Episode #64: Redundancies and Restructures

It’s not personal

Restructures in large organisations are commonplace, and quite often imply that the organisation is seeking greater efficiency, which results in a number of roles being made redundant. These decisions, from the front line perspective, may seem to lack rationality and create a lot of angst, as sometimes very good people are moved on.

How do you handle this emotionally and psychologically if you are caught in the firing line and, in your role as a leader, how can you help to make a redundancy and restructure process as painless as possible for your people, while giving your organisation the best chance of capturing value?

This episode covers all the basics you need to manage redundancies, and provides guidance on handling the most difficult conversations.

I’ve created a really handy free downloadable PDF that will help you get redundancies right. Download the ‘9 Ways to Get Redundancies Right’ below.

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REDUNDANCIES AND RESTRUCTURES: IT'S NOT PERSONAL

Episode #64 Transcript

Hey there and welcome to Episode 64 of the No Bullsh!t Leadership podcast. This week's episode, Restructures and Redundancies: It's not personal. It's common in most organisations to restructure from time to time. These restructures are generally carried out for the right reasons, but are too often ill conceived in terms of how much value they'll generate when weighed against the disruption, cost and uncertainty that come as a byproduct of that restructure. Also, a restructure quite often implies that the organisation is seeking efficiencies and this results in a number of roles being made redundant. These decisions from the front line perspective may seem to lack rationality and create a lot of angst is sometimes very good people are moved on. In this week's episode I'll cover off on how to handle this emotionally and psychologically if you are caught in the firing line. And then in our role as leaders, I'll give you some pointers about how to make a redundancy and restructure process as painless as possible for your people and give the organisation the best chance of capturing value to boot. So we're going to start by looking at the personal impact of restructure and redundancy. I'll talk about the basics of this process from a leader's perspective. We'll move on to the meat and potatoes of the episode by looking at the conversations you'll need to have as a leader and how to handle these competently. And we'll finish with a look at how to manage large scale redundancies and restructures. So let's get into it.

Let's look at the personal impact of restructure and redundancy. In 2003 I was working for a mining company in Queensland, Mount Isa Mines, or MIM as we called it. And MIM was an ASX top 50 listed diversified miner. Now I was Chief Information Officer and I'd only been there for a relatively short period of time when it was announced that a takeover bid had been made by a newish global mining firm named Xstrata. The news broke in the Australian financial press in November of 2002 and that's when the excitement started. Not long after the Xstrata executive responsible for the acquisition called me on the phone, he was based in London. And he said that he wanted to meet with me as soon as possible and obviously I obliged. So he came to Brisbane and when we met, he said to me, "We're very confident that the takeover will proceed. I've been looking at this transaction for some time and I'm across most of it and I'm pretty comfortable with it. But the thing that I'm least comfortable with is the integration of the technologies through the IT business." So after a brief discussion on the issues, he garnered my commitment to help with the transition post acquisition. And then he asked a really simple question, "Have you thought about your own future?" Now I said that I had, I figured that Xstrata already had a Chief Information Officer and that even if they preferred me to him, there was no way I was moving to London. So I guess I'm out of a job. He concurred. We shook hands and we moved on.

Now within half an hour, he had eliminated any uncertainty for me and we had agreed a path forward. On top of that, the session demonstrated to me that I could trust this man, that he would honour any contractual commitments that MIM had made to its employees and he would look after us if we helped them to get the integration right.

He was incredibly pragmatic, intelligent, and a fundamentally decent human. So even though it was Xstrata that was in the driver's seat, he wouldn't throw the baby out with the bath water. I worked through the process of making roughly half of my group redundant as the company was restructured for the new business shape and strategy. Now, MIM was structured on a centralised functional model and Xstrata very much had a business unit independence model. I learned an enormous amount during that 12 months and it really tested my metal. When all was said and done and the integration was successfully implemented, I wound out of the business as agreed in that initial conversation roughly 12 months earlier. I'd had plenty of opportunity to get my head around my own fate and had spent my time trying to provide the best exit I possibly could for my people who were also leaving.

Having said that, when I finally walked out of the offices on my last day, I was surprised at how I felt about this emotionally. I knew it had nothing to do with my performance. Indeed quite the opposite. I knew it wasn't personal, but I still felt a sense of loss and a weird feeling of not having an identity. I went from being a senior leader in a top 50 listed company to being just another corporate guy out of work. Now, even though I had plenty of money in the bank as a result of the experience, my self esteem actually took a hit.

I went to get a new mobile phone plan, this is a great example. Because I was considered unemployed, I couldn't give them details or my employer, this particular major telco provider would only offer me a prepaid service. I shit you not. I had hundreds of thousands of dollars in cash sitting there in the bank and couldn't get a mobile phone plan.

