Bob Phillips - Managing Downsizing and Reductions in Force

Steve

Hi, this is Steve Hunt with People Performance Radio. This week's interview is with Bob Phillips, who's the president of RW & Associates. Bob has over 30 years of experience in HR, and this interview is a really great one because he talks about his experience going through some of the major downsizings of the '80s, as we're kind of in the current environment, companies are really facing with some pretty massive reductions in force, and frankly a lot of the people that are overseeing this have not lived through this sort of thing before. Bob, who draws on this experience, he says goes all the way to 1972, and talks about some of the lessons learned, and as he admits, some painful lessons from massive downsizings that occurred in the '80s that most people don't really remember, or if they do, they're older than I am. I remember them vaguely. So it's a great interview, and I encourage you to listen to it, especially if you're in an organization that may be facing this issue. Thanks.

Hi, this is Steve Hunt with People Performance Radio, and today we're talking to Bob Phillips, who is the president of RW & Associates. Bob is a human resource professional and consultant with over 30 years of experience in human resources and he's worked at multiple levels from the VP level, and I'm guessing every other level in between, and so to start off a little bit, Bob, can you just tell a little bit about what RW & Associates does, and what your real focus is?

Bob

Sure Steve, when I left the corporate world and started working in my own consulting firm, one of the things I was really interested in doing is, how do you take the experience level that I have in those 30 years of working with companies, and then applying it to the consulting business, and one of the key things was to really start looking at, how do you help organizations reduce the number of areas in working with their staff, working with people, and I think your organization, SuccessFactors, has really helped put a lot of tools in place, that people can look at those areas, but from my standpoint organizational development, working with companies to maximize utilization of their human capital and other things.

Also, as you know, I wrote a book called "Absolute Honesty—Building a Culture that Values Straight Talking, Rewards Integrity", and what I really have done with that is try to get the message out of, how do you teach people to speak up and be honest, so you can really maxmize the full potential of your employee workforce, so those are a few of the things I've been working on, Steve.

Steve

I think one of the things is, Bob, is great, that you've gone into this consulting and shared experience, because if there's one thing that's very difficult for somebody, especially earlier in the talent management field to get, is access to 30 years of experience and all that comes with that, and one of the things that you and I were just chatting about a little bit before we started the interview, was the current economic climate, and the downsizing companies are doing, there's probably more downsizing coming, and your comment that a lot of the people in the talent management industry now were really not around when the last major wave of downsizing occurred, which was not in the last recession, that was true in certain sectors, but the really huge wave of downsizing in the United States last occurred in the mid to late '80s, and you were saying that you'd gone through some of those experiences.

I think that would be really fascinating if you could share with our listeners some of the things when you reflect back on that wave of downsizing, what are the things people need to remember who have never really gone through this before? What are the things, the lessons learned, that people need to focus on, as you really get - you look at these things like, we're going to have cut our workforce by 10, 15, 20% - what should people be thinking about?

Bob

Well, I think the first thing you really have to think about is that, it's not easy for anybody, the people implementing, the people being delivered the message, and the people that are surviving. When I first did this, some of the early '80s when we were really, I think, neophytes at how to do this, we made a lot of mistakes, and those were mistakes that thinking more of, what are the legal ramifications, do we meet the letter of the law, and the requirements, and not really thinking about, how do we treat people when they walk out of here, how do we treat and worry about the survivors, how do we communicate? We spent a lot of time in the early days focusing on the packages, the, what do we give them, what have they received, the people that are leaving, and not really thinking about what happens at the other end, and I think through our first few lay-offs that I went through and reductions in force, that we really focused more on the packages.

As we learned, and we learned the hard way, that there was a whole group of people called survivors that needed probably more attention, because those were the people that were really going to get us through these tough times, and if they're always worrying about, "Am I next?", then you're not going to get full productivity. These are going to be your core group of people that are going to bring you out the other side, and while you're worrying about hiring people back into the workforce, these are the ones that are going to have to be the engine running the organization through those tough times.

