Voluntary redundancy sends confusing message

From outside it looks odd when a company offers workers voluntary redundancy. This happened in New Zealand on Thursday when the ANZ Bank asked staff to volunteer for redundancy.

There’s no confusion a company making such an offer wants to cut its wage bill. This means cutting staff. Or to use the fashionable euphemism ‘downsizing’. To my ears the other popular phrase ‘change management’ is downright Orwellian.

Why would managers offer voluntary redundancies and not draw up a hit list?

Redundancy is most attractive to people who find it easiest to get good jobs elsewhere. It can mean collecting a sizable payout on a Friday and starting a new job, with a similar or better salary, on Monday. They get a windfall, the troubled company cuts its payroll, There’s little disruption and minimal residual resentment from the remaining workers.

To use another modern management cliché: a classic win-win arrangement.

But the people most willing to accept voluntary redundancy, that is those who are most employable, are the people an employer can least afford to lose.

A badly run voluntary redundancy programme can see the experienced, highly skilled, motivated workers depart taking their accumulated knowledge and energy with them. On the other hand, people with few or out-of-date skills are the least likely to volunteer for a redundancy package. So if the process isn’t carefully managed, the overall effect is a dumbed-down workforce.

Of course, this may be deliberate.

Even worse, skilled people opting for redundancy may take their know-how and inspiration to a competitor. In some case, these people could start their own businesses and become competitors.

This is what happened during the 1980s and early 1990s when technology companies kept slashing their workforces. Many lost their best people to competitors, a handful left their employers with the ability and capital to start their own businesses just in time for the dotcom boom.

Ironically, during this period, those technology companies that had earlier cut staff numbers suddenly needed to hire new people to meet the increased demand for experience and skills.

3 thoughts on “Voluntary redundancy sends confusing message

  1. nice post – i have never been a fan of voluntary redundancy. if an employee raises their hand, but they or their job is considered critical to the organisation and they are refused redundancy, it doesn’t make for a very engaged employee …

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