Professional services firms have recognised that avoiding redundancies if possible is a ‘good thing’. It is. Reports of another firm’s plan for part time working instead of declaring redundancies are an almost daily occurrence. The benefits of retaining partners and staff by re-negotiating terms have been identified in this blog.
For a firm to obtain the full benefit of proceeding in this way real care is needed in implementation. If badly handled morale can be seriously damaged and this may not be obvious straight away. The effort and cost of retaining staff during a recession will be lost if staff leave when the recession is coming to an end and alternative employment opportunities become available. Firms who have followed the redundancy route will find themselves with glaring holes in capability as happened in many sectors following the recession in the early nineties and will be anxious to recruit. Law firms had great difficulty recruiting property lawyers under partner level, for example, for several years.
Staff will leave when the market picks up if they feel that they were not treated fairly under retention plans. Not all sectors in the firm will be in trouble and staff will be unhappy to take a salary hit and go part time if working hard and hitting their targets. There will have to be a reasonable match between the work to be done and the retained capacity of the sectors under pressure. Too much capacity is unsustainable on a cost basis but cutting down working days too much may damage client relationships. Clients will want their advisors to be available to them at crucial times however understanding of the firm’s staff retention plan.
The words ‘deflation’ and ‘the UK economy’ are starting to be used together. Firms may need to achieve deeper cost cutting than retention plans produce and must balance redundancies and retention. Any perceived cynicism in reducing salaries and then declaring redundancies on reduced terms is really going to lose loyalty and credibility. The retention plan should be clear about the commercial terms of subsequent redundancy.
Fairness in work allocation and career development will be the soft elements that firms must demonstrate. All recessions end. Get this right and be in a prime position when this one does.