I think those were probably the toughest lessons we learned, Steve, and that once it's over with, the communication doesn't stop, that the communication has to happen more frequently, you have to bring people in and let them know the current state, I think some of the economic issues we're facing today, it's really a lot of virgin territory for people, those of us who've been through some of these things before, how do you know what it's going to look like on the other side? And so that hand holding and understanding who your survivors are, and the important role they play, is really the critical thing. I think it's probably, the thing I learned the most, and it was really the hardest lesson is, understanding that the survivors are so important.

Steve

When you look back, can you give some specific examples of either a classic, real major mistakes that people really need to avoid and maybe things the organization did, or conversely examples of things that did really well, where you saw a leader in an organization not just communicate, but communicate the right things?

Bob

Well, probably, let's start with the mistakes, and I think we can hit a couple of those, and I've talked about that. Also, one of the mistakes we made is we truly did not understand, and you have to remember in those days succession planning was not a word that was in the vocabulary, so a lot of times we didn't really understand who our key technical people were, who our key performers were, who were the highest level of individual, so not identifying some of your key staff before you start the process was something that we learned, and we learned the hard way, and you have to remember, I came out of mostly high tech organizations, and if you were a small start up company, and you were looking at maybe two or three key designers, you couldn't afford to lose those people, and we really didn't understand that impact, so I think those mistakes in selecting the folks, in selecting things, were really critical, and mistakes that we made.

Steve

A quick question, and clarification—I'm looking at that mistake, I've heard the stories of people, companies firing people and then turning around and having to re-hire them because they realized that's the only person in the company that knows how to do something, like, "That's the only person that knows how to fix that machine!" Is that partly you think because companies tend to take technical skills sometimes for granted, because the things that make somebody visible, the leadership, are not going to be their technical expertise so much as their social skills? You think that plays into that at all?

Bob

Well I think that being highly visible doesn't mean you're always competent, and I think you're absolutely right. In small organizations, I have a company I'm working with right now, it's a biotech company, and they have one IT person, and when you look at all of the studies that they have to do, the clinical trials, and this person was key, and when there was some slowdown and one of the products didn't pass its clinical trials, that person was identified as somebody that was going to be leaving, and I said, "Do you guys really understand what this person does and the role they play?", and when it came down to it there was nobody in the organization could have done his role, so they would have done that, they would have made that mistake, they would have laid off the one key component, key person that would have kept their trials, and being able to process all the data that was important to take the FDA.

Steve

That's a great example, I guess the lesson I'm taking away from that is, really before you start deciding who you're going to keep and let go, make sure you actually know what people do, and know what you need to know to perform those tasks. I think often companies don't do a good job of actually tracking the technical side of what people bring to their jobs.

You were talking about communication, can you talk a little bit more about the leadership communication side of this?—both good and bad?

Bob

Well I think that probably, I worked in a major corporation, it was a billion dollar corporation, and one of the finest examples of leadership was that we used to have the annual kick-off meeting of how the business was doing, and as we progressed, there was maybe a once a year update. What we did is we changed from a once a year, twice a year organizational update, after did our first major lay-off, that we went to a monthly meeting where the CEO would train all of the managers and then we would do a CEO broadcast, and then each of the managers were required to do a meeting with their employees to update them on what was happening, what was the current state of the business, what was the potential of us getting through this, were there any other lay-offs that we anticipated - because we were a public company, we had to be very careful about what we could say, but the effort was always made, and then the managers were required to do a write-up and feedback through the human resource organization, what issues were raised, and then the following month we would address those issues, so it was probably one of the finest examples that I've ever come across.

Steve

I think that's such a great example, and I think one of the things you really take away from this, people always say, we need to do more communication when you're going through these sort of downsizings, and what you've said there is, well how about communication—that's a massive investment of time, that every month the CEO—and not just that they're going to get up in front and talk to people about what's going on, but they're going to have people have a dialog about it, and they're going to capture the information from that dialog and feed it back for the next monthly meeting, and that's closing the loop cycle of communcation. That is really impressive, because I have not seen very many especially larger organizations that have put a structure in place to maintain that level of communication. That's a great example.

