Recession, Restructuring and

ReSelection

Fred Fishback

President, Javelin HR SolutionsFred.Fishback@JavelinHR.com

561-793-3471

Unemployment RatesCategory Unemployment Rate

Adult Male 7.6

Adult Female 6.2

Teenagers 20.8

White 6.6

African –Am 12.6

Latino 9.7

OVERALL 7.6

The Real Unemployment Rate

73% Increase in Mass Layoffs

Source: BLS.gov Number of Mass Layoffs

Fourth Quarter 2007 1814

Fourth Quarter 2008 3140

How Bad?

Conclusions

• Recession is faster and deeper than the past two

• One more month of bad numbers (equal to last month), and we match the 1981 recession---what many consider the worst since WWII

• Institutional memory and experience on how to manage a company through a recession of this magnitude is limited

There are Good Resources…

• Resizing the Organization: Managing Layoffs, Divestitures, And Closings Kenneth De Meuse, Mitchell Lee Marks (SIOP Series)

• Responsible Restructuring: Creative and Profitable Alternatives to Layoffs (Hardcover) Wayne F Cascio

• The Organization in Crisis: Downsizing, Restructuring, and Privatization (Manchester Business and Management Series) (Paperback) Cary L. Cooper (Editor)

Typical Approaches to Layoffs

• A reactive response to cut costs

• Find redundancies

• Job consolidation

• Focus on essential job functions only

• Eliminate jobs

• Do it quickly

• Secretive

Some Past Evidence

• S&P Companies that used downsizing as a way to reduce costs did not improve returns compared to control companies who maintained stable employment (Cascio)

• After layoffs, productivity increases in a third of the cases and declines in about a third (AMA Study)

• Two thirds of companies that layoff off one year, layoff again next year

• Decreased morale and increased stress: 70% report decreased morale and trust after a layoff; 83% reported higher workload and 85%, increased stress

The Two Camps…

• Smallest number of employees to get the job done

• Most efficient way to organize to create a sustainable, elastic business model and competitive advantage

Re-Tooling Ourselves

• For those in the selection and hiring space, business is down.

• How can we apply our skill set to the challenges that businesses face today?

A Different Perspective on Layoffs

• We’re not deciding who to layoff, we’re deciding who to rehire

• Don’t just focus on the job, focus on the people

The Old Adage…

• The Best Predictor of Future Performance is Past Performance?

Why Not Performance Appraisal?

• Performance appraisal evaluates behavior that has already occurred

• Selection predicts behavior that has not yet occurred

ReSelection Results in Different Outcomes

• Fred: How long has she worked here?

• VP: 20 years• Fred: How long has she been at the

bottom of her class• VP: Most of that time• VP: Why is she still here?• VP: She never did anything bad

enough to get fired.

The Impossible Dream?

Downsize the Workforce

Upsize the Talent

Why Be Normal?

Change the Distribution to Upsize Talent

• Three ways…– Chop off the left hand tail– Move the hump– Make the right tail thicker and

shorter

• In other words, don’t just shift the distribution over to the right, seek to fundamentally change its position and shape.

Case Study #1 (Aluminum)

• Commodity Manufacturing Business• Pricing is essentially set on the world market• Current State…inventory stores are high,

prices low• Several US Aluminum plants have already

shut down and others are shuttering lines because of the rapid decline in commodity prices

• When this project started, just over a year ago, the price was $400/ton and their price structure was about $360/ton

The Steps

• Anticipate

• Engage

• ReInvent

• ReSelect

• Support and Manage the Transition & Disruption

Engagement

• Did not go in knowing how many jobs needed to be cut; we went in knowing we wanted to get to 280/ton

• Analyze every job, every process, every cost

• Let the chips fall where they may• Every employee’s insights were sought

on reducing costs and improving efficiency, safety and quality

ReInvent

• Fundamental redesign of jobs, many union jobs!

• Fewer jobs and more accountability and empowerment

• Layers of management taken out• More self-directed teams• New contracts with vendors• Lean practices• New policies on overtime

ReSelection

• Opportunity to opt out

• Assessments were conducted on every employee, ranging from full assessment centers to more prosaic T&E, surveys and self-assessments at the hourly level

Results

• Cost per ton decreased from $360/ton to $280/ton

• 25% reduction in headcount while total plant production levels held constant

• Current price on the spot market is $280/ton!

Comments from the Leadership

Case Study #2 Pharmaceutical

• “The next several years are expected to be sweet for the generic drug industry and rather bitter for brand pharmaceutical companies”…Wall Street analyst

• The prescription pharmaceutical industry is posed to lose 200 billion through patent expirations and generic encroachment by 2012

• Current drug pipeline, if everything approved, is projected at 100 billion in the same time period

• Longer-term pipeline is promising

The Steps

• Anticipate

• Engage

• ReInvent

• ReSelect

• Support and Manage the Transition/Disruption

The New HR Job

• Identify the critical functions that add value to the business

• Get out of the transactional business• Elimination of transaction

requirements freed up as much as 40% of their time

• Transformed jobs…driving cultural change, participating in business planning, strategic HR activities

ReSelection

• Simulations

• T&E

• Behavioral examples

• Ratings

• Performance reviews

Primarily Content Valid Tools

Some Results• Overall, 30% not reselected• 10% new hires• Net 20% reduction

Some Thoughts…• Is re-selection rate a potential

criterion?• Does re-selection offer a mechanism

to better calibrate our hiring tools• Merging selection and performance

management

What People Have to Say• “This changed the HR function more positively and

more quickly than I could have imagined. Was it disruptive? Yes. But disruption is not always a bad thing”… VP HR

• “We weren’t convinced the change they had been talking about was real until they asked for our resumes and told us what the hiring process for the job looked like”…Separated HR Manager

• “I love my new job!” …Selected HR Manager

• “Nice work”…Employment Attorney in the General Counsel’s office

Some Preliminary Numbers

• We are averaging about 20 to 30% not getting rehired

• Expect voluntary separation --- i.e., people who do not re-apply

• Correlation with historical performance ranges from .45 to .70

Summary

• You can’t always predict but you should always prepare; Anticipate downturns

• Use the full scope of your company’s brain trust…engage the employees

• Reinvent; simplify the operating model, examine and redesign every job in a way that adds value

• Selection is an ongoing process; Do not select people into a job once and then let performance management and training take over

Some Things to Do

• Be pre-emptive

• Get prepared

• Reinvent yourself

• Focus on adding value

“We are all transformation leaders now”

The End

Thank You

For more information, contact:Fred.Fishback@JavelinHR.com

www.JavelinHR.com561-793-3471