Leading through the pain & misery of retrenchments

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RETRENCHMENTS

Like many other countries on the continent, South Africa has not been spared from this black swan event of a global pandemic that has resulted in deaths, illnesses, grief, sorrow and misery. In an attempt to contain the human impact as a direct result of this pandemic, countries have declared state of emergencies by closing borders, instituting partial or full lockdowns and have issued strict Covid19 protocols which outline measures under which businesses can operate. Relief programmes for both businesses and individuals have been proclaimed, however, many businesses have been faced with rising Covid19 related costs, shrinking revenues, uncertainty about trading under lockdown regulations. In South Africa, the hardest hit country on our continent, there are businesses and industries that have experienced a complete shutdown since March 2020. 

Business leaders, business owners and entrepreneurs in small, medium or large businesses have responded to these challenges by taking various steps such as:

  • Prioritizing health protocols to maintain a duty of care towards staff and customers;
  • Activating business continuity plans;
  • Undertaking rigorous liquidity stress tests; 
  • Reviewing capital allocations; 
  • Introducing relief measures for clients and suppliers;
  • Engaging with regulators and government officials on Covid19 regulations; 
  • Reviewing and forecasting revenue performance;
  • Providing support for staff who are working from home and staff members who have to physically report for duty;
  • Reviewing all risks organization’s face at a time like this and developing appropriate mitigation strategies;  
  • Recasting and optimizing cash flow; and
  • Reducing operational costs.

None of these steps are easy; they require complex analytical work, collaboration across different business units and regular engagements of the senior leadership team –that complexity is compounded by having to do all this while some members are in the office and some are working from home.   

 

What are the implications of this?

When a business’s revenue growth is projected to be significantly lower than its cost growth, the business is forced to bring down costs dramatically.  Typically, in any business, staff costs tend to make up the majority of the total costs, resulting in staff costs being one of the first areas that are scrutinised. Depending on the financial strength of an organisation, its future outlook, the impact of Covid19, and its potential to recover, ultimately decisions that impact people will have to be made.

Some of the common decisions adopted by various businesses include reducing working hours which is often accompanied by reduction in salaries, foregoing of incentives. A retrenchment exercise is the last option that businesses will consider because of the emotional toll it has on those to be retrenched, those who will conduct the retrenchment exercise, those who made the decisions to retrench and even to those who will remain behind. The effects of a retrenchment exercise on staff morale, on a brand’s reputation, on the trust between leaders and employees are normally felt for months after the formal retrenchment process has been concluded. 

When an organisation contemplates retrenchments, it is important for leadrs to fully appreciate that a retrenchment is a no-fault termination – there is nothing that those to be retrenched have done to be retrenched, neither is there anything they can or could have done not to be retrenched. It is this fundamental sense of unfairness that lies at the heart of the pain, misery and emotion that most people experience during a retrenchment exercise. It is precisely for this reason that the retrenchment process, difficult as it may be, justfied as it may be, legal as it may be, must always be handled in a sensitive, delicate, fair, objective and empathetic manner.

 

The process of retrenching: Section 189 of the Labour Relations Act 66 of 1995

In the South African context, the process of retrenching is governed by the Labour Relations Act 66 of 1995, it is important that all leaders familiarize themselves with it not only its provisions but the spirit of that legislation within the context of a constitutional democracy. When this retrenchment exercise is either contemplated or becomes an option, section 189 of the Labour Relations Act requires organisations to issue a written notice to employees that must set out, amongst others:

  • The reasons for the proposed dismissals, the alternatives considered by the employer before proposing retrenchments and the reasons for rejecting each of those alternatives;
  • The number of employees likely to be affected and the job categories in which they are employed;
  • The proposed method of selecting which employees to dismiss;
  • The time or period when the dismissals are likely to take effect, the severance pay proposed; 
  • The assistance offered to employees likely to be dismissed, the possibility of future re-employment, the number of employees employed by the employer, the number of employees that will be dismissed as a result of operational requirements in the preceding 12 months.

The process appears simple, however, whenever an organisation proposed retrenchments, it always lands as a shock to the entire workforce and psychologically triggers a vortex of emotions such as:

  • Anxiety: Am I one of the people who will be retrenched?
  • Fear: How will I cope without a source of income?
  • Shame: If I am retrenched, I will have failed my family as a breadwinner;
  • Humiliation: Why would they choose me, am I a failure?
  • Embarrassment: What would my friends and former colleagues think of me?
  • Anger: How could this organisation ask me to leave after my years of service?
  • Betrayal: How could the bank do this after all my sacrifices?

Many employees grapple with difficult questions such as, should I tell my family, should I share with my friends, should I seek spiritual help, an should I inform my children. During this difficult and painful time, those who are facing the anxiety and uncertainty of a possible retrenchment are paralyzed by fear, they battle to focus on anything else, and battle to cope with the processes as they have one question on their mind, will it be me, if so why me, and what will happen to me and my family. 

From the moment of an announcement, to the handing out of section 189 letters to employees, the pain, anger, suspicion and resentment begins, this will likely last for months. The manner in which individual leaders conduct themselves or how the leadership collective behaves, will determine how this mood will get better over time or will get worse. 

