How to mitigate the risk of reputational damage from redundancies

Organisations like 3M, the University of Otago, Xero, the Warehouse Group, Sky TV and AWS have already downsized their workforces this year and the trend doesn’t appear to be slowing – this month, new owners of winemaker Villa Maria and hardware giant Bunnings have also announced cuts to their Kiwi workforces.

While businesses may be tightening their belts in the face of the country’s financial recession, newly released research suggests that 82% of New Zealanders don’t think it’s fair of employers to make redundancies during a recession.

And over a third (35%) of respondents said they would stop spending money with a business that laid off a significant number of employees.

The research, which was commissioned by communications agency Anthem as part of their “Fair Enough?” research series, and conducted by Talbot Mills, surveyed more than 1000 Kiwis.

 “The research should serve as a reminder to businesses that there are significant reputational risks in the way they conduct themselves through financially difficult times,” Talbot Mills Research Managing Director, David Talbot, said in a press release.

Cast your mind back to March where the poor handling of Mediaworks’ Today FM closure saw presenter Tova O’Brien tell the radio station’s listenership that its staff we’re “being f**ked” in her update live on air.

“All organisations go through a life cycle where they need to reinvent themselves to stay relevant and remain in business. This is no different during difficult financial times,” said John Miles, CEO of New Zealand Marketing Association.

The brand and brand reputation expert continued, “It’s the old thing, you’ve got to have a level of common sense to try and mitigate the risks.”

Consult with workforce on challenges

Miles believes it’s important for organisations to focus on adding value to their offering and consider alternative revenue streams before resorting to layoffs and to discuss the options not just at the executive or managerial level, but with your entire workforce.

“When you share a problem with a wider number of people, they can come up with solutions that you’ve never dreamed of,” he said.

“Quite often the people who are doing the job will see where the inefficiencies are occurring and how to do things in a way that will make you more efficient.”

Miles says that consultation process is even more important for organisations who conclude that redundancies are necessary.

Be fair and humane with redundancies

“If you can show that due process has been taken, all avenues have been looked at, and that you've dealt with people fairly and in a humane way, [then] you will minimise damage,” said Miles.

AJ Lodge, partner and employment lawyer at Anderson Lloyd, agrees that businesses should treat the consultation process with employees as an opportunity to solve critical business issues, and he implored organisations to keep an open mind about the consultation process.

“Some organisations make cost-cutting decisions when in financial difficulty without giving due importance to consultation, which can appear as a lack of concern for employees and ultimately damage an organisation’s reputation,” he said in a press release.

However, when asked the question “Generally speaking, when companies make layoffs in New Zealand, do you think they consult in a way that is equitable and fair?” one-third of survey respondents considered consultation with employees nothing more than a “window-dressing” exercise.

“Businesses should ensure their decisions are seen as fair and necessary with honest and transparent communication to build understanding and trust,” said Talbot in a press release.

Layoffs impact employee trust

Nearly half (47%) of the respondents stated their trust in an employer would diminish if it had a history of cutting employees’ jobs during tough times.

In addition, over a third (35%) of respondents said they would stop spending money with a business that laid off a significant number of employees, with the number higher for respondents aged under 30 (46%).

However, 36% of respondents stated they were unsure about what they would do and 29% said they would continue to spend money with that business.