Tha Art of Letting Your People Go

As banks cut noncredit expenses, undoubtedly the toughest job is deciding whom to let go and how to do it.

The term "downsizing" is impersonal, antiseptic. It means throwing people out of work, hurting their families. And in today's environment, the chances of gaining quick employment elsewhere in the banking industry are not very great.

No wonder so many human-resources people and top executives consider letting people go the toughest job they have ever had.

Life After Banking

One silver lining is that banking jobs are not as specialized as they used to be. In the past, the training of a bank lending officer was only in bank lending. Looking for employment elsewhere almost meant starting from square one.

Today, however, with operations, investments, marketing, and other transferable skills so much more important, more laid-off bankers can find equivalent jobs in other industries.

Also, many bankers have developed skills they can use in small companies or as entrepreneurs. Acute banks are developing outplacement programs that help the laid-off recognize these skills and make the most of them in looking for a job.

But when downsizing, banks must consider the people who will stay on board as well as those who will leave.

Don't Dawdle

A simple rule is: When you decide to let someone go, do it fast.

When people know their jobs are nearly over, letting them hang around can bring devastating consequences.

One Indiana bank CEO fired a loan officer for making poor loans but kept him on for a couple of months to find new employment. In that time, maybe out of spite or maybe just out of poor judgment, the employee made three times as many bad loans as before.

Acting more prudently, a bank that was transferring its transit work to an outside facilities manager waited until the last minute to tell employees they were through. If they had been told earlier, the bank said, a lot of checks would have been thrown off the truck.

Think of how much damage any employee could do to the bank's files if given even an hour or so for dirty work. A disgruntled employee could mess up the important loan files and documents in a trice.

A Quick Lunch

A few year back, one major New York bank let 600 people go at a single lunchtime. They were invited to lunch and told there that they would never return to their desks or offices. Meanwhile, their desks were being emptied into waiting cars.

Even with noncritical employees, there is reason for haste in the process. Once employees know that their days on board are numbered, the amount of effective work they do diminishes markedly and absenteeism soars, hurting everyone's morale.

Of course the key question is whom to let go.

Some banks have found that downsizing just didn't provide the savings hoped for - because the wrong people were fired. The choices had been based on politics or such issues as the candidates' salary levels or years of seniority.

The real issue is who is needed and who is not. When other considerations come first, the result is often that necessary people are let go, only to be hired back as consultants. The bank winds up paying termination benefits and consultant fees to the same person.

The Upside

Though pruning and firing may be distasteful, banker after banker reports that if the job has been done right, the morale of the remaining staff goes up, rather than down. The survivors feel not only that they have "made the cut" but that their effectiveness and the importance of their jobs are appreciated by the people above them.

Nothing can help a bank improve efficiency more.

But when downsizing, make sure to let the people who will remain know what is happening, where they fit in, and what their prospects will be in the new, slimmer organization. If they aren't clued in, the process can easily demoralize them and lead to their departure. The bank can wind up losing many of the very people needed for its future success and prosperity.

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