Employment: The Corporate L-Word

"Are consumers afraid to spend, or just broke?” So asked the heading of a recent New York Times letter to the editor.

If your business is still struggling to overcome the disaster that was last year — one of the worst economic meltdowns in living memory — you need to focus even more on restructuring, cutting costs and, yes, laying people off if you want to recover and survive.

Not even the mighty L.L. Bean is immune to soft sales and the falling economy. Bean President/CEO Chris McCormick announced to employees at the end of last year that cost-cutting measures such as voluntary retirement incentives, the canceling of six new store openings, and a high likelihood that “layoffs are forthcoming” all loomed due to a bleak forecast for 2009 — a scenario to which most catalogers can relate.

Since personnel is a company’s largest expense, letting people go is likely on your radar. But if you’re not using best practices to downsize, it could cost you. Your reputation, retention rate, employee morale and other key factors all could suffer. You also run the risk of employee lawsuits.

Layoff Questions
If you let people go, you’ll deal with these questions and more.

• Last hired, first to go?
• Is Friday better than any other day of the week?
• What about the end of a pay period?
• Should you offer two weeks’ severance or more?

According to a recent article in the Guide to Human Resources housed on About.com, your first move should be speaking with an attorney or consultant who specializes in layoffs. The answers may depend on the practices your company has used before, and a variety of legal and ethical guidelines, many of which are spelled out by your local department of labor.

One suggestion might be the elimination of an entire department, with the managers deciding whom they could most afford to lose based on individual job description. Be careful not to discriminate against any protected classification. Apply the criteria for layoff selection equally across all departments.

Retain Top Talent
The “last hired, first to go” rule isn’t recommended. Doing so may eliminate many experienced recent hires or young, diverse talent. There should be a business case made for each layoff. Some companies eliminate shifts. Other companies have all employees take an unpaid day every two weeks. Be creative; layoffs may not be your only answer.

Eliminating a position, such as all clerical employees, and shifting that work to managers and staff is as routine as telling each department it must downsize by 10 percent. While seeming “fair,” this may be bad for your business because essential positions will be cut.

Job Search in Mind
Consider layoffs as close to the beginning of a week as possible so people can immediately apply for unemployment and start their job searches. The last thing you want to do is to create a situation where people are mourning, fretting and becoming angry over a weekend when their opportunities to act are limited.

It’s recommended that layoffs occur as soon as the business need makes them necessary. Be prepared to have ready a severance package and a legal document releasing your company from liability. Laws regarding these may differ from state to state, so you should check with your state department of labor. Employees generally have a certain number of days to respond and a certain number of days during which they can change their minds about signing.

To learn more about employee entitlements for unemployed workers, written from the worker’s point of view, read “Entitlements of the Unemployed.”

Depending on your business and the number of layoffs you’re contemplating, the WARN Act provides legal guidance about when employees must be notified of upcoming layoffs. Learn more about the WARN Act and employee lawsuits here.

Appropriate Severance Pay
You may want to come up with a formula that provides one to two weeks of pay for each year the employee has worked for you. Also, consider providing laid-off employees with assistance services. The more generous your severance package, the more likely your employee is to accept it and sign the release from liability.

Treat people with dignity and respect. These are tough times for everybody. And the people about to be laid off will have their confidence and foundations shattered. So do it gently, but unequivocally. Do the layoffs one-on-one in the presence of a human resources rep and your worker’s manager. Complete the process that same day. Don’t even think about a mass meeting, telephone conference call or e-mail — your people deserve more than that from you.

Direct, clear and timely communication is essential. The sooner your employees know about your business problems and that layoffs may be coming, the easier it’ll be to win their trust and strengthen the morale of your remaining workforce.

Les Gore is managing partner of Executive Search International, a catalog, online and retail recruiting firm. You can reach him at (617) 527-8787 or les@execsearchintl.com.