44 £0 | repnuass 2089 -cro.comt[think everyone could se 2009 was go ing to be tough sledding.” says Stefan Tomlinson, CFO ofthe Sumnyal. Cal 77" r ifornia-based witeess-nctworking fm. ‘To make sure the rem ces understood why the pesitions w ‘llminated, top executives held a com panywide meeting explained thatthe lays were part ofa broader cost cutting effort designed to, inpartsavejobs "Wereally emphasized that we did not want fo ave te make 3 second round of cuts, says Tomlinson, A few days after Aruba's an- nouncement, ananagers ofa small New England-based consulting firm cold employees that prospects for the new year looked grim. Asked ifthere would be lays, one executive said only that the fran was “considering alot of op. tions” For ewo weeks nervous staffers gathered in the hallways to swap rie mots and handicap thelr chances of having a jab come Cheistmas. Just bee forethe holidays the word came down: 25 percent ofthe staff was boing let go. ‘But management lot news trickle out many employees were traveling and only gotword through the office grape Vine, In fact, some former emptoyees bheatd the news before content staffers did. Those employees who remained received litle reassurance that their jobs were safeor that management had strategy for reviving the business. Layin bat as the examples of Aruba Net works and the New England consult ingfirm show. some approachesarefar less damaging to morale and company reputation than others. At Avuba, the employees who remained understood Why the Ryo were made and knew that same day and off workers is never easy rshada planfor ma ing the business forward. At the con salting firm, the employees who kept their jobs were left burnishing their ré- sumés and wondering they would be eek coe perce “IF YOU’RE HOLED UP IN YOUR OFFICE AND NOT HAVING ALL-HANDS MEETINGS, PEOPLE WILL BE EVEN MORE SCARED ABOUT WHAT’S GOING ON,” SAYS TOMLINSON. 6 cro, Francasy 20m cro. ng employ: Spomeestnieeerennsnneenenenenowneteeiternanpeenentnin presserable to jump ship before it sank: Many more businesses wil face the thorny prospect of downs: coming year. Companies made thousands oflayofls in 2008—xeith morethan 2,000 us nesses laying off at least 50 workers in Novem ber alone—and nearly halfoFall finance exect: Lives surveyed by CFO say their companies will reduce their workforces this year, Given th many businesses are rapidly taking on water, shard to blame managers for taking a short term view of layols. Still, experts recommend, pausing frst and taking along, measured look before issuing pink slips, “Executiveteamsthatare considering work force reductions have to slow down,” says Ted ‘Olsca, a partner with law frm Sherman & How are who specializes in employment defense," seeing too many reductions in force that are be Ing conducted too hastily. People are feeling the economic pressure, they'ce in panie mode, and they re losing perspective” ASURGICAL APPROACH Beyond the business and morale reasons for proceeding cautiously, Olsen points out, there law under the Worker Adjustment and Retrain- ing Notification Act (WARN) requires many employers to provide workers with 60 days! no- tice before terminating theit employment (see ‘Due Warning.” page 50). Hasty layots can also resultin discrimination fawsuits To cuethatisk and make a difficult decision easier, Olen re ‘ommends developing system for determining which employees will be let go. "So often el ents will say 0 me, ‘Well, I know Bill needs to be let go” rather than making the case for why Bill needs to be let go” says Olsen. “Te makes so ‘much moresense to set up a system an then lay ‘off the employees, rather than jumping in and then ty At Aruba, the management “surgical” approach to layolls, according to ‘Tomlinson. They evaluated the company’s product-development priorities and decided to come up with the reasoa.” as took a Aoallocate resources to fewer projects, favoring those that would help customers save money sme ancillary features and prod- ucts that mighthavebeen niceto havethatwere no longer evitieal in this envigoameat,” says Tomlinson, Thus, entite project groups could “There were “/M SEEING TOO MANY REDUC- TIONS IN FORCE THAT ‘ARE BEING CONDUCT- ED TOO HASTILY. PEOPLE ARE FEELING THE ECONOMIC PRESSURE, THEY’RE IN PANIC MODE, AND THEY’RE LOSING PERSPECTIVE.” TED OLSEN, SHERMAN & HOWARD. be eliminated without damaging the core bus: ness. Stil, he notes, "The amount of cutting we did in R&D was pretty light.” When wxecatives expect to make cuts across the business (¢ method Tarnlinson calls the peamut-butter-spread approach’), a sys fom to evaluate employees can help manag ers stay focused on abjectve criteria instead of petsonal preferences. Length ofservie, perfor iplinary history, and versatility are all possible benchmarks, says Olsen. "At the end ofthe process, these ought tobe a written case for why cuts happened the way they di, andl why certain people were selected to be let 20. Makeiesystematic, rather than making one off decisions about people. ‘Thespeed with hich companies havecon ducted mass la staggests that many management teams are not bei hehas cen clientscuttoa quickly and ton deep. Iy, only to find themselves short statfed later ‘on. Companies