Types of Reductions in Force

Voluntary RIF

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 RIFs 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.

Other important steps to prepare for a voluntary severance offering include:

• Set clear goals and objectives of the initiative. Document goals you want to achieve as well outcomes you want to avoid, such as losing high performers.

• Establish the qualifications and business rules for inclusion in the candidate pool.

• Review the candidate pool with managers prior to announcing publicly in order to identify any candidates who should be blocked from the voluntary severance or should be offered retention incentives instead.

• Communicate packages and options to candidates through a secure online interface in which candidates accept offers or cancel acceptance

• Create processes for:

• collecting acceptances and reporting in real time so managers and administrators have full visibility
• reviewing acceptances with managers to ensure acceptance
• creating and distributing packages to employees who opt-in and are accepted for the voluntary program
• communicating off-payroll status to core HR systems

Managing voluntary events with technology, such as Transition Manager from HumanConcepts, instead of manual processes yields faster results with greater visibility and substantial cost savings.

By using technology, organizations benefit from time savings, cost savings and generation of goodwill from departing employees. If done manually, identifying candidates, communicating the program, collecting and processing responses can take a team of administrators weeks to manage. With technology, this is all done automatically in a fraction of the time. Likewise, when managed manually, costs of the program escalate from human errors as well as delays in the process. By reducing human processing to a minimum, specialized technology can reduce the process by weeks, resulting in significant savings in salaries and administrative expenses.

In addition to cost savings, the departing employees leave on good terms, fueling positive PR and word of mouth recommendations to the community at large.

90% of best-in-class companies already use technology to optimize hiring processes.

Involuntary RIF

Involuntary reductions in force account for the large majority of company-driven workforce separation events. In an involuntary reduction in force, employees are terminated based on any single or combination of reasons. Typical reasons include job elimination, low performance, closing a plant or geography, inappropriate skill set for the go-forward organization or lower tenure / seniority.

These forced separations introduce significant risks to organizations. Legal risks are, perhaps, the greatest. If any individual feels they are unfairly terminated or the subject of adverse impact, they can bring a legal argument against the organization. It's important to be able to prove reasons behind termination. Oversights that can get a management team in legal trouble in an involuntary severance situation include:

• failure to make decisions in a consistent way and in compliance with regulatory or business guidelines

• failure to run adverse impact analysis on all groups and sub-groups to ensure that no groups based on age, race or gender are being unfairly affected

• failure to maintain records of all decisions and decision criteria, and maintain the back-up information to support the decisions.

• treating individuals in the same group differently or in a preferential way

• relying on individual managers to keep track or redundancy related records. If the manager leaves the company, the records are usually lost with him or her.

One way to mitigate risk is by using a consistent process supported by technology. One option is the Transition Manager platform. Other solutions are built in-house.

By using technology, organizations gain the consistency of decision making and documentation unavailable in a manual process. Additionally, technology helps to reduce administrative errors that result in delays and inaccurate payments.

The average cost of a wrongful termination claim is $400,000.

See Also

• Why Initiate a Reduction in Force Event
• Reduction in Force Best Practices for Employers
• Technology Support for the Separation Process