Organizations do not lightly contemplate retrenchments for reasons of cost, disruption to business, negative market perceptions and loss of staff morale. In addition, retrenching staff poses risks to the organization. The first risk is that of running foul of the Industrial Relations procedures and the second is reputation risk.

Industrial Relations risk

The IR risk concerns the processes that have to be rigorously followed in order for the retrenchment process to be “fair”. Due to the length of time these laws have been operational and the availability of sound procedural advice, this risk has in the past usually been able to be minimised.

 

Cosatu however has recently called for changes to Section 189 of the Labour Act to make it more difficult to retrench staff. This call will probably be contested by the SA Chamber of Commerce and Industry (Sacci), which has stated that the retrenchment laws are stringent enough, and further tightening will have a negative effect on business. The link to this article is: http://www.busrep.co.za/index.php?from=rss_&fArticleId=4791814

Thus the IR risk associated with retrenchment needs to be carefully monitored over the coming months.

Reputation risk

The second organizational risk is to the organization’s reputation, and is often not recognised. This risk concerns the perceptions the stakeholders have of the retrenchment process and the impact it has – on the people leaving as well as on the people remaining in the organisation.

The retrenched people’s opinions and comments find ready ears with the remaining staff. Their experience of the retrenchment process becomes the subject of coffee machine and corridor conversations – negative perceptions, gossip and rumours are eagerly received, passed on and thus multiply. Productivity and morale can plummet. In this way everyone becomes a victim of the retrenchment malaise. No wonder the unaffected people suffer from what has been termed “survivor sickness”!

The reputation risk to the organization is largely influenced, if not determined by what the retrenched people say about the organization during and after their retrenchment. Their voices are heard by all organizational stakeholders: unaffected staff; customers; unions and staff associations; press and the community at large. Do they hate, slate and deride the organization? Or do they talk about how while it was an unwelcome and a tough experience, they were helped by the organization and it has opened new options for them?

Thus when organizations have no option but to consider retrenchment, serious consideration should be given as to how they can practically assist these people cope with the dark night of adversity into which they are about be thrust. That’s a socially responsible approach to retrenchment which actually ameliorates the associated organizational risk.

The pay-off from a socially responsible retrenchment process can be actually enhanced reputation. How about that for turning the thinking about the risk of retrenching staff on its head!