Volatility and the Workforce Response

Whether or not the economic downturn and expected recession will have a direct impact on their organisation, employees in many industries currently feel extremely unsettled. They are concerned about the security of their jobs, their need to stay in the workforce longer than they had expected (due to the decrease in value of their superannuation funds and other assets), new demands that may be placed on them in their roles if their jobs are redesigned or their colleagues leave, demands that they move states or divisions, and other consequences of softening demand.

Confusion, fear, alarm and distrust are common responses to actual change and to anticipated change. Whether or not the negative impacts of current economic conditions actually materialise, the impact on employees needs to be actively managed.

Guiding employees through times of change can be a challenge, but like any other challenge in human resources, planning and creativity will see you through. Here are some strategies we have recently discussed with our clients.


(1) Retain your employees’ trust

Continue to earn and deserve your employees’ trust. If employees trust their supervisors and managers, and they trust the employer as a whole, change will prompt less fear. If employees know what the organisation might do to respond to market volatility and they trust that it will stay true to its ethical ground rules, the organisation’s response will be predictable, lessening employees’ fears.

Trust is hard to gain and easy to lose. You will need your employees’ trust throughout the downturn and after the recovery.


(2) Manage the fear factor

Manage employees’ fears and dispel any rumours by communicating with employees early and often. This means more than the announcement “We’re reviewing the business as a whole and we’ll get back to you in a month”. This will be translated by many employees to mean “You have no input into your future here and you’ve got a month to find another job!”. Have a communications strategy to keep people regularly informed.


(3) Involve employees

Involving employees at an early stage in the organisation’s plan will increase the likelihood that they will understand those plans, contribute constructive and innovative ideas for the future, and be ready when the organisation implements the new strategies. When the downturn is affecting the business, seek employees’ opinions, anticipate their concerns and consider their feelings. Sharing your vision for the organisation will create the common ground from which you all operate. Otherwise, no matter what strategies the company decides to employ in future, there will be only alienated and dispirited employees left to implement them.


(4) Walk the talk

Management must “walk the talk”, believing in the organisation’s plan to manage the downturn and in the responsibility of each individual to contribute. Without composed and determined leaders at the helm, employees will have little confidence that their organisation can be steered safely through the rapids. With managers modelling confidence and commitment, employees will follow suit.


(5) Take a coordinated approach

If the organisation is working on a number of different projects to improve performance in response to the downturn (such as process re-engineering, restructure, debt refinancing, and customer engagement projects), ensure that those efforts are coordinated and that employees are engaged in a “whole of organisation” approach. Getting employees on board with the organisation’s overall strategy is key to retaining them and keeping them productive.


(6) Match the workforce to market need

Be vigilent in tracking market needs as they change, and how the organisation is responding. The greater your ability to align accurately the organisation’s workforce with its workload, the greater the likelihood that the organisation will maintain success despite the volatility. In industries in which this is difficult, many organisations are resorting to temporary staff (at a higher immediate cost) or short-term contracts. Manage your workforce alignment as closely as your cash flow!


(7) Don’t assume that redundancies will resolve your people issues

Given that payroll costs are the single largest expense for many businesses, it is not surprising that it is the first place some people look to cut costs. Redundancies that are not ultimately necessary or carefully managed, however, can damage the business in the short term, and devastate it in the long run (see our article below: “The Pitfalls of Downsizing”).

Reducing the number of employees on the payroll affects a business in a number of ways. Certainly, the wages bill is less, but so is the capacity of the business to produce a sufficient quantity and quantity of products and services. Furthermore, when demand returns, the organisation will be understaffed and the cost of recruitment and induction of replacement staff will be high. Even if consumer demand fluctuates wildly, the organisation must retain sufficient employees to build the products, provide the services, serve the customers, and keep operations running. Sacking employees is a very short term way to manage labour costs.


(8) If possible, as an alternative to redundancies, explore whether there are any flexibilities in the organisation’s use and deployment of labour.


(9) When managing the workforce now, remember that ultimately the economy will bounce back.



The Pitfalls of “Downsizing”: Stress, Overwork and Discrimination


Redundancy programs involve significant risks for the employer, which should be managed carefully as part of any redundancy program.


The Wellbeing of Remaining Staff

Two of the key risks of redundancy programs are unrealistic workloads and a lack of job training for those employees who are left behind. Don’t assume that the remaining staff can pick up the work that was done by the pre-downsized workforce. Overloading the remaining employees may lead to significant problems. You may lose more staff than you bargained for, this time
due to:

Even if the remaining employees are pleased to have kept their jobs, employees will react to being required to do the work of up to two people. Managing that reaction and supporting their emotional needs, as well as operational needs, will minimise
the fall-out.

If you are modifying job duties to accommodate staff losses, consult with staff about what resources, including training, they believe they will need to fulfil the new job description. Throwing a new staff member “in the deep end” is not best practice. The employer’s approach should not be any different where the duties of existing staff are substantially changed.



Where a decision is made to make staff redundant, be careful that you do not act in any way that could amount to a breach of state or federal discrimination laws. Such errors could make for very costly and damaging problems for the organisation as a whole.

For example, in the classic case, Australian Iron & Steel Pty Ltd v Banovic [1989] HCA 56; (1989) 168 CLR 165 (5 December 1989), redundancies were decided through a “last on first off” principle. Whilst this does not initially appear controversial, the demographic of a particular workplace may be “skewed” due to that workplace, industry or sub-culture. For example, it may be that staff who were taken on recently are more likely to be female (as was the case with the Australian Iron & Steel case), or perhaps younger (for example in telemarketing or mobile phone sales). Given this possibility, applying the rule of “last on first off” may lead, in these circumstances, to making more women or younger people redundant, and could amount to indirect discrimination.

Another problem can arise where a workplace does not communicate with its staff about the possibility of redundancy, and/or seek their input with staff about a redundancy. This can lead to staff on extended leave (parental, study or long service leave/sabbatical, for example) not being kept “in the loop” about redundancy possibilities. And if a staff member is made redundant because they are on parental leave, that may amount to discrimination on the ground of sex, carer’s status or parental status. Making someone redundant whilst they are on long service leave or a sabbatical may amount to age discrimination.

The message is clear: if you are designing and applying a rule about whom to make redundant, examine it for any hidden “discrimination twist”.

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