November 11, 2012

MU0010 [Manpower Planning and Resourcing] Set1 Q6

Q.6 List the strategies for managing redundancy.


Resourcing Strategy

Large organizations today employ human resource specialists to manage, coordinate or lead employee resourcing. This may have been seen as a passive role of a HR person, but in a dynamic business context with globalization, this is no longer a passive area, it is in fact the most active area and is a burning issue in companies present in the BPO space in India. It has been extremely hard for them to scale-up operations as and when required. Growth is stunted not on account of infrastructure or leadership, but due to the lack of resources or the inability to identify, attract and engage them.

In fact, successful recruitment must be proactive. Organizations can take one of three actions to fulfill their employee resourcing:
(i) Reassign job responsibilities and tasks between employees such that employees get exposure in newer areas and are able to take on larger set of responsibilities. It requires organizations to multi-skill resources and use sophisticated assessment and development programs.
(ii) Reallocate people within the organization. By allowing high performing employees to take different roles or leadership roles, the challenge of hiring staff for those different roles or leadership is resolved.
(iii) Recruit new staff from the market.

Organizations have usually followed the last option of hiring externally without leveraging internal capability and developing internal capability.

Strategy for Redundancy
The global recession that set-in, in 2008, has forced organizations to consider strategies for managing redundancy. The challenges of having to give up a large workforce or having to issue pink-slips (an American term that refers to being fired or laid off from one’s job) have been daunting.

Some of the strategies used are:
Strategy 1: Organizations only consider undertaking projects where the risks are minimal, the natural attrition can address the challenge of redundancies and no undue costs or strain on the business is experienced for laying-off the workforce.
Strategy 2: Hire very cautiously and work with vendors till the requirement is really seen to stay.
Strategy 3: To review performance very critically, so as to ensure only the high performing employees continue, the rest can find employment elsewhere.
Strategy 4: Pay the lowest and attract workforce to join, lay-off if required by providing few months pay in lieu of a notice.
Strategy 5: Ensure the contracts are drafted such that it gives them enough levers to recover the cost of any sudden fluctuations in manpower requirements.
Strategy 5: This is extremely difficult, but another strategy is to work with advance payments, to minimize the impact of such redundancy situations. For smaller entities, this seems to apply when specially working
Strategy 6: Moving business to a low cost destination where the labor-arbitrage can make the business profitable, effective and efficient.
Strategy 7: Leveraging technology to reduce operational costs, manpower costs, automating or moving to more niche areas of business allows the business to remain profitable.
Strategy 8: Acquiring inorganically businesses to benefit from the scale of operations or ramping up the business such that the scale of operations benefits the organization exponentially.
Strategy 8: Entering into associated businesses. Sometimes diversifying into newer areas to deploy workforce productively or minimize the need for the same type of workforce.
Strategy 9: Or use a combination of the above as the situation demands or any other innovative strategies developed.

Redundancy is never a circumstance that anyone wishes to manage. However, when its unwelcome face first peers over the horizon it is time to take action and start working on damage limitation for the people who could be affected, the company, and the remaining staff. The first phase of good redundancy management begins when those initial warning signs of potential redundancies surface. Such early attention can sometimes fend off threatened redundancies altogether.

Phase 1 - Change Management
The reasons for threatened redundancies are many and varied: market downturn; company merger; falling profits; funding or cash flow crisis; outsourcing; loss of a major contract, etc. What each of these situations has in common is that it will require swift attention and lead to some form of change management before redundancies are decided. All the procedures and principals of good change management will apply. Strategies need to be revisited, trends need to be carefully monitored, new plans need to be drawn up, and above all people need to be kept informed. Where a collective redundancy situation (20 or more) is feared, staff representatives must be consulted within the statutory time frame.

However, explaining the situation to staff members early is good practice regardless of the numbers affected, and has a variety of benefits:

  • It gives you control over what, when and, most importantly, how information is put across.
  • It avoids damaging rumour and innuendo.
  • It rallies support for change and unites staff and senior management in a common fight for survival.
  • It provides an opportunity for the 'grass-roots' staff to offer efficiency and cost cutting suggestions.
  • It makes any subsequent efficiency and/or cost cutting measures more palatable.
  • It lessens the shock and the reaction, if and when redundancies do have to be made.
  • It fosters an environment of honesty, trust and respect.

Clearly, dissemination of information to staff needs to be carefully managed and controlled to avoid any additional damage to the company or panic amongst the staff. However, there are many success stories from companies who have involved their staff members, including voluntary pay cuts initiated by staff members. Peer pressure is far more compelling and effective than management ultimatums, however couched.

Phase 2 - Minimising Redundancies
Having developed an outline plan in consultation with all the pertinent managers and operatives, if redundancies are required, the next phase is to carefully examine all avenues for minimising redundancies and the damaging effects of redundancies. Of all changes in the work environment, redundancy engenders the most negative response. Minimising the job cuts and being seen to be making every effort to avoid redundancies is crucial. The avenues open to you will of course vary according to the size, situation, and nature of the business. 

The following have all been used successfully by a variety of companies.

