How to Do a Layoff Right

A layoff is still a layoff. But how you do it matters to the strength of your IT organization.

You know it: Preparing for layoffs will be a key part of the job for many CIOs in the months to come. Economic upheaval forces cutbacks in projects and people. Need a history lesson? Look back to the dotcom bust, then consider that the current financial mess touches many more industries and many more countries.

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Doug Cormany, senior vice president and CIO at Preferred Care Partners, a Medicare Advantage Plan headquartered in Miami, has laid off technology staff a few times during his 30-odd year career as a CIO at the staffing firm Spherion and at the equipment rental company formerly known as NationsRent, among others. He never likes the task. What he dislikes even more are those instances he's seen of IT leaders doing it badly. Cormany, a member of our CIO Executive Council, spoke with CIO magazine Senior Editor Kim S. Nash about the right way and the wrong way of telling your people they've got to go.

CIO: IT layoffs have already begun. But not every CIO does it well. What's your experience with handling this kind of bad news?

Doug Cormany: I do that as part of doing turnarounds. At Spherion, for instance, we had numerous disparate systems and we knew that once we got over to PeopleSoft applications, we would have a reduction of workforce. So over the course of two years, I had to let go 152 information technology services people. I outsourced [another] 63 people. That's the biggest layoff I've done.

How did you figure out who would stay and who would go at Spherion?

We did an assessment of the skills of each IT employee. We had each one assess his own skills, then we had supervisors assess each employee. We had the next level—the directors—look at them. We also brought in [management from the] business, to ask them about the people we had assigned to them.

Once we had that process finished, we said, "What is the 'to be' organization going to look like in two years? What skill sets will be needed? What did the job descriptions look like?" Then we started placing names in each position.

What happened to those employees whom you didn't slot for a position?

We asked ourselves the question: Do we need them to maintain old systems while delivering new systems? We were up-front with people. They knew at the beginning of the project that they were [either] working themselves out of a job or working themselves into a [new] job. We sat with each employee and gave them three months' notice, six months' notice, nine months' notice, as the project was done in phases. In addition to giving them notice, we also gave them reasons to stay. They would get X number of weeks per year of service, if they stayed through the end of their assignments.

What else did you offer?

Job assistance, which entailed working to find them new positions in other companies or within Spherion but out of IT. A couple of people did move out of IT into the business. If they wanted it, we sent them to career counselors within the Spherion business unit.

Who conveyed all this news? You?

Either myself or my directors or VPs would meet with them, with human resources. HR was in step with this all the way.

What goes into the employee assessments?

We look at everything from their education, courses they'd taken on the technology or business side, to applications they'd worked on. Technical skills, management skills, partnership skills. They had to rank themselves [as] good, better, best in each area. Then a supervisor would meet with them [and we know that] somewhere in the middle is the truth, just like with a performance appraisal. We got an agreed upon assessment and we noted if any [items] were not agreed upon. We knew after the assessment who wanted to learn and who didn't. Read: "How to Recession-Proof Yourself"

How did you develop this method?

I've been in this business well over 30 years. This is something I had to learn early on. In my 20 years at Disney, during the fuel crisis of the 70s, I had to let a lot of my people go. I learned how to try and take the emotion out.

Different people take it different ways. This is the hardest type of severance. Disciplinary actions are different. But at Spherion we just went to a new technology and fewer applications to support. I'd say 95 percent to 98 percent of the people were OK.

How could you tell?

They didn't leave. People still worked on these projects and kept old systems running and worked the 10- to 12-hour days, six days a week during this hard time. They showed up and did a good job. We were meeting all delivery dates. We met every one. We only lost a couple [of people].

They went off and found other jobs?

Right. Throughout the two years&some people whom we had questions about shined and some people whom we thought were keepers ended up not catching on to the new technology as well as we thought they would.

How do you explain that?

I don't know if you can. I don't know if they applied themselves more or enjoyed learning new technology. Some people—there's nothing wrong with this—but some people just want to be a heads-down programmer.

How did you deal with discouragement and morale issues along the way?

Coaching from management. At our monthly town hall meetings, we answered every question asked by any member of the team, no matter what. We always made sure to speak openly and freely, and to have fun. And sometimes, you make a decision to part ways. We did have a few of those, but very few. When you have to let people go, it is hard.

What layoff mistakes do you see getting made by CIOs?

The biggest error a lot of people make is they don't look at the "to be" organization. Know what you want to be, because [otherwise] the morale of your IT organization will deteriorate and you'll lose productivity.

I hear of companies that lay off 10 people this week, then five more the next month. Everyone's in fear for their jobs then. If employees see that every month there's a black Friday, they're going to be out looking for jobs. The best thing you can do is work up a layoff plan. Then deal with it: Do it once.

Why does that mistake happen?

As companies are losing revenue, they often don't know what they need to do. But they do know they have to cut expenses. So they go from department to department and say, "We need you to cut five percent of spending." Next quarter, it's another five percent to 10 percent, until sales recover. Those are hard times.

How do contingency plans usually work?

A Plan A is best case. 'We hope the trend is going to be this' and there's a foreseeable uptick. A Plan B would be a 20 percent decrease [in spending] from Plan A. At my last three companies, probably 65 percent of [IT] costs couldn't be cut. It's things like maintenance, utilities, software licenses. Those are fixed. So that leaves travel, personnel and new projects. And training. Unfortunately, we always cut training. It's always a big target. A Plan C is the worst case. If things really get bad, you're not going to do new innovation. You won't be able to get capital spending. So the people who are going to have to find new jobs are those who are working on the new stuff.

How are you doing in this current economic chaos?

My company is not so affected right now because our revenues are from Medicare. But our employees still feel it. With their spouses' jobs. With clothing, food. It takes a toll on productivity. We're all talking about it. Think about all the money companies are losing in productivity. I just announced two new projects. That keeps things going. I've been on the lucky side this time.

Copyright © 2008 IDG Communications, Inc.

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