“Recession is when your neighbor loses his job. Depression is when you lose yours. And recovery is when Jimmy Carter loses his.” –Ronald Reagan
Consolidation, reductions in force (RIF), right-sizing, down-sizing, lay-offs, staff cuts, pink slips, restructuring, voluntary termination, involuntary termination – while the list of terms has grown over the years, they all mean one thing: people are losing their jobs.
In the recent past, we’ve seen far too many announcements of staff reductions. Larger regional and national banks have laid off thousands of employees throughout the ongoing financial crisis. Just a few examples:
While layoffs at the big banks are grabbing national headlines, we’re also beginning to see community banks and credit unions reaching the same conclusion: “We need to cut staff to remain profitable.” These cuts will be tougher for smaller institutions that already keep staffing levels low to control costs. Cutting 20 percent of the workforce at a smaller institution can mean firing five key people the institution simply cannot afford to lose.
It speaks volumes about our current situation that the stigma once associated with those who were “affected” is gone. Still, a RIF is one of the most unsettling events an organization can experience – regardless of the institution’s size. Those on the receiving end of a pink slip are devastated; those watching their co-workers pack boxes and get escorted out the door are demoralized. And those forced to face the distasteful but necessary management act of laying people off deal with decreased sleep and increased stomach acid.
Managers, a decision to reduce the number of employees at your institution should be viewed as an act of last resort, one that follows any and all other revenue enhancements and expense reductions. Before embarking on staff cuts, make sure you acted on all other avenues to curtail employee expenses. For example:
Having been involved in several RIFs, both as a bearer and receiver of bad news, I feel qualified to speak on some of the human issues that need to be kept forefront in our minds.
What determines who stays and who goes?
One of the first dialogues management will undertake concerns the number of full-time equivalent employees, or FTEs, that need to be cut. Before making any decisions, ascertain how many reductions can be made through attrition. Next, a careful evaluation of essential and non-essential jobs may present positions that fall logically into the “stay” or “go” categories. Back office and support folks are usually reviewed with the “re-structure/re-engineer” magnifying glass.
It is critical throughout this process to strive for objectivity. Analyze the comparative performance of employees (forced rankings) based on current or prior performance appraisals with emphasis on fulfilling post-reduction job functions and requirements. Be careful not to use this exercise as a means of addressing previously tolerated employees with performance deficiencies – there are laws to protect them. If it’s truly a disciplinary issue, be honest and address it as such.
When there’s no other way?
If a staff reduction at your organization is unavoidable, there are a few steps you can follow to make the process as smooth as possible.
GonzoBankers, this is a brutal business, whichever way you look at it. For those of you on the receiving end of a layoff, we pray that it’s executed with dignity and respect with some compassion and honesty thrown in for good measure. For any of you on the “giving” end, please don’t ever say to a displaced employee, “Someday you’ll thank me for this.” As in my case and many other bankers I know, while it may be true that I’m better off today than I was then, they just can’t see it that way – today.
Cornerstone Advisors has assisted financial institutions of all sizes achieve greater efficiency with customized benchmarking and process improvements strategies. We can help you:
We would welcome an opportunity to talk with you about boosting your organization’s performance and profits using our proven methods.
Contact us today to get started.