Latest Survey Results: Managing a Reduction in Force

Sadly, in today’s challenging economic climate, it’s difficult to find any organization, large or small, that hasn’t had to consider or carry out a reduction in force (RIF). The Institute for Corporate Productivity conducted a “taking the pulse” survey about RIF in October. Here’s what they found, along with their recommendations for managing the process.

Survey Questions

  1. Has your organization undergone a recent reduction in force (RIF)? Is a RIF planned within the next six months?
  2. How much notice is given to employees affected by reductions in force? How many were affected? How is a RIF announced?
  3. How do organizations identify the pool of employees who may be affected by a RIF?
  4. Which affected employees in organizations are offered severance packages? Do employees get to select their severance option? How is the severance amount determined?
  5. Are outplacement services offered? What outplacement services are provided?

Lesson 1: Reductions in force are becoming more difficult to avoid.
• Fifty-eight percent of responding companies have had a reduction in force (RIF) within the last year, and 39% foresee one coming within the next six months.
• Of overall respondents that reported a RIF in the last year, almost half (48%) expect another cut in the next six months.
• In large companies (those with more than 10,000 employees), RIFs have been even more common. The study found that, in the last 12 months, 71% of companies with more than 10,000 employees said they have undergone a RIF. More than half of companies of that size report that their workforce will likely undergo a RIF in the next six months.
• In large companies, 29% reported that the most recent RIF had an effect on anywhere from 250 to 999 employees. Twenty-seven percent said the cutback had an effect on 1,000 or more workers.
• RIFs affecting fewer than 25 workers were predictably highest among small companies. The largest percentage of RIFs of this size occurred in small companies, with 81%. Just 4% of companies with more than 10,000 workers laid off fewer than 25 employees in a RIF during that period.

Lesson 2: Generally, not much notice is given to employees when a RIF is planned.
• Of those companies that have had a RIF in the last year, 29% said the organization did not provide notice that the RIF was planned.
• Overall, 20% of respondents said 30 days’ notification was provided, followed by 18% who provided two weeks’ notice. Eighteen percent said they provided 60 days’ notice prior to cutbacks.
• When it comes to announcing a reduction in force, most companies (76%) hold individual meetings with those being affected. Group meetings with all employees being affected are favored by 34% of companies, and 24% schedule an all-company meeting to make the announcement.

Lesson 3: Job position and performance play lead roles in determining potential cutback targets.
• In determining areas that will be cut back in a RIF, most companies look first at “job position.” Overall, 66% of companies said that’s the first area they look at when determining the pool of employees to be affected.
• Job performance reviews also rank high when determining those to be affected by a RIF: 59% consider employees’ performance review scores.
• 54% of reporting companies also said that the assessment of a worker’s knowledge and skills was part of the determining factors looked at during a RIF.

Lesson 4: After a RIF occurs, most companies offer assistance to employees caught in the downsizing.
• Sixty percent of all queried companies offer a severance package to all employees affected by a RIF. Following the “all” severance option, 17% approach severance on a case-by-case basis.
• Nine percent of small companies and 4% of large organizations do not offer a severance package to employees affected by a RIF.
• The amount of severance awarded is overwhelmingly decided by length of service. Eighty-seven percent of all companies use length of service as the top determination, followed by job position (33%). Twenty-one percent of respondents determine the severance package based on a percentage of the employee’s base salary.
• Half of the companies polled provide severance in the form of continued salary for a set period of time, and 44% provide a one-time flat monetary amount. Most companies (76%) do not allow employees to choose their severance option.

Lesson 5: In general, companies will help employees caught in a RIF with outplacement services.
• Overall, 59% of companies surveyed offer outplacement services to employees caught up in a reduction. Large companies are especially helpful, with 80% of respondents reporting they offer outplacement options.
• The most common outplacement service provided is assistance in the search for a new job, offered by 90% of responding companies. Résumé writing assistance is offered by 87% of polled organizations overall, while 83% help employees with interviewing skills.
• Predominantly, outplacement services are outsourced to a third-party vendor—with 91% of all respondents and 96% of large companies selecting this option. Slightly less than 20% of companies overall rely on their internal HR functions to provide outplacement services.

Recommendations for Managing a Reduction in Force

  • Before a reduction in force takes place in your organization, clearly communicate to all employees the reason for the upcoming RIF, the selection process, the planned time frame for the reduction and the company’s severance plans. If employees don’t feel “blindsided” by the RIF, engagement and retention are much less likely to become a problem.
  • If you are not doing so already, institute an auditing system of the RIF pool to see if any protected groups (age, race, gender) are disproportionately affected by reductions. Also, make sure there is clear documentation to back up the choice of selected employees targeted for a RIF action.
  • Coach all leadership positions in dealing with the concerns/questions they can expect from employees following a downsizing action. Strong leadership following a RIF can help build organizational trust moving forward.
  • Plan the RIF announcement timing carefully. There is a small window between communicating intentions to the whole company (and coaching managers) and notifying those affected before the organization rumor mill begins running at full steam.
  • During and following the reduction, reinforce the business reasons behind the RIF, and explain how remaining employees’ positions fit in the “new” organization.
  • Keep all lines of communication open following a RIF. Involve “survivors” in activities for improving the company. Encourage feedback on a one-on-one level, in departmental meetings and through company-wide efforts such as employee surveys.
  • The entire reduction process should be carried out with dignity. The larger the RIF, the more likely it will be publicized. Avoid releasing employees via electronic means, such as e-mail. Informing employees that they are being let go in any way other than personally can lead to public relations problems and reduced morale/trust among remaining employees.

© Institute for Corporate Productivity. All rights reserved.

About the survey:
The Institute for Corporate Productivity (i4cp) conducted the Taking the Pulse: Reduction in Force survey in October 2008. A total of 314 organizations participated.

Note: Due to rounding, percentages may not total 100. The results are sorted by overall response and broken down by size of workforce (ranging from under 1,000 employees to more than 10,000). For full survey results, contact Greg Pernula at Greg.Pernula@i4cp.com.


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