I had to be aware of the Worker Adjustment and Retaining Notifi- cation (WARN) Act to ensure that we were not violating any laws. The WARN Act states that a company cannot lay off more than fifty employees, or 33 percent of employees per work site where there are more than one hundred employees, without proper notifica- tion. Because we were terminating employees from three locations (San Francisco, Los Angeles, and New York), the WARN Act was not an issue. At this point, our attorney okayed our reduction numbers. Because of the company’s current revenue and the stock price (less than one dollar per share at this time), most employees un- derstood their jobs were not very secure. There was a sense within the company that it was just a matter of time before another layoff would be announced. It was not a great working environment. During the previous month, employees had visited my office to in- quire about a layoff and voice concerns about their jobs. I made a point of sitting down with the employees to listen to their appre- hensions and fears. I told them that there was no layoff planned at the moment, but that every one of us was working in an uncertain environment and that we all should be saving money and carefully planning for the future. Employees know when a company is in trouble. How a layoff should be conducted always is up for debate. Do you tell people in advance? What day of the week do you let them go? What time during the day? Who should do it? How much time do you give them to pack up their belongings? Do you need secu- rity in case someone gets violent? Overall, there is no perfect way of implementing a layoff. The whole process is dismal. Laying peo- ple off is something that you never want to get good at doing. The most important thing to remember is that the decisions being made are affecting people and their families. I have found that many ex- ecutives are afraid of the whole process of downsizing. Often, they make the decisions to lay off staff, but on the day of the layoff, they are nowhere to be seen. They leave the dirty work for middle manage- ment and HR professionals to do. I think it is extremely important that top executives are visible and available for every employee dur- ing a layoff. It sends a powerful message to employees being let go, as well as employees remaining in the company, that their leader- ship is not afraid to face their decisions and those individuals affected by them. It is our job as HR professionals to see that em- ployees exit the company in the most professional, respectful, and ANOTHER LAYOFF? A DOT-COM REALITY! 61 TEAMFLY Team-Fly ® 62 RESIZING THE ORGANIZATION compassionate way possible. I believe it is imperative that the or- ganization’s leadership sees it this way too. When to Tell People Thursday Morning: Three Business Days Before the Layoff The company was reducing staff in some departments by more than one-half. We decided that it made more sense for managers to talk to their employees individually and inform them about the reduction on Thursday morning, three business days before the layoff. This approach would give time to employees who were being let go to give their work to those remaining and give them a few extra days to get their bearings. In addition, managers could check in with employees remaining and make sure they were will- ing to take on additional tasks. Another major reason we decided to tell people early was that it is nearly impossible to keep an up- coming layoff of such magnitude a secret. Preparing the Final Packages Thursday Afternoon: Three Business Days Before the Layoff Now it is time to kick into administrative overload and prepare the final packages for the exiting employees. It is imperative to be organized and thorough when putting packages together. If all of the paperwork is in order, the day of the layoff will run much more smoothly and you can focus on what is really important: the people. Putting packages together takes time and can be tedious. Here is the process that I followed to make sure I had everything covered. First Things First It is imperative that the list of employees being laid off remains confidential, even after the employees have been notified. Typi- cally, the only employees who should be given access to the names are the executives, the hiring manager, the HR manager, and the payroll manager. Payroll has to cut their final checks. It also is important to examine employee files and check for any special agreements or circumstances. Some employees, de- pending on their level, may have separation agreements included in their original job offer. Give the final list to the payroll manager, so he or she can cut final and severance checks. Payroll also can provide the dollar amounts of money owed, so that the amount is available for the separation agreement. Also, get employees’ cur- rent addresses from payroll. Having the information in an Excel spreadsheet makes for a much more efficient process. You can mail-merge data into letters when you are ready. Finally, it important to determine what company property the employees have been issued (such as cell phones, credit cards, and laptop computers). This information is usually available from the information technology, accounting, or facilities department. Putting the Packets Together Buy enough letter-size manila envelopes (one per employee) for paperwork. In addition, buy a sufficient number of small manila envelopes to collect keys, door badges, and cellular phones from each employee. Purchase address labels to go with each of the en- velopes. Also, acquire “sign it here” flags to stick on the documents that the employee needs to sign. The following material belongs in each employee’s packet: 1. Change of address form. Put this right at the front of the paperwork. It is very important that you know the employee’s cur- rent address, and employees feel reassured that the company knows how to contact them in the future. 