders in case of Retrenchment or Misconduct. In all cases, the legality as defined must be followed to prevent the Layoff/ Retrenchment / Termination is termed null/ void.
Usually except in unionized setups it is safer to adopt a Resignation/ VRS route towards manpower optimisation. One of the best methods is VRS in unionized setups.

Q-What are the rights of an employee being laid off?

Rights of employees have been defined in both cases of Lay off and Retrenchment under the Industrial Disputes Act 1947. There are certain conditions under Layoff with respect to provisions of alternate employment.

Layoff if prolonged can result in Retrenchment provided conditions thereto are fulfilled w.r.t .permissions if any, notice pay and compensation.etc

Q-How can we make downsizing less painful?

Any change is difficult, more so when it impacts livelihood. In our country when majority of employees employed in the organized sectors depend on a monthly payout, any disturbance in its flow impacts monetarily and psychologically.

Whereas anxiety or fear of any downsizing cannot be removed, it can none the less be minimized, Some key steps which can help towards such mitigation involve the following:

  • Communicating extensively in small groups, family groups and fielding Q/As. This is an important step towards employees being informed and bringing awareness to the reasons and not alienating them through a perception of arbitrary action. ( also refer to Question- 3)
  • Treating employees with dignity and empathy.
  • Preferably offering a Voluntary Retirement Scheme providing financial help to those impacted by downsizing through lumpsum or Annuity or both as combination, and within the IT provisions.
  • Terminal and accrued balances such as Leave/LTA etc as part of full/ final settlement.
  • Where possible amortization of loans ( NPV ).
  • Non financial help through outplacement initiatives; Placement Partners, Personal Contacts, Organisation can provide a fee to the Placement Partners to help outsource. Hence in such cases the Placement Partner gets remunerated both ways.
  • Alternate employment within the Group.
  • Providing entrepreneurial options.

Q-What is the impact of layoff on insurance and retirement benefits of an employee(s)?

Lay off is not termination of employment. Hence Insurance /retirement benefits remain unless it results in Retrenchment/Termination or cessation of service for any reason whatsoever.

Questions are answered by Vikram Puri, he has worked for many organizations- BILT, SRF, Standard Chartered Bank, Xerox and in the last assignment with the OP Jindal Group – Jindal SAW & Jindal ITF Ltd He was Group President HR at Jindal ITF Ltd managing HR in 5 verticles in EPC & Infrastructure, Transportation & Manufacturing. He was WTD & Director on some of the Companies.

Photo Credit- QuickTalk



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