Strategic Workforce Management Helps Businesses Weather Tough Times

Updated: July 06, 2010

Businesses facing downturns or other challenges often implement reductions in force as a means of preserving cash. Where a changing business model, cash flow or other challenges require a cut back in head count, a strategically designed reduction in force appropriately implemented to minimize employment and operational liabilities can be helpful if not indispensible under certain circumstances. Frequently, however, timely action to tighten up and strategically reform workforce and compensation practices can help businesses to redeploy operations to meet emerging businesses challenges or opportunities while avoiding or minimizing the need for layoffs or other more catastrophic business events. Where evolving business needs require a change or reduction in workforce, timely strategic action becomes even more critical to secure, retain, and manage the key staff and their performance. In all events, profitability and survival often turns on how quickly and how well management identifies and implements strategic workforce changes to meet their organization's emerging business reality.

For businesses seeking to enhance workforce performance and efficiency to meet changing businesses needs, steps worth considering include:

  • Identifying and implementing changes in operations and associated job description and performance requirements necessary to position your organization to respond to emerging challenges and opportunities
  • Re-enforcing and tightening management of existing performance requirements undermining material operational effectiveness
  • Exploring and implementing potential changes in compensation, benefits, scheduling or other staffing and compensation practices to streamline costs or improve cost or other effectiveness
  • Strengthening your liability shield by updating and tightening promotion, discipline, hiring, termination, pay, trade secret and other data security and other human resources, ethics and corporate compliance policies and practices to reduce corporate risk.

Knowing and appropriately documenting and communicating the business goals and needs underlying the choices you make as part of this process plays a key role in the effectiveness of these efforts.

Since the success of these efforts depends heavily on your organization's ability to predict the specific performances necessary to your success, begin by evaluating your existing business model and operations. Closely re-examine your current operations in light of the changing economic and business environment to identify the key performances that your organization views as critical to help your business respond to these emerging challenges and opportunities. Consider both the existing performances that the business needs to continue or enhance, as well as business and attendant performance changes that management expects to need to respond effectively to emerging business environment. Documenting the specific performance changes in terms of the behavior changes desired, the timelines for implementation, and the underlying analysis and business justifications often can both enhance the effectiveness of efforts to implement these changes and promote their defensibility against potential future legal challenges.

Once management determines the performance refinements needed to achieve its goals, communicate your expectations to your employees and other members of the workforce by giving impacted workers an updated performance improvement plan that notifies them of the business' expectations about their performance, including where applicable, performance requirements and expectations, relevant performance measures, timelines, and consequences for meeting or failing to meet these expectations. To reinforce to employees and other workforce members that their performance matters and to position your organization to address potential inadequacies in compliance by members of the workforce, communicate your plans to hold employees accountable for prompt adjustment of their performance by monitoring and documenting performance, then perform on this promise my monitoring and enforcing compliance through feedback, follow up training and providing appropriate discipline or rewards.

Along side enhanced efforts to manage performance, businesses going through transitions also consider taking steps to help protect it and its leaders to workforce and compliance related liabilities. Certain employees or other service providers concerned about the potential implications of slowdowns or other changes may seek to protect their positions or to position themselves to bring whistleblower, discrimination or other claims. Businesses facing substantial reductions in force in response to bankruptcy, plant closing, or other substantial setbacks face significant legal risk unless employee benefit and certain other human resources and corporate compliance responsibilities are appropriately handled. Businesses tightening up management or experiencing other changes should position themselves to defend their promotion, demotion, termination, compensation and other personnel performance decisions. Appropriate documentation of performance expectations and measurements, their business justification, training and disciplinary efforts to secure compliance, and other strategic actions can help minimize exposures to these claims and strategies by disgruntled employees or other service providers. Reviewing and appropriately updating compensation, benefits, worker classification and other practices also can produce significant benefits. On one hand, many businesses overlook opportunities to reduce workforce expense by reclassifying workers, tightening up scheduling and documentation of hours worked, redesigning overly generous vacation or other leave, disability, health, severance or other human resources and compensation practices, changing or renegotiating vendor or worker compensation, or other making other cost saving adjustments. At the same time, numerous regulatory changes make it important that businesses operating in times of change act to minimize themselves and their leaders against potentially significant liability exposures by ensuring that their worker classification, employee benefit, wage & hour, waiver, severance and settlement, and other compensation and employment practices and documentation are up to date and appropriately administered in accordance with applicable tax, labor, securities, and other laws and regulations.

Strategic planning and effective performance management always plays a vital role in the successfulness of operations. For businesses facing losses, bankruptcies or other business set backs, these and other preparations can help reduce workforce, benefit and compliance related liability risks and costs for the business and its management. For other businesses, enhanced effectiveness in management of performance and human resources related costs and liabilities promotes business success by supporting enhanced profitability and competitiveness and reduced operational and legal risk. In either case, prompt and effective action can produce big returns for businesses that act on a timely basis.

While effective restructuring and management of workforce can produce significant benefits, the planning, implementation and administration of these activities if not properly evaluated or implemented can produce unexpected or undesired costs or liabilities. While employment discrimination and other employment related claims always present a significant source of exposure for businesses, these exposures become heightened during times of layoffs, or other business or workforce restructuring or other change. In many situations, changes in workforce, benefit plans, and other operations or practices may necessitate or make advisable various activities to comply with applicable regulatory or contractual requirements. Failure to appropriately document business motivations or termination selection procedures, to conduct required bargaining with union representatives or other contracted parties, to give required plant closing or plan termination notices, to document, communicate and implement employee benefit plan changes or terminations, to handle payroll and employee benefit plan contributions, to make required securities disclosures and reports, to make required tax or other filings or to properly handle other concerns can undermine effectiveness at best, and trigger significant liability for the business as well as its board and management. Businesses uninformed or concerned about avoiding legal expense often unintentionally exacerbate or overlook opportunities to minimize these exposures by failing to obtain advice and assistance to appropriately negotiate the employment and employee benefit related traps hidden in the transition process. To help minimize these exposures and position sensitive discussions and deliberations to qualify for protection from disclosure under attorney-client privilege and work product rules of evidence, businesses generally should obtain the assistance in planning and implementing these and other related activities from legal counsel experienced in advising businesses about managing workforce and employee benefit risks in times of business change.

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