Layoffs are Imminent

by Santiago Patiño

“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:

• Bank of New York Mellon – 1,800 (4%)
• JP Morgan Chase – 7,000 investment staff + 9,200 WAMU (21%)
• Citigroup – 75,000 (20% based on late 2007 peak staffing levels)
• Bank of America – 35,000 (over a three year period )
• Ocean Bank, Miami – 127 (12% of staff)

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:

• A freeze on hiring, salaries and promotional increases
• Elimination/consolidation of similar activities (e.g. having reconcilers in operating department vs. consolidated in accounting)
• Reduction/elimination of training budgets
• Reduction of employee benefits (bonus and 401K matching contributions)
• Diminished use of outside headhunters for key positions
• Stepped up promotion of customer self service channels
• Increased automation of routine tasks

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.

• Get legal representation. The road to planned layoffs is riddled with legal turns and requirements. While not all of the rules are easy to comply with, they are there to protect both the employee and the employer. Before embarking on a RIF, make sure you have the best legal advice you can afford.
• Communicate often and be consistent in your message. Review the principles and ideals expressed in your vision and mission statements to determine if there are contradictory impacts of staff reductions. Consider the short-term and long-term impact on all employees – those leaving and those remaining. Make sure you provide timely, accurate, clear and consistent information – including the reasoning behind the decision.
• Be quick and firm. A long, drawn-out reduction in force can result in decreased production and the resignations of employees the company wishes to retain. Develop a RIF plan, consider all of the business and legal issues, and implement the plan in a way that lets employees know when the process is complete.
• Alleviate post-RIF anxiety. After the RIF is carried out (hopefully in the shortest amount of time), the remaining employees require a different type of attention. We need to address their anxiety about the possibility of additional reductions, uncertainty regarding changes in workload and work redesign. In After Layoffs, There’s Survivor’s Guilt (Time, Feb. 01, 2009), Barbara Kiviat describes the feelings of depression and isolation felt by those that remain, the so-called “survivors.” How can you work to allow “surviving” employees the communication channels they need to deal with their own feelings about the event? Can you train managers and supervisors to more effectively spot employees who are not dealing well with this change?

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.
-sp

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