Is the VRS as transparent as it seems? The other side

With technological changes in the production processes, exploration of new markets, relocations, international partnerships and other factors, organisational adjustment has become an imperative.

Technology has brought realisation that an entity could perhaps manage its operations with half to one-third of its staff and that downsizing was feasible. Additionally, the implications of outsourcing, contracting services, computerisation of databases and other forms of information technology has provided further impetus to the desirable prospect to restructuring to reduce costs and increase profits, which is the bottom line of restructuring.

In this context, the Voluntary Retirement Scheme (VRS) emerges as a measure of shedding a workforce whose productivity has no financial impact on the organisation in its efforts to maintain cost effectiveness in an increasingly competitive world.

Reducing redundant workforce

Empire building is fast being replaced by technology. Voluntary retirement is the norm when companies move into modernisation through technological processes to maintain a competitive edge. Nevertheless the legislative framework does not allow the enterprise to shed redundant workforce. The enterprise has to face various legislative restrictions including a powerful workers’ union in most cases.

Thus, companies commonly refer to the VRS, a strategy to reduce so-called surplus or redundant workforce. The VRS is led by a review of the extent of overstaffing, the desired skill profile of available personnel to fill the absolute criteria, the identification of the need for new persons with relevant qualifications and expertise and the question of those whose work slots would become redundant under the new structure. The Human Resources Division (HRD) would perform an in depth study for review by the board well before any decision to offer VR.

VR would be considered after checking the legal soundness of the scheme well in advance and the transparency and objectivity of the decision to avoid any legal challenges on the grounds of violation of fundamental rights. The entity would ensure that staff across the board are made aware of the best practices in VR in the country comparable to different countries to remove misunderstanding.

Utmost care needed

VRS is handled with utmost care since mismanagement of the exercise could clearly cause major damage to both the organisation’s workforce and its business reputation. Damage to the former can seriously effect an organisation’s attractiveness with potential future employees by producing an uncaring, hire and fire image.

Similarly, bad publicity over retrenchment could give rise to problems in the continuity or quality of supplies and services and can even cause customers to wonder whether the firm is in a decline.

To avoid these complications, the entire process should be made completely transparent and consistent to the announced features of the scheme designed to diffuse legal challenges. There would be no recruitment against vacancies arising out of VRS and generally there is a freeze on recruitment for a certain period consequent to a VRS roll out.

Strictly voluntary

As the name suggests, the VRS is strictly voluntary, i.e. one can neither compel the workers to accept it nor apply it selectively to certain individuals. One can however choose the levels, units and age groups among whom one wants to offer VRS and make the offer as inviting and persuasive as possible, granting concessions over and above the norm with solid reasons as to why the entity is compelled to enter into restructuring and why VRS has become necessary.

The entity would go to lengths to build rapport with those selected for VRS by continuous interaction before, during and after VRS and would guide them to re-invest funds and secure alternate employment.

Reducing costs

Even though downsizing by offering VR may not solve all of a company’s competitive problems or bolster a company’s profits indefinitely, downsizing can help reduce costs, which can lead to greater short-term profitability. Today, organisational size is no longer a measure of corporate success. Companies needing downsizing usually arrive at that decision over a few years.

Past poor recruitment policies, low productivity levels in certain areas, overstaffing in some areas or top heavy structures are some of the reasons leading to redundancy. Companies could be letting a few very good years in business go to their heads, adding on new subsidiaries and other groups to the parent company, venturing into unfamiliar business territories, relying on consultancies and projections that may have hidden flaws, international alliances that turn out as mismatches, need for visibility, need to be seen as a major player and other such factors.

Heads of business may have allowed psychological income to sway their business judgement. Thus companies grow unthinkingly fat. Where they could well outsource, companies may go ahead and establish new product lines and the array of very cost components that go with such decisions.

For example, in a marketing conglomerate, a mistaken notion may prevail that the sales force is paid commission though the pay is basic, hence they pose no real cost to the operation. Too often there is not enough awareness about overhead or about cash flow problems. The lines of authority may stretch to such heights and may spread too far for any form of proper control, allowing mismanagement to creep in.

In the meanwhile, highly-qualified professionals may be drawn out of well-paying and established professions unknowingly to these organisations. They may be lured out by dangling the carrot of a promising future not knowing the inner intricacies of the management.

Leadership

In the wake of numerous worldwide corporate scandals, there has been renewed interest in the subject of leadership in organisations. High-level executives and the impact their actions have had on the internal and external stakeholders of entire corporations, as well as instructors of management and leadership have made startling differences to how entities are managed.

Some of these behaviours are guided by ethical standards and such standards can be highly detrimental to the long-term stability of the organisation affecting its impact on those within as well as its customers.

Enterprises favouring VR as a means of downsizing may argue that although technology may displace a certain proportion of the workforce, displaced workers would still be able to find new jobs relatively easily if those workers have skills that relate directly to the prospective employer’s business.

Despite the admitted discomfort and difficulties that downsizing has on displaced employees, many of them are able to achieve greater efficiency, competitiveness, and profitability when challenged in a new employment.

It is a common to find highly capable professionals lingering in stagnant, non-challenging employment since they have reached a comfort zone and there is absolutely no doubt that this comfort level has been induced by lack of challenges, strategic management and leadership.

Employees with high skills and potential stuck in jobs with no growth potential possibly due to poor organisational administration would be an asset to emerging industries where they are needed. Economists argue that this process strengthens the economy and helps it grow.

Shrewd employers should realise this factor and accept skilled and professional VR holders with open arms as they would contribute significantly towards maintaining a competitive advantage in the face of greater domestic and global competition.

Challenges the VR candidate faces

But could the departing VRS employee, whether from a skilled cadre or managerial level, justify to a prospective employer that by being offered VRS, the candidate was not amongst those that the company wished to weed out discreetly?

How would the VRS employee justify to the prospective employer that being offered the VRS was not due to any impairment on the part of his performance but was related to external factors that compelled management to rethink its business strategies in which his presence stood in the way? I have witnessed this dilemma time and again.

I have observed many times over the challenges the VR candidate faces in seeking employment elsewhere and this challenge cannot always be considered one that was placed on his shoulders due to any reason on his part. VRS taken at face value is not as simple as suggested in the preceding paragraphs. A hidden factor of VRS exists that some companies may prefer to keep hidden and it could well be a sick company trying to save itself!

I believe that companies could be playing unfair with their management, especially the higher calibre, by offering VR. VR produces a gamut of unwholesome thinking, not only for the VR holder but the outside world in general. The VR holder is stigmatised into believing ‘why me?’ and would certainly have to face external suspicion of being a poor performer in spite of the measures taken by the organisation to justify the VR exercise.

Placing skilled and professional cadre in this position if it were due to organisational failure and poor decision making could understandably be considered unforgiveable since most such employees have high working capacity and years of good service left in them. In too many instances, if the management had had well planned and structured growth and development strategies, VR would not have become necessary and this is a point entirely missed in general thinking and possibly by potential employers. I believe that employers would need to delve deeper to ascertain the real picture of the organisation the VR holder had departed in deciding on employing those who were given the golden handshake, as very often it is not the candidate but the organisation and its poor policies that led to the decision to revamp.

(The writer is MD/Principal Consultant of Executive Search Ltd./Appointments of International Management Specialists (AIMS), a well-known headhunting guru who is a pioneer in the field of executive search and headhunting with over three decades of experience in the business.)