Criteria for choosing retrenchment candidates

Our company, with about 700 workers, is losing money and we can no longer afford to keep some employees. The trouble is that it has become both a complex and an emotional exercise for us. We are thinking about coming up with objective criteria to help us decide which workers to let go. Can you please help us establish a system for our management committee? — Red Lantern

An effective item of workplace communication should be crisp, clear, and to the point. A good example of this is a house sign that I saw on the Internet: “No trespassing: Our guard dog can cover this distance in 2.3 seconds. How fast can you run?” That clearly communicates. The result is — no one will want to touch that fence, that yard, or that house.

To be effective communicators, we should always take the same approach, though not necessarily that threatening. But that’s only one side of a difficult journey. For one, members of a management committee may be adversely affected by the criteria that they’re trying to formulate. And for that reason, a raffle is recommended to choose who will be members of the following committees:

Committee One is tasked with defining the objective of the criteria. This includes the target number of employees to be retrenched, its effects on company operations, the business continuity plan, time line, and other factors, but without identifying the workers who will be affected.

Committee Two must be assigned to formulate the parameters and the weighting of each factor like seniority and merit, among others. In addition, it must be responsible for designing the form to be used.

Committee Three composed of the members of Committees One and Two who will be tasked to render final judgment with respect to all workers of their respective departments.

All three committees must be composed of department heads, regardless of their rank in the organization. The tricky part of this exercise is to agree on the coverage of retrenchment. In particular, all committees must decide the coverage of retrenchment. Would it include management executives or non-management people alone?

Indeed, that would be difficult to answer. If that happens, the company’s board of directors may help decide.

FIVE OBJECTIVE FACTORS
If you really want to impress upon the people that you have a fair, reasonable and objective process and are ready to defend your answers, you must decide based on the following criteria and their suggested weighting:

One is length of service (35%). This means following the rule of “first in, first out.” It defines candidates based on the number of years they have rendered for the company. That is a reasonable indicator as potential candidates are presumed to be receiving high pay and perks due to their years of service.

Two is people nearing retirement (30%). Your judgment must be grounded on the physical age of employees and not on the number of years they have spent in the company. You can cover people from 50 years of age and above. One caveat though. This approach may lead you to lose key people and their institutional memory unless you have a potent Knowledge Management Program.

Three is poor performance (20%). This is easy to understand as long as your organization has a well-established appraisal system. This means targeting people who received at least two instance “below average” ratings or its equivalent in the last three to five years. Given the tendency of many Filipino managers to play politics with their workers, it’s also best to consider workers who are receiving consistent average ratings in the last five years.

Four is attitude (10%). This includes people who after being given due process were found to have violated at least one company policy for the last three to five years. Before considering this factor, review your Code of Conduct and discover if there’s an amnesty period for minor offenses like tardiness that allow the workers to be given a clean slate after one year.

Last is red-circle pay (5%). This requires reviewing the record of all workers to determine if they’re receiving salaries over and beyond the allotted “price” for each job grade level and their job description. There could be a few of them. Just the same, you can’t ignore these people who are overpaid for the kind of work they’re doing. If you can solve this, you may also be successful in correcting salary distortions.

DOUBLE-EDGED SWORD
The above list may not be complete. You may include other factors that you feel are worthy of consideration depending on the nature of your business. Whatever you do, include a proviso where your management committee can make exceptions for certain people with special talents or unique skills that are difficult to acquire or learn, even if they’re near retirement or receiving extraordinary pay package.

Retrenchment is a double-edged sword. It can mean the company’s demise or survival. That’s why it’s necessary to compare the initial result with the company’s workplace demographics. You can probably give higher weighting to numbers one and two (length of service and those nearing retirement) as they can give you clear, immediate results.

On the other hand, maybe only a few people will fall under categories three, four and five. If that happens, you may not achieve the desired number of people to be retrenched. The cure is to focus your attention on the average performers. There are a lot of them who are working in the shadow of high-flyers and benefactors and yet they contribute to excessive operating costs.

By all means, allow each department head to make a decision with respect to their workers based on the agreed criteria. They know their own individual strengths and weaknesses, and they can also have their own biases to protect some bootlickers and deadwood. That alone is a good reason why you should create robust selection criteria that leaves no wiggle room in some matters.

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