2. Separation procedures. This document outlines what is in the final package. People who are being let go may be in shock or confusion. This document should guide them through the paper- work and answer their questions. 3. Two copies of their separation agreement. The separation agreement is a legal document that outlines their termination of employment. It should be on company letterhead and needs to be reviewed by an attorney. Once the employee reviews it and agrees to the terms, he or she signs it and returns it to HR. 4. Final paycheck. A final paycheck is given to the employee, along with information describing exactly what is being paid, such as unused vacation time, bonuses, and severance pay. ANOTHER LAYOFF? A DOT-COM REALITY! 63 64 RESIZING THE ORGANIZATION 5. A reminder of any documents that they have signed, for ex- ample, a signed proprietary agreement. 6. Information on Consolidated Omnibus Budget Reconcilia- tion Act (COBRA) benefits the employee is entitled to receive. Ex- plain the cost, how to sign up, and other pertinent information. Employees have the right to sign up and pay for their health in- surance for a maximum of eighteen months after their termina- tion date. 7. Stock option summary. If the company provides stock op- tions, all employees should receive a statement showing what options they have been granted and their vesting schedule, as well as when they can exercise it. 8. 401(k) rollover forms and tax information. The 401(k) ben- efits plan administrator should provide these forms. Make sure em- ployees receive them, so they can roll over any 401(k) money they have in their plan. 9. Unemployment brochures and information. You can get this information off the Internet for each state. The information should be easily understood, along with the telephone numbers and locations of local unemployment offices. 10. Employee assistance program brochures. Provide infor- mation and telephone numbers for employees who want to talk to a mental health professional about their layoff. Most employee assistance programs provide counseling and referral services. Once you have all of the documents assembled, customize them by using mail-merge from the information on your Excel spreadsheet. It makes a difference to an employee who was just let go to see a salutation of “Dear Mary” rather than “To terminated employee.” These details let employees know that you and the company take this process very seriously. The more customized and professional you can make the documents, the better. The less in- formation you have to get from the employee, the easier the pro- cess will go for both of you. Once the mail-merges are complete, print the documents and assemble the packets. Using the address labels, I printed out the employee’s name, department, and location and placed that label on the large envelope packet. I also printed out the name, de- partment, and location, as well as listed any company property the employee had and placed that on the smaller manila envelope. This approach makes it easy for employees to know what they need to turn in to the company and informs them they can do so by just putting it in the envelope. Coaching the Managers Every employee responds differently to a layoff. Some are cool and understanding. Some make light of it. Some sob all day. Others get mad and frustrated. Some become vocal, and some shut down. This diversity of responses also is true for the leadership. When managers have to make choices to cut employees from their staff, it is very difficult and very emotional. They work with these people every day, and in many cases they are like a family. As an HR professional, it is my job to check in with those managers and help them through this process. I coach each manager on how to talk with the employees who are being let go. I usually meet with the manager in my office to discuss their concerns about that spe- cific meeting. I then tell them exactly what I would say to the em- ployee. I remind them to explain to the employee that this termination is not performance related; it is purely a business de- cision. We review some of the questions that the employee might ask during the meeting. For example, the most common question employees ask is, “Why me? Why am I getting fired?” I reassure the manager that I will be right there to take the ball if the employee gets angry or really upset. I also inform the manager that some- times we have to let employees vent or simply respect the fact that they may want to say nothing at all. All we can do at this time is tell the employee in the best way that we can, providing as much sup- port going forward as possible. During a large layoff, middle man- agers often feel as if they have no control. Walking managers through the paperwork that their employees will be receiving not only helps the employee but also gives some control back to the manager. I outline everything the manager needs to review with the employee and then provide this information to them in writ- ing so they have it as a handy checklist. ANOTHER LAYOFF? A DOT-COM REALITY! 