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Layoffs
On The Rise? By Theresa Witham Editor's note: The following first appeared in the May 2009 issue of Credit Union Management. You can't turn on the TV, open a newspaper or browse your favorite news site these days without learning of another company laying off workers. In the U.S. in January alone, there were 2,227 mass layoff actions, involving 237,902 workers, according to the Bureau of Labor Statistics. The CU industry doesn't experience layoffs very often. "Credit unions, by their very nature, see layoffs as something of a last resort," says Rhonda Cooke, president/CEO of the human resources consulting firm Cooke/Andres, LLC, San Diego. But the current economic situation-including loan losses and the National Credit Union Administration's unexpected corporate stabilization program-is causing some to consider layoffs. Certainly every credit union is familiar with firing employees for performance issues, but layoffs are another story completely. They affect the entire CU and, if mishandled, can have dire consequences on employee morale and productivity. But they also offer an opportunity for leaders to shine, says Steve Swanston, executive vice president of CUES Supplier member and JMFA Executive Search Group, Baytown, Texas. "It's easy to be a leader when things are going well, but the true test is when things are difficult." First,
Be Strategic And examine your staffing levels. Ask: "Is our staffing level appropriate for the amount of business we have?" says Geier. Apply that question to each branch. Figure out how many people are required to handle the number of transactions you have, he says. And compare your staffing levels to other CUs. Look at each department to find areas where you can make cuts, suggests Swanston, whose firm, JMFA, has partnered with CUES to provide executive search services to CUs. In the previous steps, you'll have determined the budgetary goal. "What combo of people would it require to get to those goals?" he asks. Ask:
Can We Avoid Layoffs? You can look for other ways to trim costs, such as travel, printing, mailing and newsletter frequency. Or look at your branch staff again to see if switching to more part-time employees could help by cutting your benefit costs. Take the example of a branch with one branch manager and four full-time tellers, Geier says. Can you adequately staff that branch with two full-timers and two part-timers? If so, you could lay off two full-timers and hire two part-timers. Or perhaps two full-time employees would be willing, eager even, to switch to part time. Another option: Try a hiring freeze. For every position that opens up, ask if it really needs to be filled right now. Making
The Tough Decisions The team should focus on "What can we afford to reduce? What does that mean from a business perspective?" he says. "Going back to the branch example, if we take it down to two full- and two part-time, what does that do to the customer? How do we work the scheduling? "Once you know that you are going to do a layoff, look at the roles/jobs you are willing to do without. What roles/jobs do we want to keep? Talk about how the organization could be structured differently," he suggests. Also, "could you outsource any functions to other providers that would reduce costs and eliminate one, two or three positions?" Geier asks. Another option is to eliminate an entire level of staffing. If you have assistant managers at each branch, for example, you could decide to eliminate that position across the entire credit union. Or, perhaps you could remove the assistant branch managers at the smaller branches and leave them at your busiest branch. "Some are taking the opportunity to revise the organization's structure so it is less top heavy," Cooke says. These kinds of layoffs can create a leaner organization and potentially save the credit union more money while doing fewer terminations. Going back to Geier's branch example, let's say you decide to reduce two teller positions. How do you decide which of the tellers to let go? The "last in, first out" (also known as LIFO) strategy is less confrontational, Swanston says. "It's a lot easier to justify laying off the two people who were hired last month." But Swanston recommends what he calls "management by performance," which is an ongoing evaluation of employees' performance and how they are meeting their goals. If employees are struggling, you "find ways for them to improve and weed out those that are not fulfilling your credit union's needs," Swanston says. "If you do that on an ongoing basis, you shouldn't find yourself in a position to have to do any significant layoffs." Cooke agrees. "At some point, it's going to come down to employee performance. You want to keep your best people." But be sure to have documentation proving good performance (for those who are staying) and poor performance (for those who are being laid off), she advises. You should work with an HR attorney from the beginning, Cooke says. The attorney should review each individual earmarked for layoff. "They will want to double check or examine your criteria for establishing layoffs and be sure that you are not being discriminatory," says Cooke, especially if you not doing seniority-based layoffs, which are the easiest to defend, being the most provable. "You're trying to eliminate as much as possible any risk for potential lawsuit," she says. Finally, in each discussion "make sure you are asking 'what is the impact on service to members?'" Geier says. Delivering
The News The manager and HR representative should meet with the affected employees. Try to do all the layoffs on the same day, within a short time frame. Two people should be present, says Cooke, one to perform the actual termination and the other to serve as a witness. In some cases, another manager from a different department could serve as the witness, especially in cases where the manger and employee have a close working relationship. "You need somebody performing the action of terminations who is relatively unemotional," Cooke says, adding that it can be hard for managers to lay off employees. "These are people who are working with each other every single day, year after year and you get close to people." The terminated employees should receive a letter outlining what the severance package is and what happens to their benefits. You should do as much as you can for the laid-off employees, Cooke says. Her former client, a CEO, once said about layoffs, "I would never put even a bad employee out on the street with nothing. What sort of a monster would do that?" she tells. At a minimum, a credit union should offer two weeks severance pay, she says. "I would go farther than that" she suggests, and offer outplacement services. An outplacement firm can provide resume critiques, interviewing tips and coaching about looking for a job. "Most recruiting firms, including JMFA, will volunteer to help on the back end with those services," Swanston says. This type of service is especially helpful for highly specialized employees, Cooke notes, such as a mortgage loan processor. "If nobody is hiring mortgage loan processors, they might need assistance knowing what else they can do and how to capture that in a resume." Outplacement services can be expensive. If you cannot afford it, put together a packet of information. The Internet is full of articles and resources about job hunting. You could include a sample resume and cover letter. Also put together a list of community resources for job seekers. Church groups, management associations, networking groups, a community college, chamber of commerce or a Lions Club: All of these could be a good resource for someone looking for work, Geier says. Often employees don't know about all the resources available to them, Cooke adds. For example, the state of California offers free adult career training. Make sure you give your employees as much information and help as you can. Finally, don't let people go on a Friday afternoon, Cooke says. Layoffs are best done during the morning, preferably on a Monday because the resources that you've (hopefully) provided will be open all week. "They can get started right away" looking for a new job, she says. Management's
Role If a meeting isn't possible, the CEO should send an announcement to all staff explaining what happened and why. The message should include a positive outlook for the future, Geier recommends. "The department heads (of the areas that incurred the most layoffs) should address their groups," suggests Swanston. "People are going to be nervous." They might be thinking, "I made it, but are there going to be more layoffs in two weeks?" They will also be worried about how much extra work they will need to take on and the fact that they'll be doing more work without a raise in salary. "Managers need to lead by example," Swanston says. For instance, a manager shouldn't ask her exempt employees to work extra hours if she doesn't also plan to work extra. "If people have to come in at 7 a.m., the manager should come in at 7 a.m.," he says. "As a manager, I would not ask my people to do anything that I wouldn't do." And, don't be negative, he stresses. "Regardless of what their opinion or disagreements are with the corporate decisions, now is not a time to let that negativity be seen at the staff level. The management team needs to be cohesive in their message." Also, be an open book, he suggests. Remind employees every chance you get what your mission and values are. Share financial details with employees and say, "This is why we needed to do this. These are our goals going forward," he says. "This is really an opportunity for leadership," Swanston adds. "Those credit unions that get through those challenging times the best are the ones who have the best leaders and the best leadership plans in place." Theresa Witham is a CUES editor.
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