Redundancy: the hardest decision a business owner can make

Redundancy: the hardest decision a business owner can make

It was the mid-90s when I first recommended redundancies. I was a young, fresh-faced consultant advising a small business struggling to turn a profit. The owners believed in their product and their potential, as did I. However, unless they changed their cost structure and improved their operational efficiencies, they would go bust within a year.

The conversation was difficult. While I had met and spoken with each employee over a couple of weeks, the owner had known them for much longer. They were like a family and I was suggesting he sacrificed a few so the many could continue. As harsh reality dawned, he cried. I remained stoic and rational throughout our meeting. Later I shed a tear later when the enormity of what we’d agreed sunk in.

You may be facing the same tough decision for the first time. To save your business you may have to let people go. Not because they’ve underperformed or cheated. They’ve worked hard and been loyal, but if you don’t reduce your wage bill, no one will have a job a year from now.

It’s OK to feel guilty.

Throughout my working life I’ve encountered redundancies. Sometimes I’ve recommended the changes that led to tens or hundreds of jobs being lost. Sometimes I’ve been on the receiving end. There’s no pleasure in making these decisions, and those who say it doesn’t affect them aren’t being entirely honest.

Making people redundant destroys relationships. Some of our strongest friendships are born in the workplace. Close teams can build a special bond where life events are celebrated, and even children named after colleagues. While there is some ebb and flow as people move on or cannot perform, nothing is as violent as telling people to leave to save money.

You will feel you have failed. Somehow you didn’t do that one thing that could have saved everyone’s job. Because you didn’t decide fast enough, you will convince yourself it is your fault you have destroyed this family.

Feeling like this is normal but don’t let it drive your thinking. Convincing yourself you just need “one more month” to turn things around is a fool’s errand. Acting decisively early will save many more jobs than dithering. More than once I’ve supported managers who’ve put off the hard decision until they’re on the point of failure.

Act and be seen to be fair.

The redundancy process can seem like a dark art. Managers announce cuts are to come, then vanish into a darkened room. Uncertainty grows, anger too. Just at the time you need people to pull together, you can pull them apart.

Employees will experience something akin to grief during redundancy

Be clear in your communication. Set out why the cuts are being made, what it means for those who go and those who stay. Lay out the criteria you’ll use to select the unlucky ones, then stick to them. Criteria should be based on performance, not the personal whim of a manager. Down that road lies the risk of lawsuits and accusations scores have been settled. Both will undermine your future survival.

Most important is to acknowledge the emotional distress employees will be feeling. Redundancy processes can drag on for months as management and unions negotiate. All the while it adds to tension, mistrust and fear. The cold, hard reality of commerce must be balanced with the softer needs of people if you’re to see rapid improvements after the redundancies have happened.

Support those who stay.

Those who stay will be in a state of distress. Friendships will be disrupted and there will be fear of more cost cutting to come. Those who remain may feel like survivors. They may experience guilt and grief.

Impact of redundancy on employee performance

You need to support these people as they adjust. Early rapid improvements to performance are common and driven by fear and stress. This is not sustainable and soon performance will drop back. Whether that settles into a new steady state or continues to plunge into despair will depend on you. Adopt the attitude “they’re lucky to have jobs” and you will fail. Listen to concerns, support line managers and give people an outlet for their emotions. Be willing to adapt within sensible and fair limits.

Be a leader.

When the building is on fire, a leader doesn’t facilitate a discussion on next steps. They point to the exit, clear a path and make sure their team is out.

While the business may not be on fire, redundancy periods are a time when many will look for firm, decisive leadership. They will need reassurance this is the right path to take, they are being treated fairly and there is a clear vision for what happens next.

Leaders who are too people or process oriented will run into problems. Those who use a facilitative style of leadership will leave employees feeling directionless, as if you don’t know what to do. Process oriented styles will leave emotional needs unmet, driving distance between you and your team. Both extremes amplify the effects on teams and allow rumours to build, cliques to form and create longer-term problems that may not surface for weeks or months.

“A leader is one who knows the way, goes the way, and shows the way.” —  John C. Maxwell

A careful balance has to be struck between a fair and transparent process and the emotional needs of team members. However, you must be careful in how you tackle issues. You need the trust and support of your team in the weeks ahead, and making promises you can’t keep or showing any signs of favouritism will undermine this.

Bottom line.

A few months after the cuts had been made, I met my client to reflect on what had happened. The fear and doubt I’d seen when he cried had gone. Instead, he had a firm resolve, a confidence that his decision had been the right one. As I shared the results of a survey or current and past employees, one comment stuck out for him:

“I’m glad he was in charge.”

That came from someone who was made redundant.

Redundancies are difficult. As a business owner or senior manager, you will feel you failed in your duties. You’ll feel guilt at breaking up friendships and teams that may have grown up over years of working together. Accept this, then put it to one side as you act fairly, communicate clearly and offer what support you can. This is a time to be a visible, decisive leader who exudes confidence and clarity. Lead implies follow, and this is one of those occasions when leaders must step to the front and say, “Follow me.”

For UK businesses, the Gov.uk website has extensive information on redundancy – both from a statutory and best practice viewpoint.

About Ross A Hall

Business researcher and writer. I help people form and deliver competitive strategies.

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