14/08/2013 - 15:54

Redundancies can cruel company culture

14/08/2013 - 15:54


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Planning for the inevitable downswing in activity can ensure your business retains its best talent, and keeps them happy.

Redundancies can cruel company culture

Planning for the inevitable downswing in activity can ensure your business retains its best talent, and keeps them happy.

The fortunes of Australian resources sector continue to fluctuate through the highs and lows of commodity prices. What we are experiencing now is nothing new, nor is the reaction of many companies – redundancies.

Employees’ salaries are among the major costs for any organisation, and when profits are down these must come under scrutiny.

Yet in the interest of a company’s culture and its ability to attract and retain critical skills, employees’ careers and financial security, redundancies should be the last option.

During the upswing in the market, activity within many organisations increases dramatically. They often relax their systems and budgetary controls to do whatever it takes to capitalise on market demand. Scale and timelines quickly result in increased recruitment activity with minimal scrutiny. Employee numbers escalate.

As few organisations implement rigorous workforce planning, they fail to determine what their ‘core’ workforce is and therefore do not engage ‘flexible’ arrangements (such as short-term contracts or casuals) for their projects. 

In the case of forced redundancies, employees who retain their jobs and those who are made redundant never forget the experience.  Often, the ‘survivors’ are asked to take on increased workload for no additional reward. They constantly look over their shoulder because they may be next.  Morale drops, as does productivity.

Once the decision to downsize has been made, time constraints and/or imperfections in process can often lead to a failure to retain the ‘core’ workforce, critical key skills or high potential employees. Voluntary terminations also spike within months of effecting the reductions. Many survivors leave for opportunities with employers they perceive to be more secure and loyal.

So overall, a culture of negativity, uncertainty and mistrust prevails where many survivors deem themselves to be the unlucky ones.

On the flip side, employees who have been made redundant often feel hurt and question why they have been chosen to leave. As a consequence, they are unlikely to speak favourably of the company that has destabilised their careers and thrown their personal finances in turmoil. 

More disturbing, though, is that when these companies recover and seek to restart their recruiting efforts, they find it difficult to attract high-calibre candidates because the market has a long memory, especially in Perth. 

In the case of voluntary redundancies, those employees who elect to leave are usually the ones the company can least afford to lose (high performers or those with marketable skills). They see this as an opportunity to gain a financial windfall, and leave a company they perceive as having an uncertain future.

Once the market recovers, many organisations recommence their recruitment activity with gusto and the cycle recommences.

The good news is there are alternatives to effecting redundancies.

Planning, in conjunction with other flexible human resources solutions, can enable companies to hold true their ‘core’ workforce in all markets. 

If robust planning fails to deliver the budgetary controls required, flexible work practices can often alleviate the necessity to undergo redundancies.

With the consent of employees, one or a combination of the following can help reduce wage costs:

• reducing working hours;

• introducing nine-day fortnights with the associated reduction in wages;

• introducing job sharing;

• freezing salary increases;

• introducing wage cuts uniformly across the company; and

• offering leave without pay.

Despite the financial cost to employees, most would rather take up such flexible work practices than be confronted with the likelihood of losing their job altogether. 

Every organisation needs to: plan for these naturally occurring phases in business; ensure that each newly created role is absolutely necessary and sustainable during the highs and lows in the market; and respect its employees, their careers and protect the company’s culture.

It takes a long time to build a healthy culture in a company but one poorly planned act can destroy it.


Margaret Nielsen is director of Perth-based human resources firm Kelsen.


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