Many leaders, managers and business owners will go through this for the first time in their careers, they will battle to cope with their own emotions and views about the retrenchment whilst they have to retrench people, and some leaders are petrified about the prospect of having to make decisions that affect people’s livelihoods. I have painful memories of every retrenchment process that I’ve ever been involved in, I have learnt valuable lessons about how to act as a leader during such times. I hope to use my own experiences to offer advice and guidance to those leaders who have to implement a retrenchment process in their business or company. I hope that leaders who embrace these lessons would rise to the moment and conduct themselves in a sensitive, responsive, caring, visible and supportive way to their employees. 

 

Key leadership lessons for a retrenchment process 

 

  • Handle with care

Leaders who assume that employees will continue to give their all to the business following a retrenchment announcement may be in for a rude awakening. If the retrenchment process is not appropriately managed, discontent and demotivation are likely to spread. The impact on the business and its employees (those losing their jobs as well as those remaining) is potentially devastating. We, as leaders, must always assume that every retrenchment exercise has the potential to threaten the motivation, effectiveness, well-being and productivity of employees, many of whom are likely to view such a process with suspicion and resistance.

Depending on the organisational culture, labour relations, and the relationship with a labour union, the process may bring to the fore deep seated anger, distress, resentment, and ill-feeling. Such an environment is condicive to lowered productivity levels, turf battles, poor morale, heightened interpersonal conflict, poor time management, increased absenteeism, cynicism about the organisation’s future and a lack of trust in leaders.

That is why we, as leaders, have an enormous and onerous responsibility to ensure that a retrenchment process is effectively and sensitively implemented. We have to lead our employees through such a difficult time guided by our own personal values and the values of our organisations.  

This is not easy – however compelling the retrenchment plan may look on paper, it becomes a reality only when it is accepted and implemented by those who have to manage and lead teams through this painful process. As leaders, we have to master our emotions and be able to put aside our personal feelings, anxiety and fear in order to deal with the anger, questions, disappointments, defiance and difficulties of employees. How we show up during this time, the words we use, and our actions will forever define how we are perceived, by both those being retrenched and by those who will remain.

Each staff member is likely to respond differently to the retrenchment, it is important that you deal with each staff member, with the leaders below you and your overall team with extreme care and sensitivity during a time like this. 

 

  • Sensitivity

One of the most important principles we have to adopt in this process is to consider the morale and productivity of the remaining workforce as well as those who will leave your organisation.  This can be achieved by ensuring that the following happens:

  • Set realistic timelines for the process and be mindful of the effect of a long drawn out process on employee morale and productivity;
  • Flag important milestones to all the employees;
  • Keep working and providing service to customers;
  • Monitor morale and productivity throughout the process;
  • Create an environment where people can speak their minds, share 
  • their fears and ask questions to get clarity; and
  • Understand even those in leadership positions have their own emotions to deal with, they are not immune from anxiety, fear and anger. 

Always remember that you as a leader are seen as the embodiment of the leadership of the organisation. People will watch everything you say and everything you do.  You need to be extra sensitive to how people feel. I have seen leaders lose credibility because either they flaunt their wealth, go on holidays, post inappropriate pictures on social media or make inappropriate comments that show them to be tone deaf during such a difficult time.  Genuine empathy and compassion must be the watchwords in the words and deeds of each leader. A painful retrenchment exercise does not just define us as leaders, it reveals who we really are.   

 

  • Lead to succeed

During this time of doubt and uncertainty, visible, sensitive and approachable leadership is critical. We, as leaders, have a duty to focus the minds of our employees on the goals and objectives of the business. Our aim has to ensure that the retrenchment process is handled with empathy and sensitivity and concluded within a reasonable timeframe.

We must also ensure that by the end of the process, the business will be better, more tightly focused with little or no deterioration in employee morale and effectiveness. You may argue that that is a tall order- but that is exactly the role of leaders. You see, to be a leader means to be a dealer, a purveyor and deliverer of hope. It is the job of leaders to be deliverers of hope, even in the most difficult times. It is only through hope, determination and the right leadership that the Chilean miners could last for 67 days.

Each level of management must exercise consistent and visible leadership during such a time. It is the duty of leaders to talk to employees, to answer all questions, to provide as much information as possible, to clarify how the process will unfold and to focus on business objectives.

Our jobs as leaders require us to put our own personal concerns, feelings and opinions aside and ensure that all our employees are supported and motivated. Leaders can debate, at length, within leadership circles about the pros and cons of the retrenchment excerise, but they have to be united and have a cohesive message as they engage staff. A disjointed leadersip team, with an incoherent message causes untold harm to the workforce and to the credibility of the leadership team.

Times like this require a combination of intellectual toughness and decisiveness tinged with sensitivity and compassion to people’s needs. 

