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Wielding the axe

Wielding the axe

Restructuring, downsizing, rightsizing, rationalising, call it what you will. In an industry noted for constant change, IT bosses need to prepare for the time they may have to let go of staff.

The company founder dies and the 'bean counters' order severe cost-cutting across all departments to prepare the business for sale. The company must slash costs by a quarter to convince investors to keep the money flowing.

The company has divested a part of the business, so there will be fewer systems and staff to support.

MIS interviews a group of IS executives who have encountered these situations at one point in their careers. All of them received the same directive: To downsize their workforce.

They share their experiences; and except for one, request that their identities be kept secret. Here are their stories:

Doing himself out of a job

Dave Taylor (a pseudonym) is group technology manager for a food supplier. The owner of the company died, and the business was primed for a takeover.

Taylor was asked to restructure his department after several business entities were consolidated and sold off, and the rest of the company became up for sale.

In reducing numbers, the main considerations were increasing the "transparency" of the business and cutting costs.

"The message from the 'bean counters' was 'Bottom line is all important!'" he says.

Taylor had no guidebooks to help him through the process, but since he had done similar work with previous employers, he knew what to do. And he had to do the "dirty work" himself.

"Support from senior management was there. I prepared some IT resourcing plans and worked the people factor off."

Who stayed and who went depended on what work was left over for them, along with whose skills were the best fit for the surviving roles.

A total of 11 permanent staff and three contractors were retrenched.

"Infrastructure is in support-only mode and applications are in a change freeze, hence there were no personnel requirements," explains Taylor. "Support is all there, with back-to-backs where necessary. It is run by a skeleton staff though."

The company aimed to trim as many jobs as possible through natural attrition, but in the couple of months following the death of the business founder, some saw the writing on the wall and approached Taylor about redundancy. The second part of the shakeout took just three weeks overall.

"Redundancies were reasonably generous and all moved on to other jobs. I made sure of that! I used my contacts and helped staff by talking things through, helping them with CVs, etc.," Taylor continues.

And it was during this process he saw he had to make the ultimate sacrifice himself. "Essentially, to meet targets I needed to lose my salary, the equivalent of two team members. My senior tech in Melbourne took over the operational management role, strategic management is no more," he explains.

While the core team that was left over was "somewhat nervous" about how they might cope with servicing the business, especially if it grows again, Taylor is sure they will manage.

Now, with total IT expenditure down 70 per cent, Taylor feels the restructure has achieved its goals. The business is ripe for new owners and he has found a new job.

"Dealing with the human aspect is the most difficult. Fear of the unknown is the biggest factor by a long shot, so I always try to be clear in communications."

Slashing to save the business

A failure to expand revenues as expected brought calamity to one software vendor, which had to slash spending by a quarter across all departments.

CFO Mark Brown (a pseudonym) says the company wanted to preserve its core technology, all of its products and markets, and to keep all options open. There was a thorough review of the entire organisation, as management assessed which roles were vital to maintain company capability.

The board, with advice from management, set a "strategic parameter" of a 25 per cent cut on operating costs. This led to 80 job losses. The company sought legal advice to ensure redundancies were done properly. It mounted a public relations campaign to "protect the brand" and a communications program targeting internal staff.

"You have to think carefully about the message you send to surviving staff and to the customers, that they think you have a viable business going forward," explains Brown.

A group of eight senior managers worked on the details of the restructuring, which became known as the "redevelopment plan".

Brown says the company was aware of the need to maintain its breadth of skills, markets and products, as well as complying with laws on staff consultation and redundancy.

"But the fear was that if we did not do enough, we would have to come around for a second time and that would be debilitating for the staff."

Again, staff survival depended on their skills.

The company assessed what roles were needed, which had to be disestablished. After consultation with the staff, management finalised the list of who stayed, who went and who could be redeployed.

Brown says the company met its "contractual obligations" around redundancy. It offered counselling and advice in seeking work. He believes the "vast majority" of the retrenched staff soon found work.

In the end, company operating costs fell 30 per cent within three years, allowing the business to move back into the black. "Letting people go is the toughest thing a manager can do as these people have done nothing wrong," says Brown.

"An organisation should constantly evolve through a careful process of managing its costs to avoid cataclysmic discontinuity. Change, growing and shrinking is an important and ordinary part of a business. If you hang on too long to a contracting part, you risk the whole business."

A pro-active approach

Selina Parker (a pseudonym) is head of IT at a manufacturer. Her department needed an overhaul after a part of the business was sold. The "top heavy" organisation was too geographically diverse and delivery from a centralised location would be more efficient.

The two-stage redundancy process took six months and saw the abolition of 90 positions and the retrenchment of 50 staff.

Issues for consideration included what operations to maintain, how to deliver a good service, how to be flexible for future growth or shrinkage, support for services and geography.

Parker worked with senior management in implementing a "pro-active" restructure. "We started at the bottom and worked up to see what we could do and where we could get to."

The company's HR people were involved to ensure procedures were followed. There was consultation as required by law, which led to some changes to the planned restructure after staff feedback was taken on board.

"Some roles were obviously redundant, some were not. We went through a selective process. It was quite a rigorous and objective process," says Parker.

Thus, some people were unaffected, some left straight away, and others applied for newly-created roles. The new teams are smaller, but Parker maintains this would not affect the quality of services. "We are pretty lean and agile now."

Outplacement staff helped those affected by the downsizing to find new jobs. At no stage was the CIO role vulnerable, nor was Parker tempted to leave. "I have an important role," she says.

"Losing people is never a great thing but the ones that end up going, probably wanted to anyway, so it's not as bad as it sounds. The biggest thing is to be very open about the process. Keep communications open so there's no muttering in the corridor."

Preparing for the inevitable

Garth Biggs has implemented a few restructures in his time while working for organisations as diverse as Air New Zealand, Gen-i (where he was CEO), Deka, Sky TV and Progressive Enterprises.

Biggs, the only one who agreed to be identified in this article, has had to restructure businesses for reasons such as industry downturns following Y2K, technologies becoming obsolete or the business changing due to adoption of new philosophies or processes, sell-offs, outsourcing or moving into new markets.

Biggs, now executive director of HiGrowth and who runs a private high-level ICT consultancy, believes restructuring can make the difference between a company surviving or going under.

Typically, he says, parameters for restructuring are agreed with the CEO, with the active involvement of the CFO. "Issues centre on ensuring a fair and transparent process, minimising staff uncertainty and stress, and ensuring that the process is legally sound and current best practice and could be defended in an employment court."

Biggs says IT executives must prepare for this part of their job as "a high percentage" of them will be expected to carry out such processes in their careers, either as part of a departmental or a company-wide restructuring.

Fortunately, he says, a strong IT jobs market will not force redundant IT staffers into penury - and it has helped others to succeed better in other careers.

Nonetheless, it is essential to help the remaining staff feel their former colleagues have been treated fairly.

"At the end of the process you need to be able to look everyone involved in the eye with the knowledge that although it may have been an unpleasant process, it was a fair one," says Biggs.

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