65 66 RESIZING THE ORGANIZATION The Day of the Layoff Tuesday morning: 9:00 A.M. By Tuesday morning, the packets are together and ready to be picked up by the managers. We have decided that the managers will hold their meetings with their employees starting at 9:00 A.M. Because I am the only HR professional, I can sit in on only a few of the meetings. The more experienced managers do not need me in their meetings. However, they know where I am if they want me. I have requested a counselor from our employee assistance plan to be on-site. We informed employees that we were paying them through the end of the day, but they could pack their belongings as soon as they wanted and go home. Employees who were not being laid off could take the day off if they were upset or simply wanted to get out of the office for the day. A companywide meet- ing was scheduled at starting time the next morning. After the manager had finished meeting with the terminated employee, the employee came to my office as directed, bringing the paperwork. We signed the necessary documents, and I gave them their severance check. They came to my office with scared faces, some with relieved faces, some with no statement, and a handful with tears in their eyes. You cannot predict how people are going to react. Every person has different personal and profes- sional issues that make the specific situation unique. Even in the Internet environment where layoffs have become commonplace, the pain is still very real. Why I Work in HR It is difficult to work hard on a project that has a negative result. It is difficult to see the packets that you created in the hands of your friends and colleagues, knowing they may not be able to make next month’s rent or mortgage. All I could do at this point was to listen to every employee who came to my office, answering every ques- tion they had, no matter how long the answer took. I was amazed at how many laid-off employees came by to see how I was doing. Many came to thank me for orchestrating a process that can be cold and calculated, and making it one of respect and professionalism. The outgoing employees often wanted to shake my hand, say good-bye, or give me a hug. I definitely hugged back. My job now is to be available for our terminated employees when they call with questions about their COBRA or 401(k), as well as to ensure that existing employees are able to keep moving for- ward and motivated to come to work. I try to refocus our remain- ing employees by providing “brown-bag” training sessions on specific topics related to what is going on in the organization. “Time Management,” “Coping with Change,” and “Stress Man- agement” are some of the sessions we have conducted. We have begun holding employee lunches once a week hosted by our CEO, president, or CFO and allow open discussion to take place between them and every employee attending the lunch. My primary goal is to help create a work environment that ben- efits the employee and the goals of the company. Just as we have a responsibility to ensure our employees have a rewarding experi- ence while on the job, we also have a responsibility to make sure each employee exits the job in the most positive way possible. It is something they will remember for the rest of their lives. When you look back at previous jobs, what you think of first is not what you did every day on that job but the people you did it with. That is why I work in HR. I am fortunate to work with people from all parts of an organization and assist them in ways that they will remember forever. ANOTHER LAYOFF? A DOT-COM REALITY! 67 CHAPTER 4 Contribution-Based Process for Continually Right-Sizing an Organization Experiences from W. L. Gore & Associates, Inc. Raymond G. Lorenz Aligning a company’s staffing levels to the needs of the business often is a difficult task, especially when the business is expanding or contracting quickly. To ensure that a business has the right num- ber of employees is hard enough; throw in other critical factors like appropriate skills, motivation, costs, flexibility, timing, and rapidly changing business conditions, and the task becomes daunting. This is the case for many companies, particularly those competing in volatile and rapidly changing industries, such as the dot-coms and other Internet, telecom, and electronic-based organizations. How does a business get the people it needs, when it needs them, and adjust on the fly to the ups and downs of the business or industry it 68 Much of what is described in this chapter is a result of my experiences obtained while working at W. L. Gore & Associates from August 1989 to October 2000. Some of the principles and methods described in this chapter may be extensions or adaptations of what is actually being practiced at Gore today and are offered as suggestions for right-sizing purposes in