before a deal was announced. We continued to do so throughout the organization until the time of closure. The emphasis of the ac- tivities shifted over time in line with the evolving reality. We allowed the employees to select the sessions that were most applicable to their specific situations. The leadership initiative LEAP (Leader- ship Enhancement and Acceleration Process) for employees with high potential was continued but refocused to help people un- derstand their leadership skills in the context of leading change. In parallel, functional training sessions were continued where they had been going on before the announcement occurred. We com- municated openly with employees that the prime purpose of all training efforts was now shifting toward furthering their personal capabilities. Communication At the learning event, the HR and communications functions had agreed to make a substantial investment in the communication area. This proposal found immediate response from the leaders whose style had become more open over the past three years. In addition to the regular face-to-face meetings organized by line man- agers and their HR representative, the number of management meetings increased, including numerous question-and-answer ses- sions in line with the needs of the regions or local organizations. Frequent e-mail messages were distributed. The quarterly company magazine, Premier, was discontinued and replaced by Premier in Brief, a more regular written update on the sale of SSWG and important developments. This newsletter was published every four to six weeks and answered questions submitted by a feedback button on SSWG’s Intranet. An annoying obstacle to speedy communication was that all official messages had to be cleared first by attorneys from all the parties involved. We did not find a satisfactory way around this problem, except for the many face-to-face sessions we conducted. As the waiting for the closure dragged on, we introduced Radio Seagram—regular telephone broadcasts by the CEO in which all employees could dial in to hear the latest updates. We thereby in- creased the speed of the messages and found ways to revert to dif- ferent means of communication. It is a cliché to say that one needs to communicate, communicate, communicate, but it is the truth. WHO MOVED MY DRINK? 51 TEAMFLY Team-Fly ® 52 RESIZING THE ORGANIZATION We prided ourselves because our senior management stayed very focused and mostly visible throughout the process. Most leader- ship groups seem to vanish during a transition like this. In our case, the underlying driver was the strong pride and attachment that the top team continued to hold for their company and what it stood for among its competitors. Retention While addressing personal needs and showing respect and under- standing to the individual remained important, we believe that money remains one of the best short-term means to secure reten- tion. Consequently, HR created a number of retention schemes to keep the critical talent required to attain the business objectives SSWG’s senior management were committed to deliver. Many se- nior managers feared a massive walkout as soon as the deal was an- nounced. This never materialized; the retention levels stayed remarkably high throughout the period. Almost one year after the announcement of the intended sale, SSWG had only 534 out of its 8,500 employees (6 percent) voluntarily leave. Furthermore, the resignations have been lowest in North America, where we had the largest number of long-serving employees. Senior management and HR allocated retention funds widely across a broad management population of about 1000 people. The SSWG Focus and Motivation Reward entitled recipients to a full-year bonus after a six-month period; it could be adjusted up- ward based on strong individual performance. Surprisingly, few resignations occurred after the receipt of this bonus. A comple- mentary special retention scheme also was made available to re- ward key employees deeper in the organization with lump sums of an average 50 percent of their salary. Within this program, 575 non-bonus-eligible employees were nominated by their country managers and functional heads for being critical to the successful running of the business on a daily basis or essential to closing the sale transaction. In addition to the retention funds, the senior HR team worked hard on behalf of all SSWG employees to maintain all the normal compensation practices (such as performance bonuses and salary reviews). Understandably, this objective was not always met with great enthusiasm on behalf of the buying companies. These many measures and a generous handling with retention funds provided the necessary boost of morale and kept the employment numbers high until the fall of 2001. They contributed greatly to the record business performance results SSWG delivered at the end of June 2001. If we had been more courageous, we probably should have tried to tailor the retention efforts to individual needs even more. We acted on a very inclusive and generous basis in combination with the many other interventions people could choose. We went some way toward a not one-size-fits-all approach. Staying with It: Control Your Destiny or Somebody Else Will It became clear who the two buyers were just before Christmas. SSWG’s senior management took the initiative to reach out to them quickly and to start conversations about people. In doing that, strong HR practices that we had built during the past three to four years were leveraged immediately. Our