Bob

If I could jump in with one more additional point Steve, I think is that the key component there is that a process was clearly put in place, managers were held accountable to make those things happen, and any manager who didn't do or follow through with the follow up meetings, they basically were called on it, there was accountability, so it was not only the process, it was not only the invested time, it was the accountability that became a key component, and to me the biggest thing that happened after that was, once business picked up, that process remained in place, it became part of the culture.

Steve

That is a great example, well it's an interesting observation too, that you look at these sort of traumatic events that the companies are going through on a downsizing, that's going to change your culture—the question is, is it going to change it in a positive way or a negative way, and that example you provided was, you can use this as an opportunity to become a stronger organization as a result, if you approach it right.

Do you have other examples? Both of the examples you've provided here are just fantastic examples, and I think really are things borne from experience?—are there other things, as you're looking at companies that are trying to do this, where you're seeing companies and saying, "Oh man, they're making these mistakes again"; or are you seeing some innovative things being done too?

Bob

Well I think you triggered a thought in my mind that I'd like to address, because I think that a lot of companies in good times say that they will never do something, and there was one example when we were doing some research for the book, and I ran into this, and two of the companies I worked with, and so I really understood it, was that in the good times, what they said was that we will never lay people off, we will never reduce our workforce, and because the word "never" was utilized, when it actually happened and they did have to reduce, the company culture changed dramatically and the credibility that the management team had went from, on a scale of one to ten, from a nine down to about a three, and so the one thing I would really warn people is that, you have to let people know that anything is possible in that communications piece, and that, you work with people that are very very intelligent, and you don't have to treat them like they don't know anything, and you have to tell them, anything can be possible because a lot of times, when going into these areas that they do not fully understand.

That was another thing that I forgot to mention earlier, that really was something I learned and relearned as companies, because it took us a long time to move that three up to at least to a five or a six, because we lost so much credibility, because we said something would never happen.

Steve

It's that classic, it takes years to build credibility and minutes to lose it. One of the things you were talking about, getting back to credibility, and I think it comes in a lot of organizations around this communication, especially where the leaders don't know what's happening in the company, is a fear that, if we tell the employees too much, if we tell them our true financial situation our high potential people will leave, our high performers will leave, or we don't want to be open about the state of downsizing, we're going to try to downsize on the sly, so that Wall Street doesn't think we're better off than we are, this shell game that I think a lot of times in organizations' leadership, there's a temptation to not say too much, because you're afraid information might be used against us—what are your thoughts on that, is it better to totally lay the cards on the table, and tell the employees, "Look—this is the situation that we're in, we can work through together", or is that going to lead to people going, "Oh my goodness—this ship is sinking" and a lot of your good people leaving—how open should you be with some of that financial information?

Bob

Well, I think first of all, if you're a public company, you have to be very careful about what you can say, but the one piece that I've always advised my managers and where I've seen leadership, and it's been a personal philosophy of mine, is that I will tell them what I can tell them, and then I will also tell them what I can't tell them, if I can't tell them something about financials. At the same time, organizations that I've worked with, the really good ones that I've both consulted with and have been part of, is that we get them, the real thing is not to scare them, but get them committed to the success of the organization, and where managers really miss the point is that they don't engage their workforce in being part of the solution, and so in answer to your question, it's really what does it take to engage the remaining workforce in the solution, and not treat them as outsiders, and where organizations have really, and again early in my career and my involvement in these kinds of things is that, we even excluded some of the management team, and that a lot of times managers would hear the announcements the same time their employees hear those things, and when your employee turns to you and says, "What are they talking about?", and you have no idea, it's hard for the management team then to engage, and so again, how do you engage your management, which has the most leverage?—when you think about, the senior management team doesn't have the leverage, it's that day to day direct line manager supervisor that has the leverage with those employees to get them engaged, so you really have to think about, who do I tell and what do I tell may be at different levels, but the focus should be, what information do they need to be engaged in driving the success of the organization to come out of this whole?

So, to me Steve, that's really where the successful organizations that I've worked with, they've been able to dig out of holes, and the ones that haven't been have treated employees like they are not part of the solution, they are part of the problem, and that's a very fine line to walk.