  • Re-evaluating working hours - leading to greater flexibility, weekly, monthly or annually.
  • Re-training - leading to redeployment in other areas of the business.
  • Job sharing schemes.
  • Moves to part-time working (temporary or permanent). Cost savings here received a boost in the recent budget.
  • Temporary sabbaticals or agreed leave of absence (paid or unpaid).
  • Early retirement, natural wastage and voluntary redundancies.
  • Recruitment freeze (this needs careful management to ensure key positions are covered).
  • Voluntary pay cuts.

Once again an approach which is honest, and as open as possible, not only reduces the sometimes devastating effect on the staff, but also pays dividends to the management and the success of the plans for recovery, streamlining or downsizing. Key members of staff are far more likely to stay and weather the storm if an environment of trust and openness is nurtured. Those in business critical positions should be reassured, as early as possible in the process, that their positions are not, and will not be, in jeopardy.

Phase 3 - Selecting the Jobs to be Cut & Notifying the Individuals
Having ascertained that some redundancies are inevitable, informing the workforce first is paramount. The worst thing that can happen is for your staff to hear that they may face redundancy through outsiders, rumour, or the media, even when all the redundancies are expected to be voluntary.

Having worked through phases 1 & 2 above, a lot of care and attention needs to be given to selecting the positions and people. Check the current legislation on your consultation and notification obligations. Regardless of legal obligations however, each position deserves to be given individual consideration. A conscientious approach to this will reap rewards for the Company as well as the individuals concerned. Consider whether this position will be needed again in the near future, how the work will be dispersed, what the impact will be on others in a similar position. If you are reducing the number of people in the same or similar roles, draw up a check sheet with set criteria to determine equitably which positions should be selected.

On notifying the individuals at risk, care and empathy is essential. Even when generous redundancy packages are involved this can still be a devastating blow and poses a real threat to the recipient's livelihood. Look into each individual's personal situation beforehand so that you have some understanding of the problems they may face. Try to get a good feel for all the pertinent problems and issues so that you can aim to provide appropriate support, either via an outplacement service or directly. Explain the process and procedure carefully and follow this up in a letter.

It is advisable to have a short consultation period to allow the individuals at risk to put forward their case. However, this should not be included for cosmetic purposes only. Consultation periods can and do work. We recently worked with a company that successfully implemented a consultation period for the second time, saving one job as a direct result (having saved 2 previously). Fanny Bradbury, Personnel Manager with SEOS Ltd. said "I also invited all the non-affected members of staff to comment". This wider consultation was not a legal obligation as less than 20 staff were affected. However, this voluntary good practice paid dividends all round. "This proves that the consultation period does work", she added, "communication is the key; for everybody".

Phase 4 - Managing the People Out
Redundancy can be one of the most stressful life experiences. The affected individuals are likely to be ill equipped for positioning themselves in the job market and often feel confused, isolated, angry and afraid. Finding another position is a full time occupation, the complexity of which is rarely fully appreciated. A good company will endeavour to provide support and assistance to cushion the blow and help their people to make the transition.

An appropriate outplacement service is a big advantage. Studies show that an external outplacement service is better received and far more effective than in-house measures. In addition, it provides the 'spoonful of sugar' to help take away the bad taste, and makes the task of imparting bad news less odious for the managers. A good Outplacement Consultant will work with the Company, through all the phases above if required, providing suggestions, alternatives and pulling together a programme appropriate to the needs of the individuals. 

In selecting an outplacement service consider the following:

  • Location: Some companies require the delegates to attend their premises, others will bring the service to you. The latter can also be housed at a nearby conference centre if desired.
  • Price: An outplacement service is generally most needed when the Company feels it can least afford it. However, price need not be prohibitive. There are wide variations and many companies have a flexible approach and will suggest viable solutions to fit your budget, but watch for hidden costs.
  • Timing: The service needs to be provided at the right time for you and your people. If you have left it a little late, don't be fobbed off with bogus reasons why it would be in your advantage to delay (to a time which suits them). Try elsewhere.
  • Quality: The service needs to be 'fit for purpose'. When contacting a prospective company ask to speak with one of the consultants not just the sales staff. He/she should try to understand your situation and needs rather than push to sell you the service. If possible (and appropriate) ask to see the manual. This is a valuable tool for the delegates and a good indicator of the content and quality of the programme. Support normally continues for sometime after your contact has ceased - check this out too.
  • People: Most outplacement consultants are empathetic and experienced, but like everything else there are good and bad. Try to speak with the consultant(s) who will be assigned to your Company, by telephone or in person. Prepare a few questions and informally 'interview' them.
  • If you cannot provide an outplacement service you may be able to provide some local support through appropriate agencies and companies such as the local job centre, careers advisers, CAB, Financial Consultants, and so on. It is also worth contacting local companies in the same business to see if they have any unadvertised opportunities.

