Managing: Smart Retrenchment

MANAGING
Smart Retrenchment

When things go bad, companies can't help but let some employees go. But cutting headcount painlessly still remains an art form that few have mastered.

By Vinod Mahanta

We promised the people we spoke to not to take names, but hints should be alright. So, think Whoopi Goldberg and Oscar; think the artist who is now, again, known as Prince; and think an Indian fakir. If you still haven't realised which company we're referring to go to www.2h.com and take an IQ test. If you have, read on.

Sometime after the panic about the future of tech-companies broke, the hr department of the Bangalore-based web company we've given you so many clues about was asked to identify people who could be laid off. A hr team was created to counsel the people being retrenched. One member of the team, a senior hr exec was busy counselling (more like consoling) a devastated employee when the company's hr head entered the room and called him aside and handed him a note. It was a letter terminating his contract with the company. He too had been fired.

Accepted, this is an extreme (but certainly not apocryphal) case. But as corporate India strives to cut costs by, among other initiatives, rightsizing, their efforts at getting the numbers right is increasingly coming under the microscope. ''I've seen more people weep in the last two months than in seven years in this profession,'' says Ronesh Puri, the chief executive of executive search and placement firm Executive Access. In most cases, the cause of the increased lachrymal activity is a painful separation. No one, popular opinion warns, is safe. Not the employee who received a letter of commendation two months ago; not the manager who was sent abroad for an expensive training programme; and certainly, not you. ''Humane retrenchment?'' scoffs an employee who's felt the sharp edge of the axe, ''that's an oxymoron''. Maybe, but smart retrenchment isn't.

A Bloodless Victory

The company itself may be in all sorts of trouble, but Tata Engineering has managed to handle its retrenchment process well. For a start, the company's hr team identified four types of people who would be willing to avail the VRS on offer: people with an attendance problem, those who had hit the ceiling in terms of growth, the entrepreneurial type, and those who had land they could (and wished to) cultivate. The company met with these people, in small informal groups, to communicate the benefits of the VRS: 60 per cent of gross salary as pension for the number of years employees had left in service; a Rs 200,000 interest-free loan deductible from the pension; and comprehensive medical coverage for the employee and spouse. ''We realised that our workers needed some money, a steady source of income, and some insurance against medical hazards, so we built a scheme accordingly,'' explains V.K. Verma, General Manager, HR, Tata Engineering. Result? The company targeted a headcount-reduction of 2600; it received 4000 applications; and 3200 workers availed the VRS.

It's easy to dismiss this instance, as well as one involving Motorola-apart from a sizable severance package, the company invested in retraining employees who were going to be laid off-as being successful simply because they targeted workers, not executives. But Enron is doing the same for its to-be-retrenched executives: it has hired an outplacement agency to counsel them; it has created a business centre of sorts for them to use as a war-room (to send and receive e-mail and faxes); and some employees have been offered the option of working for the company elsewhere. ''It is the responsibility of the hr department to take care of employees who've been laid off,'' says Sandeep Malik, the head of hr at Enron.

As Messy As Can Be

Despite these bleeding-heart bytes, horror stories outnumber happy endings. When Daewoo India asked Diwaker Sinha (not his real name), a senior exec, to put in his papers in late July, he wasn't surprised. Sinha was part of the turnaround team that had been brought on board in December 2000, but, in a company where he claims pink-slipping is a way of life, he knew his days were numbered. ''Daewoo doesn't have a hr department, and you can be fired any time, no matter how senior you are.'' ''When it comes to the crunch some hard decisions will have to be taken,'' is all a Daewoo spokesperson will say in response.

Most companies, says Aquil Busrai, Executive Director, Motorola, make the mistake of not communicating hard decisions to their employees. ''No matter how much pain a decision may bring about, if it is communicated properly, the other side can see your point of view.'' Communication isn't all of it: a company that is laying off people would do well to cut other expenses as well. If it doesn't, employees, both existing and potential, could get the impression that people don't really count in the company's scheme of things. ''Companies should realise that if they are uncaring in their approach to laying off people today, they may not be able to attract employees tomorrow,'' says Puri of Executive Access.

All that matters to some companies, though, is the present. When Abhishek X (name changed on request), a 30-year old software pro walked into the office of a NOIDA-based company, for the night shift, he expected it to be another routine night at the office. Abhishek and a team of 500 were engaged in working on a project for the New York Times' internet edition. A little later in the night all employees were asked to assemble in a room for an emergency meeting. Then, the door was bolted from the outside. A voice from outside the room called out names of employees (in batches of 10), they were escorted out of the room and asked, none too politely, to hand in their papers. Those who resisted, were bundled into a van, and dropped off, literally in the middle of nowhere. ''We were shattered,'' says Abhishek. ''But you know what hurts? No one bothered to tell us why.''

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