The legal staff should also be consulted in designing the downsizing plan and the separation packages. Their advice is needed to make sure of compliance with the Employee Retirement Income Security Act (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), union agreements, and other legal requirements.
Assess Individual Employee’
s Loyalty
Decisions regarding which employees are to remain and which are to be let go should be based mostly on their skills in relation to the client’
s needs. But the
employee’
s loyalty to the employer is also an important factor in that decision even though there is no objective way to measure that loyalty. At best, loyalty can be judged by intuition, but there can be signs such as cooperative behavior, expressions of bitterness, and general demeanor indicating acceptance of management’
s
decisions and plans.
When downsizing is a part of an outsourcing arrangement and some of the client’
s
employees are to be employed by the services vendor, employees who are more loyal to their computer specialty than to their current employer may prefer to join the computer service firm rather than stay in an organization in which computer operations are not the primary function.
But loyalty can be a double-edged sword. Some employees who may not be the best qualified may feign loyalty, sensing the severe competition for survival in a downsizing situation. Their attempts to please may be appreciated, but should be tempered with a balanced evaluation of the employee’
s worth.
Encourage Valued Employees to Stay
Once it is known, from announcements or rumor, that a downsizing program is underway, some of the better employees may feel it is a good time to seek greener pastures. The employees whom the employer needs or wants to retain because of their skills and loyalty assessment, should be encouraged to stay. This may involve giving assurances as to future plans, possibly a pay increase because of added responsibilities, bonuses, or other financial incentives. These assurances are important particularly because of the general negative atmosphere that is generated by the downsizing, including lowered morale and anxiety due to the uncertainties involved.
Preach Loyalty Rationale Continuously
To those employees who will be retained, management should continuously be explaining the goals of the organization, why the prospects are good for reaching those goals, and how the individual employees fit into the plans and are wanted to help achieve those goals. These efforts are necessary to bolster the morale and offset the feelings of bitterness and resentment that are inevitable among some of the employees who are retained after seeing many of their associates leave, even though they may be given generous departure packages.
After downsizing, it is natural for remaining employees to feel insecure, anxious, depressed, and even resentful. Open communications can help. It is well to continue discussing the place of the downsizing in the organization’
s overall goals, and to seek
employee views and help in planning how the work can best be done under the post-downsizing environment. Let employees vent their feelings without being recriminated for doing so. Such communication can foster a renewed feeling of trust and sense of value.
Offer Reasonable Severance Terms
It is essential for the public relations well-being of the organization to offer fair and generous settlements to employees who are asked or encouraged to leave. Such settlements may include provisions such as a cash amount based on the years of service, earlier pension starting dates, and career guidance and support.
The cash settlement is intended primarily to support the person until he or she is able to locate another position (though some have urged stock options instead of cash so that the ex-employee may share in increased profits from the downsizing).
The earlier pension can be given by adding, say, 5 years to the employee’
s actual
age to enable him or her to achieve a retirement pension earlier than would be available otherwise. The outplacement assistance is usually provided by a consultant who guides the ex-employee in the techniques for seeking a new position and may also provide some of the resumé preparation and phone and office services helpful to the job seeker.
All these separation assistance tools help the organization’
s management to feel and
say properly that it is doing what it reasonably can to help those who are put in a difficult position by the downsizing program, often due to no fault of their own.
Try to Give Choices Between Favorable Options. To whatever extent possible, it is wise to build into the severance arrangement choices for the employees so that the employees feel that there is a voluntary element in the plan and that they are not being forced unilaterally into their new status. For example, at a downsizing program at Sea-Land Service, many employees were offered a generous severance package, but given the choice of remaining with the company, which would try to, but not guarantee to, find them a lower-level position with the company if the package was rejected. With this choice, no employees left Sea-Land without the severance package.
SECURITY
The data in the hands of an outsourcing service may be the lifeblood of the client organization. It is, therefore, essential for the client’
s management to make sure
that there are adequate backup copies of the operating data that the vendor possesses. This can often be accomplished by securing from the vendor current copies of the data so that operations could be continued should a disaster — like a flood, earthquake, or fire — destroy the client’
s data at the location of the
outsourcing service. If the client relies on backup data that the vendor has arranged, such as with a firm like the Iron Mountain Depository or Comdisco, then the client must periodically audit those extra copies to verify that they are current, complete, and properly secured. However, even if the vendor does maintain an extra data
security copy off-site, by keeping its own backup copy, the client is in a better position to terminate the vendor and resume its own work or use a new contractor.
The backup data discussed here must include copies of the current software needed to run the other data.
The other major security concern is the exposure of proprietary information through the outsourcing vendor. Of course, the restrictions on the use of key business and technical data should be spelled out in the outsourcing contract. Whether they are or not, it behooves the client to check on the proper handling of information in the hands of the vendor, by observation, inquiry, and other means. If the contract does not spell out security requirements sufficiently, they should be discussed with and agreed to between the client and vendor, with the terms put in writing, in effect, as a supplement to the contract.
HOW TO TERMINATE A CONTRACT
The contract terms have much to do with how the contract is terminated, and there are may different reasons for ending a contract that affect how it should be done. A major factor in making a smooth transition to whatever the new arrangement will be is to prepare a careful plan and schedule of the items and events involved. Finally, both client and vendor may wish to renew the contract; but then there are always adjustments and improvements to make over the previous terms and features.
Terminating a contract before its scheduled end because of problems or changed circumstances cannot be done easily or quickly. It takes time to reestablish IS
operations in-house or transfer the work to another contract service vendor.
Therefore, if and when problems occur or conditions change, it is generally best to negotiate appropriate revised arrangements with the vendor rather than choose an early separation.
Reasons for Terminating
There are many reasons for terminating outsourcing contracts. One reason may be that the contract period is finished (though if the arrangement has worked well, a renewal would be the logical outcome). It may be that the client or the vendor has become dissatisfied for one reason or another and wants out. A good reason is that another vendor, possibly with some advanced tec hnology, has offered terms that could save more money and provide specialized benefits. Or possibly, the client’
s
needs have changed in terms of product or territory, or an acquisition or merger was made that has caused the vendor’
s services to be unsuitable.
Planning and Scheduling Termination
The transition to setting up the outsourcing arrangement required listing the myriad of details that had to be taken care of; a careful plan listing the equipment, software, and personnel changes to be made; and scheduling the events in a logical fashion.
The termination process requires a similar listing of the hardware, software, and people changes and a time schedule for the events to take place. The scheduling process may be aided by Gantt or PERT charts, which help to identify the actions needed, their sequence, and the steps to follow up to keep the schedule on track.