How to deal with redundant staff

For the business owner, to make an employee who has been a loyal worker redundant is a stressful event, often seen as a failure by the owner himself. By TOM McKASKILL

By Tom McKaskill

It is inevitable in a takeover of a business that some staff will be made redundant. While some will be shareholders and cashed up, and have a payout to carry them over until they find something else, not all staff will be so lucky.

 

I went through several trade sales with my various businesses where some people were made redundant. In a few cases it was because there were duplicate roles and the business did not need to carry the extra resource.

In other cases, there was relocation of part of the business and not all the employees were able or suitable for relocation.

Sometimes a business will be restructured or refocused following a takeover and this can also result in terminations. What is clear is that it is impossible to predict exactly how the transition to new ownership will work out, and thus most staff are exposed to the possibility of termination.

Most business owners find terminations very difficult. Having taken responsibility for employing an individual, they accept that their future with the company is an on-going obligation. Providing they perform well, the employee should have an expectation of continued employment.

It is this understanding between employer and employee that provides the fabric of well-being within a business. For the business owner, to make an employee who has performed well and been a loyal worker redundant is a stressful event, often seen as a failure by the owner himself.

However, the facts of life are that such terminations do occur in a sale of a business and that, often, many of the employees are actually better off with a larger, better resourced acquirer. How then does the entrepreneur best prepare himself and his employees for this type of disruption.

One method is to ensure that there are financial compensations for the change. This can be provided through shares, options and termination bonuses and redundancy payouts. Those who benefit significantly under such arrangements can probably look after themselves.

However, most will not benefit sufficiently to adequately allow them to transition to retirement or find a new job. What is really required is a different approach that actually prepares them for new employment.

My approach to this situation was to acknowledge that I couldn’t guarantee anyone continued employment. It was not just the sale of the business that could force terminations – the ebb and flow of business itself can result in terminations if there is a shortfall of revenue.

I always took the approach that, providing staff were well trained, they could readily find new employment. I therefore tried hard to ensure they were provided with good opportunities for education, cross training and new challenges and experiences.

What I found was that this resulted in a more interesting work environment, happier staff, greater productivity, lower staff turnover and a willingness to accept higher employment risk. If they were made redundant, it meant that they could easily find new jobs.

It significantly reduced my stress and gave them greater confidence in working in the business. It also meant that the people who stayed on considered that everyone had been well treated.

For more on smarter ways to sell your business, see our Growth Resources, Exit, section.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.