How to handle corporate rumours4 min read . Updated: 20 Jan 2015, 06:26 PM IST
How should companies manage internal and external communication in such a situation? We ask experts
After a prolonged silence, the TCS (Tata Consultancy Services Ltd) management on 15 January disclosed that it had laid off just 981 employees in India, ending wild rumours of much larger numbers. But by then, the damage was done. What could TCS have done better and how should companies manage internal and external communication in such a situation? We ask experts
Share information, be proactive
Ruchi Sinha, assistant professor (organizational behaviour), Indian school of Business
Every organization has legal obligations towards its employees related to involuntary attrition or lay offs. The management also has a moral obligation to engage in organizationally just practices towards their employees who are important stakeholders, Sinha says. She spots four types of organizational justice in the way managements deal with stakeholders.
Distributive justice is when organizations provide resources (such as promotion, or bonus) based on the performance of the employees, while procedural justice manifests in transparency and justifications for procedures and systems. Then there is informational justice, or sharing information with both internal and external audiences. Informational justice is high when information is widely shared in a sincere and timely manner, Sinha says.
“Even if a firm has a fair distributive and procedural system, if the right information about these systems is not communicated, people will not perceive the organization as fair," she adds.
Managements need to get into the habit of sharing information before, during and after the process/event. The last form of justice is interactional justice, which involves treating employees with respect and dignity, she says.
At TCS, “there should have been greater procedural justice in terms of transparency of lay offs criterion and the internal messaging should have been less contradictory—some managers denied the likelihood of lay offs, while others announced lay offs externally", Sinha says. The company could have been more proactive rather than declining to comment to the media, she adds.
Invest in outplacement
Ajit Isaac, chairman and managing director, IKYA Group
Efficient internal communication and data gathering are critical when a company with a very large workforce looks to lay off employees across different verticals, because within each vertical the numbers might seem small, but together they can appear large, says Isaac.
Indians are not used to mass lay offs unlike in developed economies, which have seen more economic cycles, he says. Hence, Indian companies haven’t matured in handling such situations. “In India, we have seen two deep cycles—after 9/11 and Lehman Brothers crash. These are the only two moments where we have seen de-growth and situations where people had to be laid off," he points out.
Indian firms can learn from the West, where career counselling sessions and outplacement processes are in place, Isaac says. “In India, managements don’t invest much in outplacement. But as firms get older and wiser, they will start investing more time and resources in counselling employees who have to be let go," he adds.
Western companies attempt to see if they can fit the employees within the organization, rather than letting them go, Isaac says. However, there are no such long-term approaches in India.
“Human resource (HR) departments in India have largely become traffic management departments; they are busy managing the people coming in and going out, because of the attrition rates in India," he notes.
Companies should ensure that their HR departments focus on more qualitative and development-oriented aspects like employee engagement, organizational development and alternative careers for employees, Isaac says. “That will form a more substantive effort in terms of finding solutions to such a situation than just dealing with it monetarily," he adds.
Plan well in advance
Sankar Krishnan, managing director and co-head, Alvarez and Marsal India
When a company decides to reduce its workforce, it must be planned well ahead, says Krishnan. It must make sure that it has gone through the organization in detail and identified the functions and people for downsizing, he adds.
The second factor is to lay out the objective of these lay offs, i.e., improve productivity and efficiency of the company. Also, they need to be transparent about the decisions they have made and must inform the employees why the decision has been taken. “The employees should be informed on why such a thing is happening, even though they might not be in a position to completely comprehend the situation," says Krishnan.
“Companies should undertake this exercise in one go, and not in phases. If a company keeps laying off people in phases, then employees keep wondering about their job security, which can have negative consequences on the firm," he adds.
Right-sizing in one go is preferable, since remaining employees feel safer about their jobs and their morale remains intact, Krishnan says.
“In terms of external communications, for public listed companies, they have obligations towards their shareholders and they should inform them if the company is undertaking major lay offs... In case of private companies, external communication may not be necessary. But in both cases, people involved in the ecosystem should be aware of the developments and should feel secure," adds Krishnan.