Phase 5 - Managing the People Left
Having provided support and assistance to those directly affected, you need to turn your attention to those indirectly affected. In varying degrees this includes all members of the workforce. By implementing redundancies you will have inadvertently sown the seeds of doubt about the security of their position. Once again, good communication is essential. You need to ensure that your rising stars and major players do not lose face and change their focus of attention to the job market rather than the task in hand. Those remaining need to feel confident that the crisis is over and the company is doing all it can to avoid any further redundancies.

As the redundant staff move off the scene, gaping holes are often left. Where a friendly colleague sat, there is now and empty desk and chair; tasks will be left ownerless; the old manager may be replaced by an unknown and more distant new one. The empty void and confusion is exacerbated when senior management are hidden away in meetings at a time when their visibility is most critical.

In your initial planning, make absolutely sure that you have included measures to cover this period. Managers should spend time at the 'coal-face' to ensure that:

  • Remaining staff are not overloaded with work.
  • They understand the need for the staff cuts made, and feel that the situation has been managed fairly.
  • The implementation of any time/cost saving measures is going smoothly.
  • The most talented &/or critical staff do not feel insecure and leave.
  • Any grievances or concerns can be aired and dealt with.
  • Your remaining staff feel visible and valued.

Once your head is very clearly above the water again you may wish to think about how you can show your appreciation to the loyal staff who helped to carry the company through. There are a number of ways this can be achieved but one which provides benefits all round is Executive or Career Coaching. Offered to nominated individuals, or the top 10 performers, this also provides a useful incentive scheme.

Managing redundancy is never easy. Managing to avoid redundancy can be even harder. However the adverse effects can be substantially reduced through: good communication; timely intervention; careful analysis and planning; effective consultation with your people; sensitivity in approach; appropriate support and assistance, and good after care. Over a third of the companies voted into last year's Times '100 Best Companies To Work For' had needed to effect redundancies during the year. For both companies and individuals, good redundancy management can turn a crisis into an opportunity.

Fault tolerance is sometimes called redundancy management. For our purposes, redundancy is the provision of functional capabilities that would be unnecessary in a fault-free environment. Redundancy is necessary, but not sufficient for fault tolerance. For example, a computer system may provide redundant functions or outputs such that at least one result is correct in the presence of a fault, but if the user must somehow examine the results and select the correct one, then the only fault tolerance is being performed by the user. However, if the computer system correctly selects the correct redundant result for the user, then the computer system is not only redundant, but also fault tolerant. Redundancy management marshals the non-faulty resources to provide the correct result.

Redundancy management or fault tolerance involves the following actions:

Fault Detection
The process of determining that a fault has occurred.

Fault Diagnosis
The process of determining what caused the fault, or exactly which subsystem or component is faulty.

Fault Containment
The process that prevents the propagation of faults from their origin at one point in a system to a point where it can have an effect on the service to the user.

Fault Masking
The process of insuring that only correct values get passed to the system boundary in spite of a failed component.

Fault Compensation
If a fault occurs and is confined to a subsystem, it may be necessary for the system to provide a response to compensate for output of the faulty subsystem.

Fault Repair
The process in which faults are removed from a system. In well-designed fault tolerant systems, faults are contained before they propagate to the extent that the delivery of system service is affected. This leaves a portion of the system unusable because of residual faults. If subsequent faults occur, the system may be unable to cope because of this loss of resources, unless these resources are reclaimed through a recovery process which insures that no faults remain in system resources or in the system state.

The measure of success of redundancy management or fault tolerance is coverage. Informally, coverage is the probability of a system failure given that a fault occurs. Simplistic estimates of coverage merely measure redundancy by accounting for the number of redundant success paths in a system. More sophisticated estimates of coverage account for the fact that each fault potentially alters a systems ability to resist further faults. The usual model is a Markov process in which each fault or repair action transitions the system into a new state, some of which are failure states. Because a distinct state is generated for each stage in each possible failure and repair process, Markov models for even simple systems can consist of thousands of states. Sophisticated analysis tools are available to analyze these models and to create the Markov models from more compact system descriptions such as Petri Nets.

The implementation of the actions described above depends upon the form of redundancy employed such as space redundancy or time redundancy.

Space Redundancy
Space redundancy provides separate physical copies of a resource, function, or data item. Since it has been relatively easy to predict and detect faults in individual hardware units, such as processors, memories, and communications links, space redundancy is the approach most commonly associated with fault tolerance. It is effective when dealing with persistent faults, such as permanent component failures. Space redundancy is also the approach of choice when fault masking is required, since the redundant results are available simultaneously. The major concern in managing space redundancy is the elimination of failures caused by a fault to a function or resource that is common to all of the space-redundant units.

Time Redundancy
As mentioned before, digital systems have two unique advantages over other types of systems, including analog electrical systems. First, they can shift functions in time by storing information and programs for manipulating information. This means that if the expected faults are transient, a function can be rerun with a stored copy of the input data at a time sufficiently removed from the first execution of the function that a transient fault would not affect both. Second, since digital systems encode information as symbols, they can include redundancy in the coding scheme for the symbols. This means that information shifted in time can be checked for unwanted changes, and in many cases, the information can be corrected to its original value. 

Figure illustrates the relationship between time and space redundancy

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