I urge all leaders to take up this challenge, to play their part by ensuring that they:

  • understand what is expected of them throughout the process;
  • are forthcoming, accessible and visible to their teams;
  • communicate clearly where the business is going and how it will get there;
  • ensure fair and equitable treatment of employees; and
  • are there, visible, ready to engage and answer questions

 

  • Clarity and consistency count

During such a difficult period, the prospects of retrenchment combined with poor communication and a perceived lack of information will inevitably encourage speculation and rumour. In such a climate it is important, at the very outset, to establish clear lines of communication from senior management to all employees and other key stakeholders. 

A sound communication strategy can establish the trustworthiness and reliability of official channels over informal networks and develop confidence that employee reductions are being undertaken in a systematic, open and humane way. It can also assist employees not

directly affected to minimize concern about their future and to maintain their focus on doing their jobs. Leaders, have an obligation to communicate clearly, consistently and regularly about the process. The current Covid19 environment requires creative communication strategies to reach all staff, whether they work from home or the office, factory, or mine. 

 

  • Support the next layer of leaders

Our role as leaders is to support the next layer of leaders, who are likely to be more intimately involved with consultations with employees. There is no substitute for open and frequent communication to create confidence, trust and commitment, even where there is significant disappointment and even anger even among the next layer of leaders.

Many leaders see the anger, resentment, lack of trust and despondency of employees as a major hurdle to overcome – our job as senior leaders is to equip such leaders with the necessary insights, information and coaching to be able to have these difficult conversations. I would argue strongly that, at times like these, when relationships between the individual and the organisation are under the spotlight, it is essential to bring our true leadership skills to the fore.

It is also important to remember that to take advantage of modern technology and use available platforms for engagement with the next layer of leaders to discuss issues of concern.

When leaders speak directly to their employees at key points in the process, employee morale is built up. In those areas of our business where the exchanges are frank, robust and open, where management is straightforward and willing to tell employees when they do not have answers, employees are confident that they are getting an honest hearing. 

In those areas where leaders are not visible, where there is little or no communication or where the leaders want to give people false assurances; cynicism, negativity and mistrust prevails. These leaders need support, motivation and guidance in order for them to engage their teams. 

 

  • Combine honesty with kindness

During this time, leaders will have to deal with two conundrums:

  • How to deal with those who are affected;
  • How to deal with those who will remain behind;

Often neglected and forgotten in the retrenchment process are the “survivors” who are inevitably forced into a “do more with less” situation. After massive downsizing exercises, it’s sometimes hard to tell who is less fortunate – employees who have had to leave or those who are left behind (commonly termed “the working wounded”).

The surviving employees are often troubled by guilt, an ambivalent attitude towards management and fear of future retrenchment, as well as the burden of job enlargement, the loss of experience and expertise, and the need to adjust to a new organisational structure. 

As the mere introduction of retrenchment does not in itself ensure positive change, the very first priority in the post-retrenchment process is to rebuild morale and establish the commitment of employees to the business. 

The importance of overcoming the fears and uncertainties often associated with such change; of sharing the new vision and mission of the organisation; and of building and motivating teams to tackle set objectives with renewed determination and vigour, cannot be sufficiently emphasised. If executives expect surviving employees to give of their best, they will need to provide a very tangible message of investment in the future of the company and in its remaining employees.

 

Those who will remain

Leaders require the delicate art of looking backward and forward.  In a new situation, it is often tempting to look hopefully to the future, and to cut off any discussion of the past. But all responses to cutback pressures leave scars: broken up work groups, physical dislocations, friends who have lost their jobs, reassignments etc  Leaders who look exclusively to the future may not provide the outlets necessary for people to make sense of what they have been through. If not vented, feelings related to past events may interfere with present work. Equally, leaders who only focus on the pain and misery caused by a retrenchment can also cause more harm as such an organisation becomes inwardly focused, loses touch with its clients, disappoints its stakeholders and results in more financial losses, that may result in more retrenchments. 

We will therefore need to give careful attention to the remaining employees – some individuals may be in their original positions; others may have been internally redeployed. New members of your team may have been redeployed from another area of the business.  

While the new employee profile is being bedded down, several issues will need to be addressed:

  • Not all employees remaining in the business may want to be there;
  • Employee morale will need to be rebuilt;
  • Employee workloads will need to be reviewed.

Counselling or employee assistance programmes will have to be provided to deal with   issues such as stress and the new roles for employees after the restructuring will need to be clear. Employees need to know that they are valued and that they have a future in the organisation.

 

Conclusion 

The world we find ourselves in requires that we build a different leadership muscle that is characterised by resilience and the ability to manage change. If leaders are confident about changes and how they will benefit all stakeholders, adaptation and acceptance can become that much easier – including to a large extent – an exercise as painful as a restructure. This process will be made more difficult by social distancing and the notion of working from home. This means that some of the most delicate and sensitive consultations may be conducted via a telephone, video conference or zoom meetings –these are very impersonal tools, this requires an extraordinary effort of compassion and empathy from leaders  as they consult people in their homes, have socially distanced meetings and making decisions about people’s livelihoods during a pandemic. 

In the next article, I will give some advice to employees and managers on how to handle the difficult and painful process of consultation during the retrenchment exercise.