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Target recently announced the closure of all its Canadian operations, eliminating more than 17,000 jobs in the process. HRD examines what the American retailer did right, where it went wrong, and how companies in similar situations can downsize strategically and ethically

The right way to ‘rightsize’

THE PRESS RELEASE was simply titled “Target Corporation Announces Plans to Discontinue Canadian Operations.”

Within the hour, news outlets throughout Canada were reporting on the retail giant’s decision to abandon all 133 of its nationwide storefronts, a move resulting in the elimination of 17,600 jobs – the second biggest corporate layoff in Canadian history.

Unfortunately, it was through these very news out-lets that many employees learned they would soon to be out of a job.

One Ontario team floor member, a single mother who discovered her fate after watching a TV broad-cast in the employee break room, told the CBC, “You couldn’t go anywhere without seeing a team member absolutely in tears or in shambles, [saying] what am I going to do now?”

“There’s no such thing as a perfectly handled layoff,”

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says Gene Grabowski, partner at kglobal, a Washington, DC-based communications firm that manages corpo-rate messaging. “However, you can do it in a way that shows compassion for employees.”

Needless to say, Target may not have conducted their layoffs in such a manner. But in a year when Mexx, Sony, and Smart Set have all decided to cease Canadian operations, it seems that many companies could use a primer on how to best downsize or ‘rightsize’ their workforce.

HRD presents a guide for doing so with the needs of employees, shareholders, reputation and the commu-nity in mind.

Before the heartbreakIt is no secret that Target was struggling to remain viable in Canada. The retailer, headquartered across the border in Minneapolis, Minnesota, made headlines in 2013 when it suffered $941 million in losses, a trend that continued throughout every month of 2014.

This transparency is one of the few undertakings that Target handled well.

“I really don’t think there was any information hiding; all the facts were there. They said they were going to staff 150-200 employees per store, but if you do the math, there’s less than 135 employees in each store right now,” says Dr. Nita Chhinzer, associate pro-fessor of human resources at the University of Guelph Department of Management.

It’s essential for this openness to continue in the weeks and months leading up to layoff announcements, as rumours will inevitably surface otherwise.

“The first rule of conducting a layoff properly is to be honest and transparent,” says Grabowski. “Try to keep advanced news of the layoff nonexistent, but if you fail at that and you’re confronted by employees or the media, be honest and say something like, ‘All options for managing the company’s current situation are on the table, just as they always are.’”

Grabowski notes that this nuanced language is important, as outright denial will appear deceitful if layoffs do occur, and hints or forewarnings may cause unnecessary anxiety if downsizing is called off at the last minute.

The big dayThis communication strategy should continue until the day of announcements. While it may be tempting to place the blame elsewhere, accountability will secure the highest possible trust and loyalty with employees and external stakeholders.

“Don’t sugarcoat or obfuscate anything,” says

“The risks of doing layoffs poorly run the gamut from loss of important company information to reputational damage to more extreme circumstances”Tracy Benson

BIGGEST LAYOFFS IN CANADIAN HISTORY

1. 1992, Newfoundland and Labrador cod fishing industry Due to ecological concerns over the northern cod, the Canadian federal government placed a moratorium on all fisheries; 38,000 positions were eliminated.

2. 2015, Target The American retailer announced plans to abandon all Canadian stores, at the expense of 17,600 part-time and full-time employees.

3. 1959, Avro Canada A conservative prime minister decided to scrap plans on the Avro Arrow aircraft, leading to 14,000 employees being laid off, followed by 25,000 contract workers. The ensuing flight of scientists and engineers to NASA and the Concorde became known as Canada’s ‘brain drain.’

4. 1999, T. Eaton’s Co. After decades of decline, the Canadian department store finally collapsed at the brink of the new millennium. Around 13,000 layoffs ensued.

5. 2000-2001, Air Canada Because of the cumulative forces of economic downturn, the September 11 terrorist attacks, and rising fuel prices, the national airline downsized by approximately 13,000 in a nine-month span.

Grabowski. “If layoffs are happening because the com-pany made a poor decision, say, ‘This is the nature of business. You have to take calculated risks. We did that, and it didn’t work out, so we’re experiencing some vol-atility. We expect to bounce back, and the next quarter that we’re in better shape, we will look toward hiring again. But right now we are taking the necessary steps for the company to remain viable.’”

This advice is backed by empirical research. In a study co-authored by Dr. Chhinzer, an analysis of 142 Canadian companies that conducted layoffs between 2006 and 2009 found that the organizations that

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issued an apology were more likely to experience posi-tive long-term returns for shareholders, as opposed to those who denied any wrongdoing.

“In studying shareholders’ reaction to layoffs and the impact that has on share prices, I found that orga-nizations across Canada who denied the layoff had the most negative drop in share prices following the layoff announcement, whereas organizations that apologized had the highest,” Chhinzer says.

People firstEmployees’ personal needs should also be a top priority during the layoff process. In addition to ethical and moral obligations, neglecting the workforce comes at a high cost. If organizations are not sensitive to the impact that layoffs have on departing workers, they run the risk of creating bitter ex-employees intent on sabotaging their former employer.

“The risks of doing layoffs poorly run the gamut from loss of important company information to reputa-tional damage to extreme circumstances such as one I saw years ago where we learned an individual who had been let go earlier in the day was threatening to return with the intent of harming one of the executives,” says Tracy Benson, founder and CEO of On The Same Page.

To prevent these situations, several best practices are recommended when conducting each layoff. However, considerations should always be made on an individual basis to factor in organizational size and culture, as well as the scope of downsizing.

