3 Factors That Lead To Reductions In The Worforce

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June 7, 2011

Are reductions in force caused by retention or by poor management practices and legal hoops?

I read a great article yesterday by John Sumser over at HR Examiner called Retention Doesn’t Work. John asserts that RIFs are caused by retention programs.  According to John, “RIFs mean that we hired too many people. Said another way, we didn’t let enough people go when times were good.”  Hiring too many people and/ or not letting enough people go is a basic cause of the need to reduce headcount when financial stability takes a down turn.  On that I agree.  I think there is much more to it though.

The need to reduce the workforce is  just a symptom of overarching poor management practices that finally catch up to the leaders of an organization.  This is compounded by other factors.  So, why have a RIF?

  • It’s easier- Many leaders I’ve known don’t like to admit it but they see it as far easier to wait for senior leadership to demand a RIF just so they don’t personally have to manage poor performers in their departments.  I’ve seen it in several industries myself and heard similar stories from HR pros all through my career.
  • Lack of documentation- The legal guidelines for documentation of performance issues is one factor that many leaders struggle with.  That is why it is so critical for HR pros to advise, coach, counsel, and teach leaders to document poor performers all along the way so that they do not use a reduction as a way to get rid of a poor performer.   Poor performers should be terminated and not given many of the financial benefits that are given to employees who are part of a RIF.
  • Lack of business acumen- As organizations promote leaders who do not have a clear understanding of how the business makes money and how to manage to a budget, we will continue to have organizations that over hire and under terminate.

What have you seen in your organization or department?  What other factors lead to the need to reduce the workforce?  Be sure to comment and to click through to John’s article and leave feedback there.  John also addresses seniority and the idea of whether or not youth and innovation is what’s needed.

4 Comments

  • I think asserting that RIFs stem from good retention programs is an interesting idea, but I’d like to see some data behind it before I buy in.

    What I think we have seen, though, is a history of RIFs driven by the short term incentives built into many executive compensation packages. While there are long term incentives in the form of stock/equity, the annual or quarterly bonus structure is far too often based on short term goals, and therefore more immediate in the minds of the business leaders. We have seen more than a few organizations, many from the inside, who make decisions to cut overhead and RIF good people in order to support stock price, not long term performance.

    When Toyota was dealing with the recession (think August 2008, prior to their mechanical difficulties), there was much to do over the fact that they halted production, but did not lay off workers. Instead they used the time for paid training, cleaning, and safety. 4,500 in North America. That was a long term business decision, guided by long term thinking and company culture.

    I understand taking an old idea like RIFs and looking for a new cause, but I find it hard to swallow.

  • I have experienced RIFs caused by a lack of future business and financial planning. Even when times are good, leaders need to look 3-5 years down the road to what is coming next. Spending has to be under control at all times because good times will not last forever in our competitive economy. Unfortunately my career tag line is now ” Recruiting, Retention and Reductions”.

  • Having spent most of my career with small to medium sized organizations, most of the RIFs I have encountered are due to the reasons Bonnie laid out. I’ve seen it happen as a last ditch effort to bring an organization away from the brink due to unforseen circumstances or, more often, shaky planning.

    Like Dwane, I would like to see some data to back up John’s assertion, though I can see how it can happen in some organizations.

  • I’m a sales guy. I’d like to defend my ilk, but we have to take some of the heat. It’s forecasting. We make grand plans to blow out quota without sufficient pipeline quantity, velocity and quality. That forces the operation to staff to that level. When we miss, uh oh. This is especially true in the services sector where labor is the majority of cost of goods sold.

    That said, even the best of forecasters will miss sometimes. In those cases, I would not blame retention programs for causing staff surplus. We must to do more to retain top performers. If we continually weed out lower performers, though, our staffing engine is our throttle, not our RIF programs, which make the P&L work at great expense.

Comments are closed.

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About Trish

A former HR executive and HCM product leader with over 20 years of experience.

HR HAPPY HOUR LIVE! TALENT ACQUISITION & ONBOARDING

THE FUTURE OF WORK

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