Why do they do this ? - when so often, it’d be far FAR better, for their businesses, and to avoid serious damage thereto, by exploring carefully beforehand all the other possible, and far less business-damaging, options which are always available to them

A relevant case study

A certain (very) up-market Tour Operator business, which had been growing very fast for many years, and with a turnover of approx £25m, and with approx 200 staff, did it all absolutely wrong in 2008, and is now suffering serious long-term damage and major problems as a result 

The Owner / Founder / Chairman / CEO, who had always shown previously a markedly-enlightened and humane view towards his people, foresaw, for whatever reason, a potential slowing in demand, (albeit that the business had proved in previous recessions to be virtually recession-proof), and immediately went for the Compulsory Redundancy gun for 10% of his key and high-level, highly-qualified, highly-trained and highly-experienced (all client-facing) (Travel Consultant) staff

He over-rode the advice of his fellow directors, (all of whom were full-time executive directors), and similarly of his lawyers – HR and otherwise - reference the decision itself, and reference also the relevant implementation plan, in which no alternatives of any kind were considered or offered, and in which no “consultation process” took place

The result was 20 approx key such people being forced to leave the firm, and wirhin some considerable acrimony, and with much pain and hurt, and angst and hardship, and at short notice – Also to a number of Employment Tribunal Hearings – and a great deal of bad publicity

All of the remaining employees who stayed on were of course completely shell-shocked, and they also, not surprisingly, lost all sense of loyalty and commitment to, and enthusiasm towards, the business and to its management, and they began effectively working to rule, and continue to do so to this day

So, why were all the other options not considered or offered ? – and some of these might have included –

• Offers of Voluntary Redundancy
• Offers of Early Retirement
• Offers of Part Time working
• Offers of Short Time working 
• Offers of Job-Sharing
• Imposing with agreement a temporary Pay Cut, across the board for all, including Directors, of say 10% or 20%, or even 40% in extremis 
• Offering of (unpaid) Sabbaticals
• Calculating and utilising the impact of Natural Wastage

Well, the answer is that we shall probably never know, but what we do know is that the management there now have a massive problem, primarily with the huge lack of enthusiasm loyalty and commitment of their remaining staff – and they are also finding it incredibly difficult to recruit and retain any replacement staff for those who were dispatched away, ie the word is out !  

They are also finding that they have to spend huge amounts of money training up any new people (who they do manage to recruit) to the very high standard of quality and of experience of those who were made compulsorily redundant  
The ultimate irony is that the top-line turnover dipped hardly at all, ie exactly as in previous recessions, so just considering seriously these other options as a precautionary measure would have been hugely the far wiser initial option, and then only then to be offering all these options rather than Compulsory Redundancy, if there were indeed to prove to be a significant downturn in demand

A further irony is that the firm IS now struggling on the turnover front, as they move through and come out of recession, just because they no longer have those key twenty people available to them – Talk about a self-fulfilling prophecy ! ,

It’s easy for many to say that this case is maybe atypical of all SME’s out there, and we’d not disagree that there is certainly some evidence, this time around, that some SME firms have shown a greater degree of the relevant Enlightened Self-Interest than in previous recessions, but sadly, there are still far too many examples of the bosses of SME’s, (as we know only too well via so many other instances of which we are aware), of their going immediately for the Compulsory Redundancy gun, and at a huge resulting cost and of serious damage to their businesses, ,,,,,,,,,,,,,,,,,,  and all quite unnecessarily !

The moral of this story ? –

Well –

• It’d probably have been very different if there had been one or two strong-minded, independent detached and objective Non Execs on board – and Yes, I know, we would say that wouldn’t we ! – but it’s almost certainly true, nonetheless

• It’d have also been probably very different in this case had the roles of (Non Exec) Chairman and CEO been split

• Education, Education, Education, ,,,,,,,,,,,,,,,, and Experiential Learning of and support to MD’s / CEO’s, so that even when they have maybe been already through one or two recessions, that they do, come the moment, not react and proceed in ways that are so hugely damaging to their businesses  

More next month, on another topical issue for SME businesses.

February 2010

©OMSG Business Mentoring Ltd - 2010