general. serves without totally disrupting workforce performance and morale? This chapter presents a model for accomplishing this task that is based on individual employee contributions aligned with business needs. Contribution-Based Model for Organizational Sizing W. L. Gore & Associates has an extensive contribution-based orga- nization whose origins date back to the early days soon after the company was founded in Bill and Vieve Gore’s basement in 1958. Then, as well as today, Gore employees (called associates) assessed each other’s contribution to the success of the enterprise and ranked each other using a peer-to-peer contribution ranking sys- tem. This system is based on associates knowing what their cowork- ers are working on (their commitments), how important this work is to the success of the business (impact of commitments), and what results are being achieved (effectiveness at completing com- mitments). Associates who are ranked higher than other associates are perceived to be contributing more toward the company’s suc- cess than their lower-ranking counterparts. All associates are ranked by their teammates and leaders at least once a year, and the resulting lists place everyone in rank order based on contribution, from highest to lowest. The ultimate goal of the contribution as- sessment process is to develop a contribution-based rank-order list that is accurate and fair to all parties. The process was relatively simple in the early days when the company was small and everyone knew what everyone else was doing. The contribution assessment process gets more complicated as teams and workplace size grow. This is one of the reasons that Gore has kept its teams relatively small, generally fewer than two hundred associates in total. The primary use of this ranking information is for pay-setting purposes. People are not paid based on seniority or job title at Gore. Rather, pay is based on the contributions the employee is making to the success of the company. Leaders in the organization use the results of the ranking process to ensure that higher con- tributors are paid more than lower contributors. This is a critical component of the company’s overall compensation system and is believed at Gore to be the fairest way to differentiate wages within CONTRIBUTION-BASED PROCESS FOR RIGHT-SIZING AN ORGANIZATION 69 70 RESIZING THE ORGANIZATION the organization. Higher contributors have the opportunity to make more money than lower contributors. This philosophy helps avoid salary compression and ensures that associates who are doing great things for the organization are properly rewarded. A contribution-based compensation system also has a major in- fluence on the staffing levels within the organization. During the hiring process, Gore recruits associates who have the best chance of helping the organization meet its overall business goals and ob- jectives. As business staffing needs change, the contribution needs of the business ultimately will dictate the outcomes of these staffing decisions. The health of the organization will be maintained and improved as associates with high contribution potential are added and individuals with unacceptably low contribution are removed. This process is best practiced on an ongoing basis to ensure overall organizational health and improvement; it may accelerate in times of major business growth or decline. Diligence at practicing this process on a continuous basis can minimize or dampen the need to change staffing levels in large chunks during major business shifts, especially downturns. Deal- ing with low contributors and addressing these situations on a con- sistent basis is a far healthier situation for all associates. Layoffs may be inevitable when business downturns are large and sudden. Nev- ertheless, systematic and consistent attention to staffing levels using contribution data can reduce these numbers and ultimately result in a more vital organization with higher morale. Details of the Model A contribution-based system for staffing is well integrated with the hiring process. A company following this philosophy is constantly seeking individuals who have the skill and talents necessary to be successful within the organization. Ensuring that the company is populated with people capable of making high contributions is critical to the long-term success of the organization. Consequently, the recruiting effort must seek people who are capable of being high contributors within the organization and the business model and requirements it has developed. In addition, the organization needs a process to assess employee contribution for compensation and other reward and feedback purposes. This process must ob- . employee and then provide this information to them in writ- ing so they have it as a handy checklist. ANOTHER LAYOFF? A DOT-COM REALITY! 65 66 RESIZING THE ORGANIZATION The Day of the Layoff Tuesday. seniority or job title at Gore. Rather, pay is based on the contributions the employee is making to the success of the company. Leaders in the organization use the results of the ranking process to ensure. 9: 00 A.M. By Tuesday morning, the packets are together and ready to be picked up by the managers. We have decided that the managers will hold their meetings with their employees starting at 9: 00