talent and high- potential review process, communication process, and above all the sense of urgency that had become an integral part of our cul- ture all were intact. A series of suggestions regarding resourcing principles and processes was submitted to the buying companies. Early exchange of performance, talent, and resumé information about senior management and those with high potential was well received by the new owners. Based on the robustness of the un- derlying performance and talent processes, they took the data at face value. Consequently, it became the primary source for their decisions about whom they were going to employ. Throughout the pre-close period, the senior HR team stayed close to what was hap- pening across the company with respect to the decisions about peo- ple. We advised the buyers when the practices appeared in conflict between the two buying companies or were not in line with initially agreed principles. Our view was that we had to control the destiny of our employees for as long as we could influence the new own- ers. We also urged them to communicate the future mission of the overall company and the local organizations to our workforce and helped them organize the necessary road shows in an attempt to improve the confidence in the future. Lessons Learned: A Personal Reflection These thoughts and insights from my experience resizing SSWG are entirely subjective but I hope useful: WHO MOVED MY DRINK? 53 54 RESIZING THE ORGANIZATION • If you cannot escape the organizational change, get into it. Do not assume an attempt to acquire or merge with your company will not happen. Furthermore, do not think that because you have been acquired, all control is lost. Once a deal has been announced, do not simply sit back and wait for things to happen. A new reality will unfold sooner or later. There is much to be gained by becoming proactive and influencing your own destiny. • It is a great opportunity to show your character as both an individ- ual and an organization. It is a perfect time to answer the question, “What do we stand for?” Unfortunately, all the textbooks on this subject are right: you will encounter some of the worst in human behavior. As the acquirer, it is easy to fall into the superiority trap. It requires great integrity and sensitivity throughout your organi- zation to prevent likely power plays from occurring. Any downsiz- ing, resizing, or closure of a company will happen in a way that is consistent with the organization’s culture and underlying values, whether stated or not. In such high exposure times, it is vital that there is a rock-solid core to the organization’s reputation. In our case, the six to seven years of investment in cultural change and leadership development paid off. We praised ourselves that one of the ten success criteria for a Seagram leader had been “character counts.” • Always be in a state of preparation for a possible takeover or com- bining of companies. This should be a constant agenda item for se- nior management. Once it does become reality, both short- and long-term actions will be swiftly required. Mergers, acquisitions, and resizing always will be with us. The way in which you structure your processes and build your culture is critical for the relative smoothness of something that is not smooth at all. • Focus on increased retention of top talent. There are two elements to this point. First, talented people at the top will have much op- portunity to influence the new owners. The acquiring company will make decisions about these people first. If they are chosen to stay, they will be able to influence other decisions about people. Second, the talent pool deeper in the organization often occupies roles that are critical to the ongoing success of the business. It is necessary to secure their continued employment and commitment to help the new business reach high performance levels fast. Fur- thermore, there is evidence that these highly talented people typ- ically are higher in learning agility and faster in dealing with change than other employees. • Always be ready to provide rapid follow-up and support after every announcement. Unfortunately, the human psyche is such that it tends to hear or read all the negative implications in any piece of communication. Morale and motivation can drop quickly if peo- ple are left to form their own conclusions. In order to correct po- tential misconceptions early on, management needs to be available for follow-up dialogue. • Use straight talk—and use it often. You are bound to have to re- peat the same message over and over again. As annoying as this may be, you have to do it. Never create illusions. The most honest communication is usually frank. • Be ready to manage emotions, and expect to spend a lot of time on this practice. The emotions around loss or change traditionally have been categorized as some of the strongest stressors. The neu- rosensory research around emotional intelligence suggests that strong emotional responses from the brain have priority over the more rational side of the brain. When people are forced to live with such extreme emotions for some time, they are likely to de- velop a strong emotional filter in their mind through which mes- sages are received and which will color the way they normally listen and respond. Managing such a situation requires sensitivity and ongoing care. • Help people become aware of their skills and their strengths. The best help you can give employees with long-lasting effect is to help them assess their job strengths and weaknesses accurately. Money simply is a plaster on the wound; it does not help heal the wound. Always have employees consider redeployment. Even when the new owner has a job to offer, advise your employees to seek other op- tions as well. • Telling the truth sometimes appears to be revolutionary in organiza- tions. Support the managers delivering the message. Most of them, regardless of their seniority, are not trained to give bad news and need special support around the process. In business, most man- agers resist speaking the plain truth because they think it is going to upset people. They forget that trust can be built only on truth and sincerity. A positive workplace requires unvarnished honesty. Therefore, managers need to be told by their seniors what precisely WHO MOVED MY DRINK? 