Now, fortunately, MIM was a large customer of this particular telco provider and I was able to put a call into the CEO to get this resolved while I stood next to the sales consultant. But what if I couldn't have made that call to the CEO? What does everyone else do in these circumstances? These are some of the things that we don't think about if we haven't been through it ourselves. In short, my response having my role made redundant was very unexpected and it took me by surprise because I thought it was something that I absolutely wanted and it actually was, but I never forget how it feels for people who might find themselves in this position through no fault of their own.

Let's have a look at the basics of redundancies from a leader's perspective. Now, this should be bread and butter for any leader, you can't imagine that leaders would get too far in their career without knowing these basics. However, I'm surprised at how many I run into the don't. So there are three really simple concepts here that you have to have your head around.

Number one, do not confuse a redundancy with performance issues. So often leaders use a restructure to get rid of poor performers rather than doing the hard work of leadership and managing them out for the right reasons. I have seen lots of contrived restructures to deal with removing someone quickly, creating huge unnecessary costs for the organisation. It also results in everyone, including your top performers, seeing that you pay poor performers a lot of money to go away. This kills all of the discretionary effort in your team. And the only thing that disappears faster than the team's motivation is your own credibility as a leader.

Rule number two, if you do have to restructure a team or part of your organisation, you must have clear rationale. Typical examples would be, streamlining layers of management for greater efficiencies, removing roles that are no longer needed from a technical perspective, accommodating changes in the organisation strategy or perhaps you're closing part of your business. Quite often, it's done for cost cutting initiatives. Now this should be a last resort. on this one, it's good to ask yourself the question: Can your team see that you've tried all other measures first before cutting people? Don't send mixed messages about cost. So in other words, being lavish in some areas and then axing people. I have seen CEOs cutting staff numbers while all the time flying first class overseas and drinking thousand dollar bottles of wine over dinner. It sort of tends to kill the credibility somewhat.

Number three and probably the most crucial concept here is that redundancy is about the role, not about the person. This is a critical message. So if we refer back to the rationale that we just spoke about in point 2, one of the first responses a retrenched employee will have is, "Why me?" Or perhaps the more difficult question, "Why me and not Mary who does the same job as me?" You need to be able to answer that question clearly. So what have your selection criteria been? This is really important. Your job is no longer required is one thing, but what if there are 10 people all doing the same role? Why did you choose John? It's ok to base this on skill sets, level, capability and value delivery to the organisation, so, using performance as a selection criteria is fine when you have multiple roles. This is good from a process and fairness perspective when restructuring, but it's very different from contriving, a restructure as a way of handling poor performers.

We have to remember redundancy is no longer a shameful thing at once was a real stigma, but many good people get made redundant multiple times during their careers through no fault of their own. It's just business, so don't make it personal. If you do this right as a leader and make sure it's clearly about the role and not the person, then you can serve that person who's out of a job much better than you would otherwise. As I found out through my experience many years ago, it's going to be a hit to their self esteem no matter what. So don't make matters worse.

Alright, let's take a look at the conversations you'll need to have as a leader and how to handle these competently and I've got nine points here I'm going to have as a downloadable at the end of this episode, so you can either pick that up through the show notes link or you can go to our website, www.yourceomentor.com/episode64.

As a prelude, no matter how many of these situations you've faced as a leader, the moment you don't feel slightly sick in the stomach about the very real impact you're having on someone's life, that's the moment to realise you should not be doing this. The individual being made redundant will pick up on your indifference and they'll note your level of concern for them as a person. This makes a really big difference as to how the conversation actually goes.

Alright number one. If you're the person deciding on which roles get made redundant and therefore which people, you have to be the one to face the individual in the conversation, don't palm it off onto HR. Don't give it to one of your lower level leaders to do. Don't get someone else to do your dirty work for you. As they say in Game of Thrones, "He who passes the sentence swings the sword." Now, this should make you think pretty deeply about the human consequences of any decision you make. At MIM when I went through that process in 2003 I insisted that I hold every conversation with every employee in my division. I held them for those who were being made redundant and also for those who weren't. In a process of that scale people appreciate the opportunity to understand what you're thinking and why.

Number two, rehearse what you're going to say and what questions they might ask. Be ready to answer them. This means you've got to have some really good preparation behind you.

Number three, always do it in person. Doing it by phone is extremely impersonal and it's a bit of a cop out because you don't have the same emotional impact that you do when you're in the room. Also on a phone, it's easier to get off the phone. When you're in a room, it's really hard to get up and leave, but face up to it and do it properly. Do it in person and at least give the person that courtesy.

Number four, be prepared for the reactions. Now you may encounter a number of different types of reactions here. Anger, shock, denial, acceptance, tears, arguments or in my view, the worst is total silence. Every human being processes these things differently and it'll take different amounts of time to get them to the acceptance of the situation. Your role is to help them through these emotions and provide support. So for example, you've got to be available. Don't make someone redundant then go on leave for three weeks. You've got to outline clearly the timing and details of the redundancy. For example, can they try and redeploy into another role in the organisation and if so, how long do they have to do this? Give them as much clarity as you possibly can about options and next steps.

