Patricia Wheatley Burt of HR consultancy Trafalgar explains why financial institutions need to make fundamental changes to the way staff are employed, managed and rewarded if they are to survive post recession.

If some organisations 'fessed-up', the first tranche of redundancies have included people who weren’t performing, didn’t fit culturally, were too challenging, too demanding, due to retire, didn’t have a clearly defined brief/job, etc. In fact, the process was designed to test the water, show willingness to address the problems, and to achieve cost reduction - often driven by finance departments demanding an instant alleviation of fixed overheads. You may have managed to keep the numbers below the magic 20 or 100 in order to avoid the legal requirement of a one or three month consultation period, but there are several questions you still need to ask yourself:

• Will this do the trick?
• Was it the right knee–jerk reaction?
• How are your remaining staff feeling; are they waiting for the next round of cuts?
• Was it really strategic enough?
• How will it prepare you for the future, or can’t you see what it looks like?

What organisations seem to fail to grasp right now is that no matter what any of our ministers, business gurus, or the press may say, we will come up and out of this economic situation, it is just a matter of when. The sooner we realise that we can get there, the better. However, we do need to make fundamental changes to the way we employ staff, manage and reward them. Here are some examples of real life cases in which alternative solutions to redundancy have worked:

• KPMG are discussing with staff the option of working a four day week, or taking a three or six month sabbatical at 30% of their current salaries.
• JCB have agreed with directors and staff to a 25% pay cut across the board.
• Directors at another service company have all taken a 25% pay cut plus a few redundancies.
• Law and accountancy firms are seconding staff their clients on reduced pay.
• A number of executive boards are going to staff in ailing teams and allowing them to decide for themselves whether the firm should make X number of colleagues redundant or whether the team should take a 20 - 30% pay cut. So far, 100% of them have selected the pay cut.

What can be learnt from these successes?
Probably what we can learn is that these actions are quantum leaps in the right direction. The only concern is that they just may not be enough. Whilst they deal with this half of the year, they are not necessarily sufficient to go into 2010. These actions should be far more fundamental to have the best possible impact, for example:

• Agree pay reductions of 20 - 50%, but keep everyone on five days a week: how else are you going to manage client relationships?
• Why not grade the pay cuts with more from the most senior staff and less from the more junior/lower paid staff?
• Can you relocate/assign staff to China, or the Far East if your business is global?
• Why not include the whole firm rather than just teams, and so have savings to reward staff who are and can deliver more?

Do you really know what your staff want to do?
Through recent outplacement support projects, we would suggest that many redundant staff having seen a re-organisation on the horizon, have been saving and reconfiguring their finances to prepare for living on less, if they can. Haven’t we had an enormous hike in salaries (especially in the legal, financial and other professional sectors) which became overheated in the war for talent over the last five or so years? What if we returned all salaries to a basic that is 25 – 50% less and introduced strong performance related pay and real flexible benefits? How would your staff respond and what would be their concerns? How will you ever know unless you ask them?

Re-educating generation X+1 and us to scale it all back
Generation X+1 (those aged between 20 – 35 years) have (on the whole) never experienced failure, always passed their GCSEs, A levels, and/or got university degrees, etc. They have been paid premiums for their jobs and, worse still, we have been telling them they are the ‘golden talent of the future’. It isn’t surprising they are perhaps arrogant, but now we are talking about letting some of these staff go because neither they nor we, their managers, can work out how else to save costs. This seems an appalling missed chance.

It seems to me that we need to both re-educate these confident and buoyant people about how they save or spend their money, as well as all of us re-learning the lessons of our parents during other abstemious times. Maybe they don’t need to go off for stag weekends costing £5k per person, or have dinner out for £300 per couple (twice a week), or go on exotic holidays three or four times a year. By the same token, we don’t need to indulge our children, or continue our SKI habits (spend the kids inheritance). We need to help them (and us) realise that life can be good on less; you just need to be imaginative and creative.

Self-determination and choice
Now we are in an environment of survival of the fittest, of can do attitudes, we can give back to staff the sense of self determination and choice. However, they do still have the choice about whether they wish to be employed by you or not; although they need to realise that you too have the choice about keeping them, and only if they give you the best of their efforts. Let’s work on having better managed teams, so that nothing falls through the cracks.