Why Initiate a Reduction in Force Event
A Reorganization is an initiative to reassign employees to better meet the organizational objectives. Reorganizations typically happen once or twice a year, but with recent economic turmoil, reorganizations are being used much more frequently to adjust the workforce and manage to objectives.
Reorganizations can be costly in many ways. First, administrative and managerial time focused on the reorg is time taken away to day to day responsibilities. Second, once word of an impending reorg gets out, general workforce productivity lags until the reorg is complete. There are significant costs incurred if the reorg causes redundancies and the organization needs to layoff employees. And yet more costs if the organization lays off the wrong employees and needs to rehire for those positions. This occurs frequently when the reorganization process isn't managed effectively.
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Reduction in Force Best Practices for Employers
Best practices dictate a number of due diligence tasks to help keep you on track in preparing for a Merger or Acquisition that may involve reductions in force.
Workforce Structure and Constraints
- Obtain and begin to integrate corporate organizational charts
- Obtain a copy of the collective bargaining agreement(s) and assess all implications
- Analyze benefit plans, summary plan descriptions and scheduled cost increases
- Obtain and review the most recent IRS Letter of Determination and Form 5500 filing
- Review 401K investments, matching provisions and three-year history
Compensation and HR-Related Tasks
- Review executive contracts - change of control and cash-out provisions
- Investigate compensation guarantees, plans, accrued commissions and bonus payouts
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Types of RIFs
Voluntary severance programs are often used as an initial step in a RIF or downsizing initiative. on the surface, voluntary programs seem like an easier, less costly option than involuntary separations. However, they do involve risk and can have unforseen costs. What is important in involuntary separations is to perform front end analysis, ensuring that the people offered the voluntary separation package will not leave a gaping hole in the organization that is even more expensive to backfill.
Often the first people to accept voluntary severance offers are the high performers who know they could easily find employment elsewhere. If proper due diligence is performed before the voluntary severance offer is announced, it's more likely that expensive errors will be avoided.
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Technology Support for the Separation Process
What to look for in a Technology Solution
Workforce transitions, such as reorganizations, reductions in force or merger integrations are never easy. Technology, however, can help. By managing the processes and workflow, securing the information and producing reports and severance packages, the right technology solution can serve to mitigate risk and prevent financial disasters.
A few things to look for in evaluating a technology solution include:
Consistency and Transparency
- Supports equitable treatment of all employees and clear oversight of the process
- Maintains consistent separation processes for all involved personnel
Risk Management and Compliance
- Maintain documentation of all processes, decisions and decision criteria
- Manages a process that complies with regulatory statutes and company best practices
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