Pink slips, reduction in force, headcount adjustment, retrenchment, termination, lay-off - whatever it’s called means a lot of fear and confusion for employees. Not just for the individuals involved in these events, but every other person in the company.

The knowledge that retrenchments are coming is, in my experience, usually known about long before it happens. Sure, there are often employees that are surprised, confused and angry that they are on the list, but they knew there was a list.

I remember back to my first retrenchment, many many years ago. I walked into the office one morning and there was a feeling, a smell - something was wrong. I ignored it for an hour or two, thinking it was just me skipping breakfast. Then there was a strange general meeting of all employees. We were collected from our desks and marshalled in the large cube farm in the centre of the office. After an extended wait, with growing unease, the CEO then explained the situation - the parent company was reviewing performance, nothing firm as yet, 3 months grace, I’m in the same situation, you’ll all be looked after…

The rumor cycle starts from anywhere from a year to three months before the event. Then about a month before the actual retrenchments, there are general comments made that there ‘might be retrenchments’, or ‘we are reviewing headcount’… And with today’s corporate environment most employees knows that their job is on the line. And the thing that causes them the most stress is not knowing their position is tentative, but knowing that there is nothing they can do to change their predicament. They are not being fired for poor performance, not because they made too many mistakes, but because they are in the wrong place, at the wrong time. To them, some manager that they may have not ever met is striking a pen through their career. This can build a situation of [1] learned helplessness and depression, neither of which is desired in an employee or workforce.

A month later the same CEO called another meeting. Everyone was given a months notice. Usually the company doesn’t got out of business like this. Usually there are people left behind.

During the time of retrenchments the managers in the company need to speak plainly and clearly. It’s not enough to say that there has been retrenchments, and the company will grow stronger for it. Often the people you are saying that to know that they have just picked up someone else’s workload.

Too many times I’ve seen and heard a ‘management whispers’ (similar to the childhood game of Chinese whispers) scenario. The CEO will say one thing, and as it filters down the chain of command it changes and shifts. I’ve even experienced first hand the information to employees changing from “there should be no more retrenchments” to “there will be more retrenchments”. For two months the employees were expecting to be out the door at any time - not surprisingly their effectiveness and productivity dropped. At another time, I watched the management team say nothing - and listened to the rumor mill grind down the company morale. There is also research that shows [2] morale has an effect on stock price.

Management should be transparent in their decisions. Explain clearly why the people that have been retrenched were chosen, how that relates to the company as a whole, and how that relates to each individual. If the reason is a corporate restructure, then explain why there is a restructure. Cialdini discussed in his book Influence how this is so effective. If you want to cut in line, asking to will work about 60% of the time. Asking to and giving a reason, any reason, will work over 90% of the time… Sure, the employees don’t need to know why, but it helps them feel more comfortable and it will stop them from making up their own reasons.

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