The Real Art of Letting People Go
So far this year, the U.S. banking industry has eliminated 60,000 positions.
In human terms, tens of thousands of people in banking -- and their families - have suffered much during this essential period of industry consolidation.
While a great deal has been written about how banks should let people go, most of the advice fails to consider that we in banking are dealing with a new kind of layoff that requires a different approach to managing staff reductions.
The Nadler Approach
In his commentary on Sept. 30 ["The Art of Letting Your People Go," page 4], Paul S. Nadler failed to address this new reality adequately.
He proposed the simple solution of getting people out the door fast. This is not always possible -- or desirable -- in a rapidly changing banking environment marked by mergers and acquisitions.
Many merging banks need the very people they plan to let go, to handle the work that will consolidate operations and ultimately turn paychecks into unemployment checks.
The consolidation strategy cannot rest on technology alone. It must persuade people to help carry forward the tasks that will eventually leave them unemployed.
We at Fleet/Norstar have hands-on experience in consolidating banking companies and dealing with "firings," "downsizings," "terminations," "outplacement," and the other euphemisms that add up to the same thing from the employees' point of view.
We are currently consolidating the Bank of New England into our organization. Over the next 18 months this process will eliminate that company's two data centers, two operation centers, and four systems and programming units. We will save the corporation $90 million -- but at the human cost of eliminating 1,500 positions.
In 1985, we handled the consolidation of the former Norstar Bancorp in Albany with Fleet/Norstar Financial Group in Providence, R.I. Subsequent to that, we consolidated the Maine Savings Bank in Maine, Community National in Connecticut, and Indian Head Bank in New Hampshire.
These consolidations reduced the number of data centers to one from nearly a dozen and operations centers to four from 14. They also saved the corporation $50 million and eliminated some 1,300 positions.
These situations are always traumatic. However, banks can handle their consolidations more humanely and productively if they recognize they cannot be reduced simply to firing people.
Banks must recognize three different scenarios for letting people go, depending on which situation they face.
Scenario One: Firing for Cause
Mr. Nadler seems to dwell on firing. But firing must be distinguished from the layoffs that are rocking banking today.
Firing occurs for cause, be it poor performance, inability to work productively with customers or internal staff, or dishonesty.
A firing for cause is usually no surprise to anyone. Most companies have preceded the firing with oral and written warnings or performance evaluations.
In these cases, Mr. Nadler's advice is correct: Get the fired employee out of the office quickly. It is detrimental for morale and business to keep fired people around for any length of time.
Scenario Two: Downsizing
Downsizing requires a different approach. It occurs when a bank decides to reduce staff by a predetermined percentage to cut expenses, make up for losses, sell off assets, eliminate levels of management, or refocus the company on new markets or goals.
Downsizing is different from firing because the job loss is not the employees' fault.
The bank should not treat downsized employees in the same way as when they are fired for cause. Downsizing calls for clear and timely communication to both staff being terminated and those that remain.
It also requires a reasonable severance package and outplacement counseling, because the bank has an obligation to help these people acquire the tools for finding new employment.
Two Crucial Steps
In this scenario, banks must take two crucial and related steps to ensure the success of the transition:
* Maintain morale by working carefully and closely with those who remain, to help them focus on their future roles and the company's new expectations.
This is best achieved without the presence of former employees to remind everyone of a dramatic and painful fact of banking life.
* Provide outplacement offices for terminated midlevel and senior staff. These people often need the structure of an office environment to pursue their job searches in a disciplined and aggressive way.
Scenario Three: Consolidation
Consolidation is a function of the need of merging banks to integrate various data and operations center technologies to eliminate redundancies and reduce costs.
This process also lays the ground for establishing a bankwide platform for introducing common products and services. Like the downsizing scenario, consolidation unfortunately results in the elimination of many positions - through no fault at all of the employees.
With the Bank of New England today - just as with Norstar Bancorp in 1988 - we have had to tell people we are going to consolidate systems and, in so doing, eliminate many positions.
We have told them specifically who will go, and when, as long as 18 months in advance. We have also asked for their help in carrying out the consolidation successfully.
This is diametrically opposed to the way Mr. Nadler would have us handle the situation. We cannot simply fire these people. We need them to work with us, even though they know they will be on the street as a result.
Motivating them to assis us -- even though they face certain job loss -- is the key to successful consolidation. Merging banks must begin to view consolidations as a "people" issue, not just a technology one.
This approach entails specific actions which take guts, time, tenacity, and humanity. The merging bank must be entirely honest, from the outset, about its consolidation plans and why they are necessary.
This means telling everyone the goals, the blueprint, and the timetable; where and when the job cuts will come; and that you need them to perform well to help move the blueprint forward.
Indeed, we have seen highly professional and cooperative behavior on the part of those professionals who knew they would not be with us once the consolidation was complete.
Action, Not Just Talk
Perhaps most importantly, the merging bank must show concern for the well-being of people who will be terminated. More than talk, it involves concrete action.
For example, the bank must commit in appropriate circumstances to helping people land alternative positions within the new organization.
Alternatively, the bank is obligated to assist staff members in finding work elsewhere. When we level with our staff, we make specific commitments regarding how we will help them if they work with us. These include:
* An appropriate financial package, including fair severance.
* Outplacement assistance, including group or one-on-one counseling to improve interviewing and resume writing techniques.
* Psychological counseling, if required.
* Assurances that the organization will first seek to hire from within before going outside when filing open positions.
Toward a Smoother Transition
A consolidating bank that incorporates actions such as these will discover that the task of merging back-office operations and data centers will proceed far more smoothly than if employees are simply told to clean out their desks and go home.
Enlightened bank managers must tailor the manner in which they handle terminations to fit their new realities.
The employees who stay will judge as by how we treat those who leave, because we all harbor the fear that one day it may happen to us.
Mr. Zucchini is executive vice president and chief information officer of Fleet/Norstar Financial Group Inc.