RATIONALISING EXISTING MANPOWER TO PIVOT AN OPTIMAL WORK FORCE

In my last posting entitled "Of People, Jobs & Management", I postulated that effective management entails putting the right people in the right jobs.

Acquiring the right manpower stretches more than recruiting good new people, especially senior personnel, into the contingent of a corporation. The endeavour also relates to rationalising the entire manpower makeup toward optimisation.

Rationalising manpower involves a master plan for: 1) Relocating some existing employees. 2) Structured re-training implementation. 3) Terminations. 4) Replacements. 5) New Hires.

In simpler terms, the exercise covers overall manpower restructure.

Relocating an employee to another position is aimed at putting him in a job which matches more with his profile.

For those who are not faring that well in their jobs but have potentials for improvement, structured re-training should be provided to ensure they finally fully meet the requirements of their current roles. Re-training encompasses formal guidance and grooming approaches apart from classroom sessions.

With the utterly inept individuals, the apt course is severance, either by way of mutual separation arrangement or termination on valid grounds. Positions vacated may be filled up by existing experienced staff with the right acumen for the job scopes. or if none available, then by new qualified intakes to replace the outgoing. Off-loading excess and redundant employees - or simply put, the unnecessary manpower baggage - supports manpower expense optimisation. More excess baggage means more unnecessary manpower expenses. Considerations such as whether a particular role can be comfortably handled by one staff instead of two, or whether two positions could viably be merged into one, should be looked at.

New hiring may take place when a new role is created because of need but there is no existing employee who fits the bill to assume the job. For example, if a corporation feels it is high time to engage an internal public affairs officer instead of continuing to outsource all public relations (PR) assignments to a PR firm, then it makes sense to recruit a PR specialist. Experienced journalists who can articulate well and also have wide social contacts, including with government sectors, are good candidates to head public affairs for large corporations. However, the corporation needs to assess the cost efficiency versus the result impact of such a move first, i.e. to decipher if more costs will be incurred by setting up an internal public affairs department compared to outsourcing PR activities to external PR firms. And if the costs will be higher, a forecast whether the expected results will be more vibrant than before is to be concluded. The corporation needs to pre-assess the worthiness of such a proposed option.

Any corporation wishing to embark on a full-scale revamp to have the right people in the right jobs in place across the board must recognise that manpower rationalisation is part and parcel of the endeavour. At this juncture, I like to highlight a caveat for attention of board members and chief executives. Moving staff away from where they are - especially those being replaced - may trigger an air of negativism in the general work environment for a while. General morale may take a dip until the situation gets properly adjusted. Rationalisation, if effected immaculately, will see positive fruition as the end result in the longer run. Initially, for an interim period, there may be some challenging issues to iron out.

The prime question on the contemplation plate of topmost managements is: Are they prepared to experience the bane (managing initial personnel discontent and negative sentiments) in order to attain the boon (achieving higher levels of excellence)? Are they willing to fork out one-time upfront separation pay-outs? Is the corporation willing to experience "pain" before acquiring "gain"?

Once, I attended a special talk delivered by a prominent management guru (I prefer not to cite his name as I did not ask him for consent). I recorded a few vivid statements professed by him. Keeping people who ought not be around would be stumbling blocks to the successful transformation of a company, he emphasised. Besides aiming to find the right people, it is equally important to manage out the wrong ones.

I like to share a quote of Sir Richard Branson, the "revolutionary" founder of Virgin Group. He became an entrepreneur at age 16, made his first million at 25. Here is a punchy quote extracted from a question and answer platform of the New York Times. "The right person (manager) will build upon what you (the top management) have created, but the wrong person can bring it all down vey quickly - and (the right) culture can take an awfully long time to rebuild."

Rationalisation to a corporation is not an option but a necessity when facing either or both of the following situations:

* Need to undergo transformation in order to break through a prolonged stagnation in business growth.

* Financial losses, which will lead to the "demise" of the business if manpower structure is not overhauled.

Take the example of a national airline in Europe which was making losses until a "Mister  Turnaround" got appointed to take over the helm in 2009. The new chief executive had to deal with relevant unions while instituting a rationalisation plan. Prudently carried through, the airline began to rebound with positive financial signs. In 2014, its operating profit increased by 18 per cent over 2013.

Not many corporations are prepared to rock the status quo boat. Those which are faring fairly prefer to let the existing manpower structure be, albeit knowing there is room for further enhancement. To their top management, it is not worth stirring up unnecessary alarm in the prevailing docile work environment whilst the financials are still in reasonable shape.

For a corporation not making headway in its business ventures and encountering costs overrun, manpower rationalisation is inevitable necessary, along with revamps in other areas. Without embarking on such a move, the ailing corporation will never recover. Instead, it will plunge into deeper pits.

Other situations that could prompt a corporation to mull over a manpower rationalisation are:

* Merger of two companies.          The newly merged corporation wants to reduce roles (in the two companies) that overlap, thus releasing the redundant headcounts.