can ran into legal trouble ifthey then hire someone new to fill the position soon alte the layoff ifthe person who loses het job is female, forexampie, and the now hireis male Itshard to makea believable businessease that there was a force reduction when a position is recreated so quickly,” says Olsen. "Those are very hard discrimination cases to defend.” ls duringthe past few months nywhere near tis deliberate. Olsen says SWIFT CUTS | COncemanagershavedecided ho shoold go. they need toshiftgearsand makethecutsasquicklyas possible. Employees pick up on caesthat acon P tivity ike round after round of guessing gamesat the water cooler, Finance workersareeven mote ayisnotdoing well. and nothing saps produc LAYOFF NATION Last Novemsen As coupantes ADE MORE THAN sucszcrons 14,430 Temporsryaelp 12,563 construction 5,873" Professional employer erga sions 3,932 Food-senace eonteactors 3,237 Traveller andeamper smanclacturers 3,157 Motion-pictute and ‘seo proction 2,935 Farm laboe contractors and crew leaders 2,901" Metor-vehicle metal stamping 2,858 Hear duty rock rancfatunng 2,823" scot deopanrent aeslikely to speculate about ayo since they ae privy to detalls regurng the financial health ofthe company. “Try nat ta lay people of in waves,” advises Neal Res: tivoya partner at Tatam who is currently serving as CFO at ‘midsize manafactorer in the Midwest. "Try to get all the bad news out, reassure employees thatthe layoff is com: plete, and start a healing process for those who ate lel so they can get back to work” Restvo suggests breaking the news in small departmental meetings, “It’s important for people to get specific details about the things that are di reetly impacting them,” he says. Within a day or évo ofthe initial announcement, the ‘management team should address ll saffto explain the ay pffandanswer questions. “Executives often assume that ems ployees understand the company’s long-term plan when in ‘puny cases they don‘, says Restvo. “You want to prevent ‘situation where people are making wrong assumptions” CEOs should also avoid painting a picture that is too bleak wich could scare offtop performers. "Yourbest peaple will think, ‘Why should stay here when there's no future?" he says (see "Sexping Out the Talent,” page 52), Of course, belore communicating the big-picture view to thesurviving smployees, many CFOsmay find themselves having to deliver the bad news to the soon-to-he-depating staffers, That's a task for which few receive training, and hich many say is among the hardest things they've ever had, to da, "No one teaches yor: how to let somebody go," says Richatd Block a Tatu partner an formerfinancechiefwho law orsimply bing unaware, employers that are subject, itfallocomply abou two- thirds ofthetime, accorcing toa study by the Government Accountability Offi. ‘Last December, works ers at Republic windows and Doots in Chicago turned spotlight on WARN. The company shut down after sank of America canceled ts credit ine; management gave workers three days" law requires employers with reticeand dd aot pay for oocrmorsemployeesto accrued vacation time or ive workersGodays'wrtten provide any severance pay. notice prior toaslantelosing Emplayees at the manufae- turer protested the com- pany’s abrupt closure with the federal Worker Adjust and Retraining Notte cation Act (WARN) is hardly ew, yet-few companies seem toknow about ft. The cormacs ayo, But, eth by deliberately ignoringthe 3 cra | ronssany 2008 + ero 6 NETRAISRS RALLY OUTSIDE A BANE DUE WARNING iscurrently workingasthe interim controllerofalif-sciences firm, “Itkeeps CFOs from dong the right thingas fasta they should beeause they don’trally hve the kil se, and no one wants t have thiskind of eonversation In a previous job, Block worked with an expecienced human. resources executive who walked him through the ay off process and helped en rehearse what he would say in ad ‘vance of each employee meeting—a practice he recommends today. “Jus saying the words often helps, he say. "You need to ave a very focused conversation, because you fee so bad that you [may ind yoursel} in a discussion where you almost endl up heing the person back" ‘To keep the conversation on trek, Block recommends a tagzteam approach in which one person, asualytheindivde: al'sdirectboss tells the eraployeeaboutthelayoff givesthera tionale (preferably accompanied by an apelogy), and leaves the room. A second person, tpi “NO ONE TEACHES YOU HOW TO LET SOMEBODY GO, [WHICH] KEEPS CFOs FROM DOING THE RIGHT THING AS FAST AS THEY SHOULD, BECAUSE THEY DON’T REALLY HAVE ‘THE SKILL SET.” @ TATUM'S RICHARD BLOCK rant lawyer with Sherman feHoward. {Employers a sheday sit-in, saying they that decide otto provide had notreceivedadequate severance packages are notification inaccardance thus at greater rk of being With WARN, Followingthe in volation ofthe law) The protest, GanicoFAmeriea —_lawalso provides an exeop extended the company for companies that can enough credittoallowitto successfully claim they have payworkers¢7,000each, experienced sn unfore- WARN defines amass seen dhsaster, financial or layoltas one involving either otherwise, While leould 500-plusemployeesor sate beargued thet the credt 49gemployees that igure clsisand market