Firms can achieve a flexible workforce through staff incentives and outsourcing initiatives, as alternatives to a redundancy approach, says FRANK DILLON

IN THE midst of the gloom of a recent spate of job loss announcements, one organisation's approach last month suggested that there was an alternative way to reduce costs and headcount. Permanent tsb's initiative in incentivising staff to take career breaks of up to three years (see panel), provided a novel approach to right-sizing an organisation for a period of economic slowdown.

Achieving flexibility over different stages of the economic cycle is a tricky task for organisations. During periods of boom, organisations compete to get the best staff in a process McKinsey consultants famously described as 'the war for talent'. Ironically, in a downturn, many of these highly paid staff are then made redundant.

Prof Jeffrey Pfeffer of Stanford University, one of the world's leading management thinkers, is a huge critic of this boom and bust approach to human resources. He cites the semiconductor industry as one of the worst proponents of this cycle.

It lays off staff as soon as there is a downturn and then pays large signing bonuses to get similar, or in some cases, even the same staff back when market conditions improve. "It's a classic case of buying high and selling low," he says, adding that such an approach also disrupts the intellectual capital of the organisation at a time when, if anything, it needs to strengthen it.

The inability of organisations to manage cycles is a worldwide problem.

"Redundancy should really be the last resort for an organisation," says Michael McDonnell of CIPD. "There are a range of other options to reduce payroll costs, including recruitment freezes combined with natural wastage, reducing overtime and offering early retirement packages."

McDonnell agrees that a boom and bust approach does organisations no favour and can be counter productive. "Where you announce a redundancy programme, you run the risk that the most talented people - the ones who can more easily secure alternative employment - are the first to leave."

Another issue McDonnell says organisations need to worry about is so-called 'survivor syndrome', where those left in the organisation are psychologically damaged by seeing their colleagues leave, often leading to poor morale and consequent loss of productivity. "The redundancy programme will have been implemented with the desire to increasing competitiveness and productivity. In some cases, it may have the opposite effect," he says.

One approach to having a more flexible and scalable workforce is through the use of outsourcing. "If an organisation can plan its workforce around its production or market demand cycles, that can be a huge advantage," McDonnell says. "This means that when you have a downturn, you don't have to cut into the fabric of the organisation."

Outsourcing, however, has a bad name in this country, McDonnell says. "The debate about outsourcing has been led by the trade unions. They have presented it in the context of the so-called 'race to the bottom'. They have a vested interest in doing this as it represents a threat to their membership base."

Accenture has been one of the main drivers of outsourcing in Ireland. "Outsourcing gives Irish businesses access to highly skilled, lower-cost resources in a flexible manner, that can ramp up and ramp down with business cycles rather than representing an ongoing fixed cost," argues the firm's head of outsourcing here, John Staunton. "It enables an organisation's own employees to focus more on its customers, on driving innovation in its products and services and on taking market share in the current downturn," he adds.

Outsourcing initiatives provide an effective way of taking headcount out of an organisation while still preserving employment for staff. Alternatively, many activities can now be performed as managed services by an outsource service provider, Staunton says. McDonnell says that organisations should also examine other possibilities to redundancy.

These could include flexible or reduced working hours which may suit certain employees' circumstances and which have the benefit of keeping skilled and knowledgeable workers within the organisation. International experts agree that the best time to optimise headcount is during relatively good economic times and that organisation should neither rush to fill position when they become vacant in good times or slash them when there is a downturn.

Pamela Harper, consultant and author of Preventing Strategic Gridlock offers the following advice. "From my experience, working with companies experiencing gut-wrenching growth and/or change, breaking the cycle of excessive right-sizing and layoffs can be avoided by thinking strategically about positions before jumping to fill them. Uncovering assumptions about what, who, where, when, and how jobs need to be accomplished, often leads to more creative options and greater flexibility in achieving company objectives."

Before deciding on redundancies, management need to tread carefully and not avoid making hasty assumptions about who does what in organisations, she explains.

"I've often seen redundancies in jobs because of assumptions that were made about who was performing which roles and responsibilities. For example, in one company, I observed that two executives who thought they had different roles and responsibilities, actually significantly overlapped in what they were doing. Rather than laying off anyone, the two executives realised that there were additional responsibilities that were not being addressed by anyone. The best way to avoid excessive layoffs and right-sizing from redundancies is to not only interview people about what they do, but to observe them in action."

Mark Salisbury, author of iLearning: How to Create an Innovative Learning Organizationagrees. "To get to the right size in terms of people, organisations need to focus on the knowledge behind the work and uncover the drivers of work - the performance objectives that need to be met by the work."