* Times of challenging economic outlook with expected prolonged downturn of business revenue.          For instance, some banks in a south-east Asia nation watch their cost-to-income ratio during a period of trying economic environment. In 2015, one bank targeted to push down the ratio to be in line with the industry's average of below 50 per cent. It then offered a career transition scheme (in essence a separation scheme) as part of the overall optimisation plan.

No doubt, any rationalisation exercise must be thoroughly thought through and meticulously planned in order to be infallible. Allow me to share my pointers on the key steps for successful implementation (below).

1. Affirm the certainty of direction, i.e. to formulate the right manpower size, with the right people put in the right jobs.

2. Identify which roles/positions can be merged, and which ones are redundant.

3. Draw up a holistic plan for merging overlapping roles, and relinquishing obvious unwanted ones. Relocation/transfer or re-positioning of redundant employees should be the first consideration provided they can fit other tasks within the company. But to employees deemed as unnecessary headcounts, an amicable exit scheme will be the practical move.

4. Draw up a tactful communication process to cascade to the work force why the rationalisation exercise is required. This must be done according to an intricately thought through process before implementation. Managing people's sentiments is not easy. It is a sensitive matter, which if not handled with prudence, could arouse strong resentment from the overall work force.

5. Work out amicable separation packages to the excess personnel. The management must be prepared to bear the one-time pay-out cost for the sake of successful transformation toward prominent vibrancy in all respects. A fair package is one based on years of service, rank and in line with relevant labour laws. The management needs to ascertain the one-time separation pay-out quantum will emanate to substantial  savings in manpower cost measured within a specific time-frame. For example, if a redundant employee has another few years to retirement, will the separation pay-out be less than the total remuneration payable to him if he is retained until retirement? Such comparison involves mathematical computation analysis.

6. Institute structured guidance and training programmes for relocated and re-positioned employees and others who need improvement in performance. The objective is to ensure they fit well into their assigned jobs.

Conclusion:

Whether manpower rationalisation is an option or necessity, the decision first rests on the board of directors concerned, then probably on the chief executive in consonance with the board. To corporations that are faring quite well, the pertinent decision may be to go for optimising the right manpower size, with the right people in the right jobs, so as to reach excellence. Or they may opt for status quo so as not to experience the elements of bane before securing the boon. To corporations not doing well - worse still, the ailing ones - rationalisation in all aspects, especially manpower, becomes a matter of survival.

I want to close by citing a salient actual example of the national air carrier of a south-east Asian country. It underwent a massive overhaul in 2015 as the last resort after being in the red financially (significant losses) for five years, exacerbated by two flight disasters in 2014. The government-backed major shareholders appointed a new chief executive - an expatriate deemed as a maverick for having successfully turned around a couple of ailing airlines. The old corporate name was dissolved. A new corporation was reconstituted. Excess employees were offered a mutual separation package. The manpower size was reduced by more than 30 per cent. Those retained signed a new employment agreement with a revised remuneration scheme. Some were reassigned to new functions. Re-training was instituted. Career carnivals, which brought various related companies as participants, were organised for terminated employees to seek for job opportunities.

The major manpower rationalisation, along with revamp of excessive costs for outsourced ancillary services and curtailment of unnecessary recurring expenses, was the only recourse for survival. The mission to regain financial soundness would take a while to manifest.

The bane of facing up to arbitration issues with employees' unions of the airline and general grouses seem to have subsided at the time of my scripting this article in September 2015. Over the past few months, no adverse news reports resurfaced. On the contrary, a national newspaper carried a story on September 13, 2015 that quoted positive comments from former employees about their former employer. Here are some summarised excerpts from the story::

* He (a former customer services department staff) described the compensation (mutual separation package) as "fair" for his 17 years of service.

* A former controller said he was grateful to the company for offering him a fairly good retrenchment deal. "I only had another four years before retirement and the compensation sum is something which I see no reason to complain about."

* He (a former aircraft technician) said: "I knew the company is undergoing a restructuring exercise. I do no blame them for terminating me." He was one of the over 700 former staff who attended a career carnival to look for job opportunities. He attended four interviews with two other airlines and aircraft maintenance firms since September 1 but no job offers as yet (as at September 13, 2015).

Seemingly, lull set in after the stretched stormy episode. The new chief executive appeared to have deployed the right rationalisation approach. For now, as at September 2015, it is still early to reckon when the airline will be able to return to the black financially (with profits). At least, now that all aspects of operations under the new management have resumed to normal without further major issues, this initial positive signal points to better seasons ahead. An on-line news portal reported the new chief executive as saying the flag carrier should be able to reach break-even by year 2018. Sounds like a viable target, coming from a maverick who possesses past success stories on rationalisation to his credit and who was bold enough to carry out a major manpower restructuring in this airline. Looks like the restructured corporation got the right chief executive for the mammoth task to implement the right rationalisation execution?

 

The End...