55 56 RESIZING THE ORGANIZATION is expected from them and given assistance in the form of frequent communication by teleconferencing, briefings, dialogue, and fa- cilitation help from HR. • Tailor retention efforts to individual employee needs. There is no one-size-fits-all retention lure. I recommend that HR professionals try to customize retention programs to the individual employees whom the organization seeks to keep. Some employees will be in- terested in money only; to others, more flexible practices, such as telework, telecommuting, less travel, a challenging project, or a variable work schedule, may be more appealing. In addition, the employees you want to retain most often are the more talented ones who frequently have more options in the labor market. Con- sequently, try to demonstrate that you are paying attention to what really matters to them and to what needs they value. • Prepare yourself for a long and dirty war in the trenches. All pro- jected time lines will be incorrect and always will be delayed. Be mentally ready for twice the delay than the one announced at the onset. Also, prepare yourself for an environment of political games- manship, self-preservation tactics, and empire building. Organiza- tional change creates uncertainty and ambiguity. Such times bring out the best, but also the worst, in people. • Act quickly once the intention for a company sale has been made pub- lic. Insist that senior management roles be dealt with the soonest, so that they can be announced before or, at the latest, at the time of the close of the deal. This approach will provide clarity and di- rection for the remaining employees. If you do it quickly, the pain is sharp but brief. • The best layoff programs show respect for and trust of employees. As much notice should be given as is reasonably possible before a re- duction in force takes place. Employees should be permitted to continue to perform their normal job duties in their regular facil- ities, with full access to systems and people, enabling them to say good-bye and depart with dignity. Such an attitude can create a positive image of an employer of choice. • This is a period of determining times for the HR function. As a re- sult of four years of ongoing development in our HR function, we now can pride ourselves that it is deeply involved in the business as a true partner to the line. Not wanting to take anything for granted, we saw the breakup of our company as a huge develop- mental opportunity for our HR professionals despite the adverse circumstances. During such a massive resizing effort, the role of HR is not always clear. Typically, HR is seen as a non-revenue- producing role and is likely to be high on the list of to-be-cut jobs. Moreover, there is an increased workload in the function to process all the personnel changes, often with increasingly fewer people to do the work. At the same time, HR personnel usually are being sought out for emotional support. Despite this challenge that we too had to face, we worked hard immediately after the an- nouncement of the deal to influence the mind-set of our HR staff so that they saw the experience as an opportunity to learn and build competence throughout every phase of the combination. In addition, we found ways to educate senior executives and line man- agers about the potential pitfalls of mergers and acquisitions. We designed and implemented responsive and adequate interventions to allow the organization to deliver its strategic objectives while at the same time preparing it for its future destiny. Any HR professional who is faced with resizing issues should respond proactively. Resizing efforts build character, professional- ism, competence, and an opportunity for superior performance. These are qualities that are at the top of the list when companies seek to recruit their future strategic HR people. WHO MOVED MY DRINK? 57 CHAPTER 3 Another Layoff? A Dot-Com Reality! My Story Jeffrey Crandell Working for an Internet start-up company as a human resources (HR) professional has its highs and its lows. An Internet start-up is a fast-paced and ever-changing environment that forces you to hit the ground running. You learn aspects of your job that you would not have experienced if you were working in a more established or traditional company. The philosophy is that time is money, and growth is the key to success. In this environment, the main re- sponsibility of an HR professional is to hire, hire, and hire. Fill that bubble with talent, and help create an organization that will attract candidates from all over the world. The Internet bubble has burst. The company I work for was a spin-off of a large media company. Within a year, my company grew from twenty employees to over four