Number five, be sensitive to timing. I've seen this done on a Friday afternoon, tagged onto a regular weekly catch up. It's a shocker. You leave the person hanging over the weekend with no emotional support structure, not knowing what to tell their family and friends. It's pretty cruel.

Number six, don't be alone in the room for this discussion. You can get easily caught out with a 'he said/she said' situation when people claim you've offered things that you may not have, but they weren't in an emotional state to take things in properly. Generally when you have these conversations, people don't hear anything after the words "Your role has been made redundant". But if you have an HR person with you, they can pick up the discussion on what package and payments the person will receive and the process from here. You can kick off the meeting by telling the person what's happening and why and then pass to HR for the logistics and mechanics and this can provide continuity of processing and messaging. It also helps focus the person immediately on the future rather than re litigating the decision itself.

Number seven, go into the meeting with something that the employee can take away in writing so that things are really clear. So the only thing that they want to know is 'what does this mean for me?' You got to be ready to answer that exact question no matter what. In the most likely scenario where they're receiving a redundancy payment, it's helpful to equate that payment to numbers of months pay so they can see clearly how long they have to find another role. This can really help dissipate some of the initial panic of 'how am I going to support my family?'.

Number eight, maintain confidentiality to the greatest extent possible. Now I know this sounds obvious, but don't tell other people before you tell the impacted employee, other than the few select leaders in your organisation that actually need to know. This is going to leak. So you don't want people to hear it from someone else, you want them to hear it from you.

Finally, number nine, never make this conversation about you. I have heard leaders say, "Oh, this is the toughest thing I've ever done." Well, guess what? The person doesn't care. It's not you that's losing your job, it's them! If you're the type of leader that's going to say that, then your people will most likely already have you pegged as an uncaring numpty, so whereas you won't necessarily surprise them, you won't do anything to remove the bad taste from their mouths either.

Alright, let's finish with a quick look at how to manage large scale restructures and redundancies. When there's a structural change or close of business for major scale this can sometimes be handled slightly differently. The comms can be much broader and more structured. So first of all, make an announcement with all the impacted teams as soon as you can after the decision is made. As I said before, things invariably leak and that's the worst way for people find out you're shutting or restructuring a business. Tell them what you know and what you don't, particularly timeframes and if you can, how it will impact them. When can you get back to them with more information? Even just estimates of timeframes are really useful and don't leave people hanging too long. The vacuum will kill all engagement. Not just for those going, but also for those staying. And in a vacuum, people will fill it with speculation and incorrect assumptions.

The next thing is, if it's a long process, then you've got to keep the business running in the meantime and probably there are going to be additional projects that you have to undertake to get the integration done properly, as was the case in the MIM acquisition by Xstrata. So the first thing is make sure your top performers are locked in for the required period and by locked in, I mean they've got to have incentives to stay. Retention bonuses, alternative career plans and so forth. Otherwise they're going to jump onto the next ship they can find. Next, take full ownership of the decision. Now don't you blame the nebulous 'organisation' or the leaders above you, even if it's a strategy you don't believe in, suck it up and act like a leader. That's what you get paid for. And don't jump down into the hole with your team and start commiserating after the announcement. Stand apart and stand strong as a leader. Be ready to answer their questions, make yourself available and reiterate the company's strategy or reason for the decision. Know what this is and why, and have an intelligent and authentic way of translating this for your people and communicating to them, you will do them a massive favour if you can do just that.

Don't assume what reaction you're going to receive. Now, from my experience at MIM, there were two categories of employees. There were those who would have jobs at the end of the process and those who wouldn't, and of these, each category had two different reactions, happy or not happy. So for example, some people had a job and were unhappy because they would have preferred to move on and trouser the loot. Some people were made redundant and were ecstatic. They may have been considering moving on anyway and they get to do so with a massive wad of cash. Redundancies can be great wealth creators if your skills are marketable and you pick up another role quickly, so don't assume that everyone's going to be unhappy about not having a job. You don't know until you have the conversation, who's going to be happy and who's not. And that happens on both sides of the fence, so just play it out and let people decide.

Finally, ensure that you as a leader, have the right support around you to help through this difficult process. Don't go it alone. The level of personal composure and control that you need to have when you're with your people is critical. But that doesn't mean you have to be a martyr. If you're a strong leader with compassion and empathy, it's likely to take a toll on you, no matter how capably you handle it, or how will you accept the process intellectually.

Alright, so that brings us to the end of episode 64 thanks so much for joining us, and remember at Your CEO Mentor, our purpose is to improve the quality of leaders, globally. So please share the podcast with another leader whom you know will benefit. I'll look forward to next week's episode: How do you make someone change?

Until then I know you'll take every opportunity you can to be a No Bullsh!t Leader.

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