In today’s global economy, frequent organizational change is unavoidable
for companies that want to remain competitive. This is particularly true in
the area of offshore outsourcing, which is dependent on the strategic decisions
of their clients, and the ebb and flow of project work.
As in all areas of business, restructuring and downsizing have become necessary and indispensable tools for the outsourcing provider. Corporate executives and shareholders seem to take it as an article of faith that the savings realized in reductions in force are a necessary evil when earnings numbers are declining.
However, such actions often have a hidden cost that many employers either do not acknowledge or realize. Organizational change, whether it comes in the form of reshuffling departments or wholesale layoffs, can leave many employees distrustful of management and ultimately result in huge losses in productivity that can significantly affect the bottom line. In fact, left unaddressed, the hidden costs of organizational change can easily outstrip the savings gained from reductions in personnel.
Studies show that absenteeism and turnover in remaining employees increase after downsizing, translating into lost productivity, lower stock prices, and lower profitability. Moreover, companies face tremendous costs from dismissed employees in the form of prolonged health-insurance premiums and unemployment insurance, as well as potentially crippling litigation.
In the face of these costs, it can be reasonably argued that companies considering workforce reductions have compelling financial reasons to develop a more comprehensive understanding of the damage such actions can have on the organization. More important, these costs should persuade companies to provide discharged employees with services that will help them make the transition to a new job—in a word: outplacement.
Unfortunately, too many companies opt for the outplacement provider with the lowest bid, reasoning that the least expensive option is the most prudent in light of the financial problems that made downsizing necessary. Make no mistake, there are many outplacement providers that will cater to this cost-saving philosophy, offering discharged workers the bare minimum of a desk, phone, and computer terminal.
Organizations that invest in quality outplacement, on the other hand, receive a return on investment (ROI) that far exceeds the costs of a poorly managed or bare bones plan. We use the words “quality outplacement” throughout this article to describe the substantial impact a comprehensive outplacement program will have on individual job searches and company financial health after a downsizing event.
Such quality outplacement programs would include proactive mental health and counseling support for discharged workers, plus tailored coaching in job finding skills and technical/administrative services. This comprehensive approach, companies find, dramatically lowers the duration of unemployment for discharged workers and maximizes the utilization of an individual’s experience and skills in the next job.
Choosing quality outplacement is not simply a matter of cleansing the corporate conscience. By investing in quality outplacement services for affected employees, companies will significantly cut total costs of a downsizing action by reducing overlooked costs associated with absenteeism, unemployment insurance, healthcare insurance premiums, turnover, and litigation. As companies become more adept at measuring the total costs of their layoff actions, corporate self-interest will increase utilization of high-quality outplacement programs.
Philosophy Of Quality Outplacement
What exactly is meant by quality outplacement? What sets it apart from many of the minimal services being offered in the marketplace today? The answer is best described using the health-club analogy. Imagine this: In January, a health club offers a three-month membership, giving you unlimited access to their facilities for a lump-sum fee. By March, your resolve to work out has faded away, and the gym is completely empty, leaving you no closer to your ideal body and leaving the health club with no clients.
Many outplacement companies operate in the same way, merely providing facilities with job-hunting resources that clients may use as long as they maintain their resolve. In this way, the outplacement firms dump the burden of responsibility for job-hunting onto the terminated employees—if the ex-employees are still without a job, it is because they have not been utilizing the available facilities. Without guidance and support in first coping with job loss then managing the job search, clients walk away feeling frustrated at the process and still bitter toward their former employer.
In contrast, quality outplacement can calm tensions and minimize conflict from the very beginning of the downsizing process. From pre-termination planning, to on-site presence at the day of termination, to follow-up counseling and support throughout the job-search process, quality outplacement providers shoulder the responsibility of reaching out to the client from job loss to re-employment.
Furthermore, quality outplacement strives to improve the fundamental attitudes of the employees forced to cope with job loss. With constant encouragement, interviewing practice, and regular counseling sessions, one-on-one counselors help relieve clients’ fears and develop important job-finding skills. Clients, having accepted their former employer’s circumstances and decisions, are coached through the process—not only reducing the job-search time, but improving the kind of jobs they find and giving them the tools necessary for the rest of their careers.
Sending A Strong Message To Survivors
A common mistake companies make when choosing an outplacement provider is only considering how the service affects discharged employees. However, the quality of outplacement is critical when it comes to surviving employees.
Having lost some of their fellow coworkers, surviving employees often experience decreased morale, which typically leads to lower productivity. In a 2001 survey by Knowledge Systems and Research (Syracuse, New York), 46% of 759 layoff survivors reported that morale had decreased. The drop in morale can quickly lead to cause companies to lose valued employees as loyalty to the organization weakens. In a 1995 survey of employees at downsized organizations by Canadian Consulting firm Murray Axmith, 50% reported decreased company loyalty, and 37% reported decreased job satisfaction.
The reaction of surviving employees depends heavily on how fairly they perceive their former coworkers to have been treated—the more unfairly they believe terminated employees to have been treated, the greater job insecurity they will have. In an environment of frequent organizational change, job insecurity has become a sizable problem. According to a 1991 Right Associates (Philadelphia) survey of 909 firms that have downsized, 70% of retained employees said they were afraid of losing their jobs. Asked if they still trusted their organization after downsizing, 31% said they did not.
Quality outplacement helps to minimize job insecurity and distrust among employees through pre-termination planning and helping the company present its downsizing decision in the best possible way. On the day of termination, counselors are on-site to help affected employees cope, leaving a much calmer picture of the downsizing for everyone involved. Afterward, surviving employees see that their former coworkers are being taken care of, lessening the fear of being unfairly treated at termination that would drive them to find new jobs.
