Ethics Resource Center

Published: September 3, 2009

Ethics During Difficult Financial Times

A Conversation with Steve Miranda, Chief Human Resource, Strategic Planning and Diversity Officer, Society for Human Resource Management

 

What should managers keep in mind when communicating financial challenges to employees?
Transparency should always be accompanied by an attitude of respect.  Talk to employees on an adult, intellectual basis.  Treat employees as intelligent, logical, participatory members of your team.  Explain terms, when necessary, but don’t be defensive.  Treat people with respect.

Also, be honest, as opposed to kind.  Don’t sugar-coat things.  Be honest and empathetic about the impact it will have on people’s lives.  Don’t make promises you can’t keep.  If so do, people will want to work with you again.

What are some ethical cost-cutting measures?
When making cost-cutting decisions, first, set the context for employees.  Visually position the order in which your organization will employ various strategies.  If you make layoffs last rung on ladder, they’ll understand better why you’re doing what you’re doing. 

Make sure to decide how short-term decisions will have long-term impact. For example, does it make sense to cut all travel if it means that you don’t go see key—needed—clients?

There are a lot of concrete steps that you can take as well. 

Engage work force in generation of ideas--both cost-cutting and revenue generation.  Your employees know a great deal about what it takes to do their work effectively and efficiently.  Employees can be a wonderful resource for new ideas.  Don’t overlook their ingenuity.

Some other ideas are to: freeze hiring/replacements, freeze raises, reduce retirement, reduce health care contributions, and implement unpaid furloughs.

How does "ethics" figure into downsizing decisions?
Ethics must be central to the way you manage the layoff policy.  Ethics has to be the fabric of how you do things, not just when it comes to decisions about downsizing.  It doesn’t matter what process you’re talking about, ethics should always be fundamental to the way you do business.  A commitment to ethics is not just right thing to do, it also has long-term benefits for your organization.

In terms of layoffs specifics, ethics comes into play in several ways.

Be public and clear about the decision-making criteria to be used: performance, geography, function, seniority, based on a competency model you’ve created to plan for employees you’ll need for the future combined with technical expertise you’re using.  Once you’ve decided on the criteria, be crystal clear about your methodology and communicate it to employees.

Also, when planning for layoffs, make sure to involve people with high EQ.  They’ll help you think through how to exercise program, not just what to implement.

What advice do you have in terms of actually breaking the news, telling employees that they’re being let go?
Always tell employees in person.  Always take the time to inform employees in private, one-on-one.  Most importantly, don’t leave any doubt in employee’s mind that they have been terminated.  The worst things you can do are leave an employee wondering or, because you’re trying to spare their feelings, be so vague that they don’t know that they’re being let go.  To make sure that doesn’t happen, script clear, 30-second speech beforehand.  Be kind, caring, and absolutely clear.

If you are building on a strong relationship of trust and interdependence between employees and supervisors (which should always be a goal), you can arrive at the best possible outcome of the process.  When all’s said and done and the layoffs have been communicated, you want an employee to leave saying, “I don’t agree with the decision to downsize me...”  (employees should feel highly competent and necessary, that letting them go is a loss to the company)  “…But you’ve explained it in such a way that I understand the process.  I do believe it is fair and equitable.  I have such respect for the way you’ve conducted this process, that, if and when the chance to return comes up, I’d love to come back.” 

What can employers do to help employees who’ve been laid off?
Let them know that you’re available for continued support, e.g., letter, advice, because the company and their individual supervisors still care for them.

You also want to make sure that employees’ severance package (based on service and perhaps level) is current and appropriate for type and size of organization.

Finally, you can bring in outplacement services, e.g. Right Mgmt. or Drake, Beam, Moran, to help them transition to their next job.  They help accelerate cycle of grief, so employees can get back on their feet sooner.  Also, they understand that different generations and employees at different levels have different expectations about easing into next position, so they work with employees in ways that they need.

What should you do for employees who survived the layoff?
Look at workload.  You have fewer people so you need to decide what matters and what is not as critical.  Think about how to streamline.  Ask, of all the work that we did before when we had a full staff , what is vital and in need of replacement?

Have a discussion with remaining individuals to discuss the implications.  Don’t just talk at them and announce decisions; have a conversation.  Engage the team in how work will be restructured.   Get them—the local experts—involved.

When it comes to decisions about downsizing, how should the HR and ethics and compliance functions work together?
Really, ethics and HR should not view themselves as separate functions.  They have to be absolutely intertwined.  Because people want to operate in an organization that values and appreciates me and my contributions and that treats people fairly.  The “givens” should be a sense of hope in the future of the organization and a level of certainty regarding consequences and rewards.

Finally, which values are most important to keep in mind when making decisions during these difficult financial times?
To me, the key values are respect, dignity, transparency, and consistency.

In This Issue

• Financial Crisis: Living With the Legacy
  Column By Patricia J. Harned, Ph.D. President, ERC
• Bring Your Code of Conduct to Life
  
• The Ethics Recession Reflections on the Moral Underpinnings of the Current Economic Crisis: Book Review By Frank J. Navran
  
• Ethics During Difficult Financial Times: A Conversation with Steve Miranda, Chief Human Resource, Strategic Planning and Diversity Officer, Society for Human Resource Management