Wednesday 25 February 2009

Avoiding redundancy


   Most of my recent posts have focused on preparing organisations for the future, once the current recession starts to turn, or at least to stabilise.  But clearly, all organisations have difficult times to navigate until then.

But this still doesn't mean that they need to react in a knee-jerk manner making savage cuts which will make life more difficult later on.

There is clear evidence that redundancies cost much more than business leaders sometimes think (for example, see the CIPD's equation to calculate the cost of redundancy) and various models for organisations to use in considering alternatives (for example, see Peter Capelli's advice to use real option theory).

And there are plenty of organisations that are are being much more progressive in their short-term response to the recession.  In fact, the reaction of my current clients and other organisations I'm in regular contact with, suggests that they're treating this recession in a very different way to how they've responded to previous difficult times.  There are a number of possible reasons for this, some of which are to do with the increasing proportion of work which is knowledge based, and therefore relies on collaboration, innovation, customer service etc - all activities which are hit harder but sudden reductions in resources.

So organisations are looking at a range of other options, and the CIPD's February 2009 labour market outlook reports that:

  • 50% of organisations have implemented a recruitment freeze
  • 40% of organisations have terminated temporary / agency contracts
  • 19% have introduced more flexible working
  • 17% have cut bonuses
  • 15% have introduced short-time working, and
  • 7% have cut wages.


One organisation that's been written about quite extensively is KPMG.  Their programme, called Flexible Futures, is designed to respond to the collaborative, knowledge based environment I referred to earlier (Head of People for Europe, Rachel Campbell notes, "One of the main drivers is to make sure that should things deteriorate we can keep our team together.  We've invested an awful lot of money in recruiting and developing a talented team, and we want a more positive, responsible solution than redundancy should we be faced with a deterioration."

Under the programme, KPMG's 11,000 partners and staff have been asked to volunteer to change their terms and conditions of employment for 18 months, enabling the firm to require those who have agreed to the change to work a four-day week or take between four and 12 weeks’ sabbatical at 30% pay, with the maximum annual salary loss capped at 20%.

It's not a strategy that would work for all organisations.  30% of pay still tends to be quite a bit at KPMG but might not suffice in many others.  And as Management Today points out, "Absenting yourself from the office for a long period (or even one day a week) might keep you out of the firing line - but it also might make your employer realise how easily they can manage without you. KPMG staff will no doubt be worried that they might not have a job to come back to when they get back from their holidays..."

The key factor that makes it work is trust (the central factor in my change for the future model).  As Campbell notes, "Flexible Futures will stand or fall by the level of trust we have created. Only if our people trust our leaders to exercise the options sensitively, taking into account individual situations wherever possible, will they sign up. It is a great test of the culture we have built."



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  1. Jon, wow I had no idea KPMG was doing this. You know honestly, 4 day work weeks may not be a bad idea for many companies. Plus it could make them more lucrative for recruiting professionals who only have time for 4 days. Often the longer an employee works, the more their performance deteriorates. We're starting to realize this, and that "less is more" sometimes when it comes to how many hours your employees work.

    Of course, the pay cut though they take by working less is a problem for the employee...

  2. I guess less of a problem than loosing their job though.


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