First, it’s advised that the layoff should occur early in the week, as the productivity of the workweek will inspire employees to begin the search for a new job within the next day or two, as opposed to lingering over anger and frustration throughout the weekend.

“Everybody wants to do this on a Friday afternoon, but the problem with that is you’ve just sent a bunch of people into the community with a tremendous amount of anxiety, and they’ve maybe only absorbed two of the five messages you’ve delivered,” says Benson. “You’ve completely lost control of your message, and it looks like you just dropped the ball and ran.”

Another consideration with regard to timing is working notice. While a certain amount of advanced warning is mandated by the federal government, exceptional employers will provide more time than legally required for workers to find new opportunities before the termination officially takes suit.

Location, location, locationNews of a layoff should always be delivered by a senior leader, but choosing a venue requires further thought and depends on many particular factors.

Chhinzer notes that one-on-one meetings are ideal, but in large organizations, this may take an extended period of time and create a “grim reaper effect” of employees waiting for their turn at the axe. From a legal perspective, companies may want two management representatives on hand “so there’s full disclosure and witnesses present for a wrongful dismissal suit.”

An ideal middle ground may be a town hall-style meeting.

“It’s more realistic to sit down in a town hall where employees can have a voice, and after you present the information, provide an opportunity for them to express that voice,” says Chhinzer.

No matter the setting, a comprehensive guide should be distributed, in case employees are too dis-traught to remember details regarding severance and timing. Chhinzer also advises leaders to display a public bulletin with answers to common queries.

Additional considerations include:• Having a procedure in place for employees to gather

belongings safely• Providing pre-arranged taxi trips in case workers

are too distressed to drive home• Hosting an employee relations professional on-site

if additional counselling is needed

A ROUGH ROAD AHEADTim Horton’s Although the café and bake shop is successful, its acquisition by Burger King means the workforce may be downsized by as many as 700 employees (as of March 2015).

Baker Hughes Declining crude oil prices will result in the oilfield service company laying off hundreds of Canadian workers

Sony In early 2015, the Japanese electronics manufacturer announced that it was closing all 14 of its Canadian retail outlets, resulting in 90 layoffs.

Source: Calgary Herald, Huffington Post

“Organizations across Canada that denied the layoff had the most negative drop in share prices following the layoff announcement”Dr. Nita Chhinzer

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Gone, but not forgottenEven after employees have left their post, it’s highly recommended that organizations assist with the sub-sequent job search. This guidance can come in the form of resume coaching, interview preparation or simply informing employees of the most up-to-date tools for locating open positions, such as the mobile app Wirkn.

“Support to employees doesn’t have to be expen-sive at all; it only costs 3% of payroll every year to do sufficient outplacement,” Chhinzer says.

Organizations also can partner with such govern-ment programs as Services Canada, who may provide on-site information sessions regarding benefits, services, training opportunities and government- sponsored job banks.

And while it may seem counterintuitive, if a com-pany is insolvent, they should consider reaching out to a competitor who may form special arrangements that can ease transitions for employees.

Although it wasn’t facilitated by management, a pertinent example of this involves Sears Canada, who agreed to prioritize former Target workers when recruiting for open job postings. In addition, Starbucks Canada hosted a week of one-hour ses-sions where job applicants could meet with a store manager to review opportunities for full and part-time work, as well as discuss the corporate culture and compensation packages.

“The sooner that Target can give these employees resume help, training and career planning services, the better it will be for their reputation and the morale of any remaining staff in other countries,” Chhinzer says.

Weathering the stormWith these suggestions in mind, leaders can be equipped to handle a bad situation in the best way possible.

“There’s never a great way to do it. But there are better ways to do it. And when a company is judged as having performed a layoff with compassion, honesty, and having been direct with reporters and stakehold-ers about why the decision was necessary, they will be judged to have handled the layoff the best they could under the circumstances,” Grabowski says.

Both employees and managers will struggle to remain engaged after the layoffs. Employees may suf-fer from ‘survivor syndrome,’ or guilt from remaining while beloved colleagues had to depart, and manag-ers may not know how to be firm.

To mitigate this, Chhinzer recommends that two

principles prevail: fairness and equity.First, the layoffs should occur in a fair and trans-

parent manner – Target did this well, as everyone was laid off. But afterwards, managers should apply sympathy uniformly throughout the workforce. “If [they are] interactively, procedurally and distribu-tively fair to me and my colleagues, then those nega-tive consequences can be mitigated,” Chhizner says.

Also, when it comes to equity, employees need to know that they are expected to maintain output even in downsizing or reorganizing, and those who slack off will not receive the same pay or severance package.

Chhinzer emphasizes that although supervisors may be hesitant to reprimand workers from fear of lowering morale even further, rules still need to apply, or else employees who are still working hard will become bitter.

“The idea is you have to maintain commitment and progressive discipline,” she advises. If you don’t consistently apply it, you can face a wrongful dis-missal suit. The same policies apply as before, and they need to be applied consistently.”

QUICK TIPS: BENEVOLENT GOODBYES

y Provide tissues and bottled water

y Have pre-paid taxis or car services available

y Plot a route out of the building for workers to bypass pesky media

y Use LinkedIn to connect laid off employees with other opportunities in network

y Offer to write employees an exceptional recommendation letter

Source: Businessweek, Inc.com

“The sooner that Target can give these employees resume help, training and career planning services, the better it will be for their reputation and the morale of any remaining staff in other countries”Dr. Nita Chhinzer

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