meltdown constitutes at easta third of acompany’s workers. n practice, companies often were unforeseen disasters, “there have net been lot oF companies having success avoid giving 6a days’ notice with those arguments,” says Insuch stations by provie- Olsen. Lawyers say they ing severance payforat least expect more WARN-related fo days instead, says Tec (zen, alabor and employ: lavaits as mass layaliscon- tinueto spread. KosFOR BOTH ALTRUISTIC AND BUSINESS. REASONS, SOME COMPANIES ARE SEEKING ALTERNATIVES TO LAYOFFS. LATE LAST DECEMBER, FedEx announced that Instead of laying off workers it would institute pay cuts for35,2000 employees— Including top executives. (CEO Fea Smith took a 2o percent pay ct, while other senior executives took reductions of75 1010 percent, Other salaried em= Ployees saw heir paychecks ‘ut bys percent. Executives hoped the acrossthe-boare cuts ould enable the=n ‘oavele malainglayotts despite dismal numbers for the shipping giant. "Our financial performance is buyout packages tonearly every corporate worker tits Mineapolis head ‘quarters, During the 2001 recession, Cleca Systems Increasingly beingchal- famously preserved much lenged by some ofthe ofits workforce by offering worst econamicconditions people se percent oftheir inthe company’s 35-year operating history,” sic ‘Smith onthe company’s fourth-quarter earnings call in December. Despite exist Ingplanste stash illion Inoperating expenses inthe ‘company’s 2009 fiscal year, Fedtxis "taking additional Actions necessary to help offsee weak demand, protect aur business, and rinimize the oes of obs, said Smith Fetxis not alone Insrying to avoid ayotts and thewrconsequences, which include damaged ‘morale, loss of talent, and he expense efhirieg and vaining new employees when the conamy turns atound, After announcing 477 percent plunge nits third-quarter 2008 profits, Best Buy recently offered salaries wile they took. sabbaticals or performed charity work. Other compa ies are considering hiring andl wage freezes, recac- tion of overtime, elimina tion of ponuses,shartened workaneeks, reduced or sliminated aon(k} matches, and reduced company contributions to health benelits (ee "Prognosis: Negative,” page 5). “Ted Olsen, a labor and employment lawyer at Sherman & Hove ad, suggests mskinga commitment ta laid-off ‘workers to rehire themif business tins around ar tocortactthem fistifthe position i recreated. "Ian employer can give any kind of veassurance—without covercommittng—it should, "hesays. KO's, cally an Hi manager, stays behind and spells ut the departure date, severance pay, an any accommodations the company is making, sch as access to carecr-counscling services “L's usualy a this point that the news starts to hit the person.” says Block. “Thisis when you have to worry about the emotional impact.” As Block has gained experience with layoffs, he has occasionally played what he calls “the mechanic" role—the person who stays behind, handles the dotails, and sympathizes with the employce. While prac tice has helped him lear how ¢o conduet such mectings as smoothly as possi, it's still not easy. "You don't sleep the aight before, because you know you have to doi,” he says | MOVING ON ‘The eifect of layoffs ona workforce ean linger for months. Establishing an ongoing employee-coramunications prs ‘eesscan make abi ditions are changing rapidly, and even regular quarterly meetings may no longer suffice. Managers frequently as- stone workers know more about the company’s strateyy and financial position than they do, and these days workers who are not kept up to date might assume the worst, "You have tobe attuned to how much your stafTlooks to you for how you are compocting yourself and haw you are com: ‘municating,"says Aruba's Tomlinson."Ifyou'reholed upin your office and wot having al-hands meetings, people will be even mote scared about what's going on, ‘CFOs should quickly eeech out to those employees ‘who are mest vital to che company and let them know that they ac valued, advises Block. Otherwise, even in the cur- rent market, op performers may decide to jump ship. “If you don't want to lose them, you have to make ic more ap- pealing for them to stay by offering future responsibilities ‘or more current responsibiities than they would find else ‘where, or maybe making it firancially rewarding,” he says, Executives also need tohelp a smaller workforce figure ‘out how to redistsibute the workload, “It doesn't ork to Just say, ‘Weve eliminated 10 percent ofthestaffand you're going to need to pick up the slack” says Restvo, “That ap- ‘roach just increases anxiety.” Instead, managers can bring their departments together and discuss how to streamline processes and eliminate unnecessary work Finaly, workers need to be reassured that the company hhasa future, and that they are needed to help ie get there. ‘Youneed to let peaple knove thatthe company isola, and, thatthe matketsthe company servesares't goingaway." says Restivo. "You want people to start thinking abost the longer termand recognizethat thebusinessisgoingtacome back — and that when it does, the company neds to be ready." era litference, especially s econornic con KATE O'SULLIVAN IKATEOSULLIVAN@CFO.COM) IS A SENIOR WRITER AT CPO.