Finding Alternatives to Downsizing

Dec 12, 2008
This article is part of a series called News & Trends.

Recruiting departments will continue to be under pressure to cut staff. Wayne Cascio, a professor of management at the University of Colorado in Denver, has done research on which approaches to downsizing work best. His research on downsizing can be found in his book Responsible Restructuring: Creative and Profitable Alternatives to Layoffs.

We asked Dr. Cascio to share his insights with ERE.

ERE: What is the single most powerful thing a recruiting department can do to protect its staff, even when the number of recruiting requisitions has fallen dramatically?

WC: One of the most enlightened things companies can do is redeploy people to other functions. If you think about recruiters, they are excellent salespeople. I’d think about redeploying them into sales and marketing, where at least they stay with the company.

Lincoln Electric, which makes arc welding equipment, is a great example of the power of redeployment. When hard times hit, it redeployed blue-collar workers to work in what they called “leopard teams.” They were called leopard teams because the goal was to find spots in the market that weren’t being served. These people were trained in sales and marketing then sent out to talk to customers. They discovered there was a market for home welding equipment. This was not a minor discovery; it’s now an $800 million a year business for Lincoln Electric.

If you redeploy recruiters to sales and marketing, not only do you beef up your sales force and hang on to some great recruiters, you will end up with even better recruiters because they will have learned so much about the company, its products, and its customers as part of the experience.

ERE: What else could the head of recruiting do?

WC: One great company to learn from is Reflexite; it makes reflective material like you see on highway signs. It created a “business decline contingency grid.” The grid described four stages of business decline and some key markers to identify each stage. It worked with employees to identify what actions they would take at each stage. The action of employee layoffs only occurred at the fourth stage, which it described as “code red.” Every two weeks, managers met with employees to give them an update as to where things stood.

It’s ideal to do this at a company level, but if that’s not happening there is no reason why the head of the recruiting function couldn’t create something similar for his or her department. There are two main things this does. One is that it creates very open communication and it makes clear that layoffs are a last resort. The other thing it does is engage the employees in finding solutions. People can get very creative when their jobs are at stake. One of the chief findings of my research was that companies should involve employees in finding ways to respond to a downturn, not make decisions behind closed doors.

ERE: Are there any other creative things you’ve seen for departments to minimize the pain of downsizing?

WC: A lot of polls have shown that people prefer to share the pain rather than see a few people get the axe. Xilinx, which makes programmable logic chips, once faced a dramatic collapse of its business, and after consultation with its employees, it cut costs through a mandatory two-week shutdown and some mandatory vacation. Other companies have encouraged people to take various kinds of furloughs or sabbaticals rather than simply fire them and lose the talent altogether.

I’ve also seen companies move people to work schedules where they only work for a few days a week and for the other days get some unemployment compensation. More and more state governments are receptive to these sorts of unemployment compensation agreements as an alternative to having people laid off altogether. This is certainly something recruiting leaders should look into in their state.

Delta Airlines set up employee advisory councils, and one of their insights was that many people join airlines because they like to travel, so instead of offering people severance in cash they gave them an option of taking the severance in terms of flight benefits. The point here is that your staff may have some very good ideas if you take the time to get them involved.

ERE: Do you have any final words of advice?

WC: I don’t want to make it sound like I’m always against layoffs because sometimes you have to get rid of headcount. But if you involve employees and are creative there are many ways you can minimize the damage. We’ve spent years talking about how hard it is to get the best talent; it’s foolish to now throw it overboard the first time the seas get rough.

This article is part of a series called News & Trends.