hundred. Every department was growing, with three employees seated in one cubicle, facilitating new employee orientations every other day. Days like these make you flex your HR muscle and put everything you have learned about recruiting, benefits, employee relations, and training to the test to make this growing machine roll as smoothly as possible. The one piece missing in the picture was profit. The company was not 58 Jeff Crandell’s last day of work at Snowball.com was February 15, 2002. making a dime in profit and losing millions. The bubble was about to burst. Less than a year after topping off at over 400 employees, we now are a company with approximately 110 employees. The road getting to 110 employees, like the road to getting to 400 employ- ees, was not an easy one. Nevertheless, it is a road that every HR professional can learn from and may have to go down at some point in his or her career. One of the challenges that a HR professional has to balance is the desires of the executive staff and board of directors with the needs and rights of employees. When the market changes or rev- enue declines, the company has to look at its business model and figure out how to cut costs. Staff reduction often is the first area that management considers when attempting to reduce overhead expenses. It is the HR job to make sure that any staff reduction is done legally, fairly, and humanely. It is also the part of the job that is not very pleasant. Concern for people is what made most of us choose HR as a career. We help employees every day in a way that not only affects their work life but their home life as well. Starting a new job is a big milestone. Losing a job can be devastating. Snowball.com develops and maintains Internet Web sites. Like most other Internet firms, it is only a few years old and grew very quickly and then contracted quickly. It has gone through four lay- offs since its height. These reductions were due to shutting down of some on-line networks. The first reduction in force occurred in May 2000. The employees who were let go during this layoff worked directly on those networks. We paid out three months’ severance pay to those employees. The second layoff, in October 2000, was primarily a reduction in overall workforce, and cuts were made across the board. About three months later, in January 2001, we im- plemented an even larger layoff—another across-the-board reduc- tion in force. Employees were given an average of one month’s severance pay if they had been employed one year or longer and three weeks if they had been employed less than a year. All of these job reductions were implemented on an involuntary basis. On the morning of the layoff, employees were informed by their respec- tive manager or the director of their division that their job had been eliminated. On average, they were allotted about three hours to pack up their belongings and leave the building. The largest, ANOTHER LAYOFF? A DOT-COM REALITY! 59 60 RESIZING THE ORGANIZATION and probably the most emotional, layoff was the most recent. For months, we experienced a lot of turnover within our company. The job market was hot, and people could go anywhere they wanted. Now, people do not have the same options. Employees are hold- ing on to their jobs, happy to receive a paycheck every two weeks. Consequently, conducting a layoff during these times is even more painful for everyone. Everyone from the executives making the re- duction decisions to those employees remaining who have just lost their coworkers and friends feels the pain. The Layoff Prior to our most recent layoff, we had 170 employees. We had conducted a few layoffs and had seen reductions in staff through resignations and performance issues. During this time, the HR de- partment was reduced to one employee: me, supporting 170 em- ployees based in San Francisco, New York, and Los Angeles. During the past six months, our vice president of HR resigned. We had to let our recruiter go, and my HR generalist resigned to move out of state. Thus, the chaos within the company had reached the HR de- partment as well. I knew that another layoff was around the cor- ner, because we had a bad quarter and executives were stalling on hiring a replacement for the HR generalist. The Process Monday Evening Late on Monday, the chief financial officer told me that we were going to implement another reduction and that the executive team wanted to do it within a week. The executive team would like the layoff to occur six business days later, on the following Tuesday. Tuesday was selected because we needed the six business days to decide where the cuts in staff would take place and have time to get everything organized. Wednesday Afternoon: Five Business Days Before the Layoff After many meetings and discussions with managers, the final num- ber of job reductions was set at fifty-seven. Because we were not giv- ing sixty days’ notice of the upcoming reductions to our employees, . so throughout the organization until the time of closure. The emphasis of the ac- tivities shifted over time in line with the evolving reality. We allowed the employees to select the sessions. could influence the new own- ers. We also urged them to communicate the future mission of the overall company and the local organizations to our workforce and helped them organize the necessary. well received by the new owners. Based on the robustness of the un- derlying performance and talent processes, they took the data at face value. Consequently, it became the primary source for their decisions