This is the key to improving the efficiency of organisations and having the right staffing levels in both good and bad times, he adds. Where redundancies are necessary, many organisations are trying to take a more humanitarian approach to dealing with the personal devastation involved for employees forced to leave.

Keith O'Malley of Career Consultants provides outplacement service for Irish companies. He says that there has been a significant increase in inquiries in recent weeks with many organisations planning redundancy programmes for 2009.

O'Malley says that organisations are trying to be as generous as possible in their severance terms at the moment, but that these redundancies are being forced by short-term financial pressures rather than more strategic initiatives to exit markets.

O'Malley says that the challenges for those who lose their jobs will be greater now than those faced in the 1980s.

"Back then, the gap between social welfare benefits and pay rates was far less than it is now because of better social welfare entitlements for the unemployed and higher rates of tax for those who were employed," says O'Malley. "Those who are facing redundancy now will find it much harder. They really need to get back into employment very quickly," he says.

Those who are facing redundancy now will find it much harder. They really need to get back into employment very quickly

ROUGH TIMES:HOW TO DEAL WITH A DIFFICULT SITUATION

REDUNDANCY CAN have a devastating impact on those who suffer it, but experts say there are many immediate positive steps employees can take to survive this trauma and rebuild their careers.

"First of all, do not to take it personally, although it may feel like it. It is something that is experienced by many of us and now has no impact on your CV as it would have done 20 years ago," says Dr Ann Parkinson, subject area leader for managing people and performance at Henley Business School. "Redundancy can be a good opportunity to take stock of what you really want to do and for many it can be a wake-up call," she adds.

She advises taking some time out, on a holiday, for example, to help get some perspective. "But treat it as you would a holiday from work and come back refreshed and ready to approach your job hunting as you would a project. It's always a good idea to pay attention to your health and fitness at this time as well. Walking is a good time to reflect and think about what you want to do."

Job seekers should be assessing the transferable skills that they have or other skills they need to acquire to position themselves for new career opportunities. "Keep in touch with your networks especially if you are a member of a professional body as you will often find opportunities arising from networking, even if it is just being able to keep up with what is going on in you area," she advises.

Cary Cooper, professor of organisational psychology at Lancaster University Management School, agrees that this is a time to take stock of life and career. "Reflect for a few days on what you really want to do. Don't rush into the same job in the same sector.

The chances are that the sectors which are making redundancies are not employing people," he says. "Look at your skills base, what you are good at, and how this can be applied to other sectors that are reasonably buoyant - then look for a job or consider opportunities to become self-employed, using your skills and contacts."

Isolation and negative feelings need to be tackled to avoid getting depressed. Cooper suggests getting support from your social and professional network. "If you know somebody within business or industry who can help you look at your other options, then seek them out. Government support is available to re-train to gain particular skills that you feel you are missing, and this will be free, but you have to take control and act on things yourself. Also, don't worry if you are rejected for jobs along the way, as you will be."

STAFF INCENTIVES:NOT SO PERMANENT DEPARTURES

IT WAS an idea born in a management brainstorming session. Permanent tsb's initiative to incentivise staff to take career breaks was devised as an innovative approach to the organisation's need to trim short-term headcount. As the deadline for applications to the scheme approached last week, the indications were that the initiative had proved successful, according to the organisation's HR manager, Laura Phelan.

"There has been a good cross-section in the applications so far between male and female, and younger and more mature members of staff," she added. Phelan said that it would take a couple of weeks to process the applications and to arrive at a final figure for the uptake of the scheme.

At face value, the "incentivised career break" certainly appears attractive. The scheme offers a paid career break where staff can receive up to 50 per cent of their salary up to a maximum of €20,000 for a two-year break - equating to €10,000 a year - while for those willing to leave the organisation for three years, the incentive is 75 per cent of salary up to a maximum total payment of €35,000. The scheme is open to all employees who have two years service at the bank.

When employees return after the career break, they are guaranteed a role at a similar level in the bank in the same geographical area. The initiative is an attempt to provide a 'win-win' for both organisation and employees. The organisation saves payroll costs such as salary and pension at a time of shrinking business and market uncertainty, while employees get the opportunity to study, travel or pursue other personal interests.

"We see it as a better solution to trimming our cost base than offering a redundancy deal and a good example of a partnership approach to an issue," Phelan says. "The reaction we have got internally is that it is a novel approach and the voluntary nature is seen as very positive aspect."

Restrictions in the scheme include not working for competitor financial institutions during the duration of the career break. Employees are taxed on the package, but most will find themselves paying only marginal amounts of tax.

A possible downside of the scheme includes the potential to lose out on promotion or career advancement during the period of leave.