Role reductions, workforce adjustments, flattening the organization structure, managing attrition, reshaping for the future . . . while the lingo varies, the message is the same: layoffs are coming. Over the past six months, the business press has seen its share of layoff announcements. After acknowledging, and often apologizing, for the strain that layoffs bring to those affected as well as those left behind, these announcements often go on to talk about the benefits that layoffs will bring the organization: a leaner structure, greater efficiency, lower costs, higher profits, a better future, and the list goes on. But, what is not talked about in these announcements as much, if at all, are the organizational downsides that layoffs can have—downsides that undermine the very benefits that layoffs are expected to bring.
In this blog, I am sharing an excerpt of APQC’s Human Capital Management Metric of the Month on involuntary termination. After describing this metric and providing a benchmark, it provides guidance on how leadership and communication practices, if put in place today, could reduce the need for mass involuntary terminations in the future.
Too many involuntary terminations expose an organization to financial and reputational risk in addition to decreased morale and employee engagement. Relationships and collaboration with leaders, managers, and your internal communications function can help to reduce unnecessary terminations, empower employees for internal mobility, and provide transparency during difficult times.
All else being equal, a lower involuntary termination rate is a sign that your organization is doing a good job recruiting the right talent and preparing, supporting, and motivating employees to perform their roles well. A lower rate also means that your organization is doing a good job planning and preparing for workforce-related changes and reskilling or moving employees when possible.
APQC finds that organizations at the 25th percentile have an involuntary termination rate equal to 1.5 percent of total business entity employees. The involuntary termination rate for organizations at the 75th percentile is more than three times higher at 4.7 percent.
Leadership Matters in Involuntary Termination Reduction
Leaders often have visibility into talent needs across the enterprise and can provide intelligence that helps HR fine-tune workforce planning, analysis, and scenario modeling. For example, even if a specific business unit needs to reduce the number of data analysts that it has, other business units in the organization may have a desperate need for those skills. With enough visibility and lead time, the organization could retrain and deploy those employees to other parts of the organization rather than letting them go.
APQC has found that partnerships between HR and leaders are a critical success factor for workforce planning and are a characteristic of best-in-class HR functions. If you do not have these types of partnership with leaders, start cultivating them now so you learn as quickly as possible when the need for big workforce changes may be coming.
Involuntary turnover often carries a hefty price tag. In addition to the financial cost of severance packages or the cost of replacement hiring and onboarding, you may find it more difficult to attract talent if you start to develop a reputation for laying off large groups of employees.
Partnerships between HR and the business are critical for effectively managing involuntary terminations. HR can’t go it alone—it needs intelligence from leaders for workforce planning, support from managers to help employees chart their own careers, and the right messaging to ensure that remaining employees stay engaged. These partnerships help organizations to keep involuntary terminations and any associated risk as low as reasonably possible.
To learn more about involuntary terminations as a percentage of total business entity employees you can download this article where APQC reviews cross-industry data and discusses partnerships between HR and the business as a critical success factor for managing involuntary terminations effectively.
APQC members have access to APQC’s Workforce Planning Toolkit which includes our Workforce Planning Business Leader Interview Guide. Use this tool to gather business leader intelligence regarding future workforce needs.