Steve

That's interesting, I think a couple of things that come to mind there, one, as you say, people can't help you fix the problem if you don't tell them what the problem truly is, but the other point too, as far as sharing that, is there is a right way to communicate when these issues are coming up, it maybe a way to characterize it to say, if you look at the levels of an organization, the level above an employee should always know a little bit more than the level below them about the issue.

Bob

Disengaging management is a sin that happens in every major corporation, because it's like senior management doesn't trust the next level, which doesn't trust the next level, and it's kind of like, we're all part of the same organization, we're not the enemy, we are part of the solution.

Steve

Do you think that's, when you encounter companies that have that attitude of, "We have to be careful who we share this information with because we don't trust them", which is different from, "We can't share it because of legal issues", when you've encountered companies like that, how can they overcome that?—because that's not the employees not trusting the managers, the managers not trusting the employees?

Bob

I wish I had a quick answer to that, I have a lot of gray hairs because I've worked at trying to drive that. Trust is developed through relationships, relationships are developed by being honest, by setting examples, by being held accountable, and by not BS-ing people, and to me you sometimes have to take risks, and people aren't willing sometimes to take that risk. It's really interesting that the old adage that information that's power, people treat it that way, and to me one of the things that I've found over the years is that, the more you share, the more you get back, and it's hard for managers to do that, because they've not really understood, I mean now we're getting into some real psychological probably and some discussions of leadership and management and how do you develop that stuff, but managers who are not secure in their role will normally not trust, and they will use position power and information power over folks instead of engaging them, and there's a big difference between directing and engaging, as far as I'm concerned.

Steve

I think going back, if you look at a threat response, and this is again more psychological, but that's all right, I'm a psychologist, I don't mind!—when people are under economic stress and they're worried about their jobs, they become more guarded, and guarded is less trusting, but the only way you can build trust with somebody, really showing trust in somebody is risking something with them, providing information in the belief that they're going to use that information effectively, and not in a way that will hurt you, so there's an element of risk that you have to take to establish trust, and when you're in this economic environment, a natural tendency for people to be more risk-averse because they're nervous, honestly trusting, just nervous, and so I go back to the example you had of the company that said of that communication plan that said, "Not only do we expect you to communicate to your employees, but we're going to track you, and if you don't communicate with your employees, we're going to hold you accountable for it", because that will, if you get to it undermine the trust the employees have in the company.

Bob

You're absolutely right, and the one message that starts becoming crystal clear throughout our conversation is that you don't wait until these tough economic times and start the communication.

Steve

It's sort of like, don't wait till the storm hits to start doing the drill, that's why we do fire drills. Well, just sensitive to your time, Bob, but I really appreciate the insights you've shared. Are there any last things that you would share, as there are people saying, "You know, the storm has already hit or it's coming, and we need to start preparing for it"—what should companies start doing right now that they may not have focused on as much when times were better?

Bob

I think again, number one, engage your employees in some of the solutions; start developing communication channels of open and honest communication; and the last thing, realize that this is not easy, it's not easy on you, the person that has to implement it, and make the decisions, and it's not easy on your employees, and get together with them and really make them a part of your team, and don't forget the survivors.

I always used to tell my folks, when I was inside working, I said, "The day that reductions in force get easy, you've lost your ability to be a human being", and today, as we're talking about this, it brings back a lot of old, really tough times for me, it's like a '60s' flashback, and it's really something, Steve, that will never get easy, but the more you treat people with respect, the more you involve them, the more you can be successful coming out the other side. Well, those are my thoughts.

Steve

Great thoughts, thank you so much. Again, we were talking to Bob Phillips of RW & Associates, we'll have a link to Bob's website on the podcast, if you want to tap into his experience off line. He's also written a great book called "Absolute Honesty", and it's co-written with another author, Bob—what was the person's name, I don't have it in front of me?

Bob

It's Larry Johnson.

Steve

So with Larry Johnson, which is a great book on really establishing that honesty and credibility, so Bob, thank you very much for appearing on People Performance Radio.

Bob

Keep up the good work, Steve—really appreciate it.

Speaker

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