This column was originally published on Jeff Neal’s blog, ChiefHRO.com, and was republished here with permission from the author.
Most people do not like to think or talk about a reduction in force (RIF) and they certainly do not want to do a RIF. But, think and talk about it we must. And in some agencies, leaders may have to more than that.
Most people would rather talk about the “A word” — attrition. For many years that has been the preferred way to shrink the workforce. Attrition is less harsh, it does not force people out of their jobs, and presents fewer opportunities for favoritism or other bad things. So why would we ever consider RIF when we have the allegedly painless magic of attrition? There are at least three reasons.
1. Attrition is random. It does not always happen where you need it. If we have an organization where we want to reduce the number of people in position A, but keep all that we have in position B, we have to pray that the people who leave are in position A. If not, we may find ourselves being unable to hire for the jobs we need and still having too many people in the positions we do not need. Multiply that by a few dozen types of jobs and it is easy to see how an agency could get itself into a bind.
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2. Prolonged pain. Attrition takes a downsizing process and drags it out for months or even years. The organization is constantly under stress, leaders may not see the need for rapid rethinking of processes and structures, and the workforce is asked to do more with less until they break. It is not good the agency, its mission or its workforce.
3. Timing. This one is most important for our situation today. Attrition depends on people leaving. If they are leaving in large numbers (and from the right jobs), attrition can work well. But most agencies do not have high turnover rates. If an agency has a turnover rate of 5 percent and is told to take a 10 percent cut (the size of the reductions we are hearing about in the President’s budget plan) on Oct. 1, they have a problem. Turnover takes time, and in that agency with 5 percent turnover, it would take two years of hiring no one to meet the goal. That is two years too late. Agencies can increase turnover by offering buyouts and early retirement, but that takes time, and they either need more money to pay for the buyouts or they have to do them early in the fiscal year. Attrition is great for small reductions that do not have a budget deadline. For big reductions, the timing simply does not work.
So, if attrition can be bad, why not just go ahead and do a RIF right away? What could go wrong? In a word, everything. Here are just a few examples:
Lump sum leave, buyouts and severance pay do not take into account the biggest cost of RIF — grade and pay retention. Let’s say you abolish a GS-12 position where the employee makes that same $90K per year. The employee has enough seniority to bump or retreat into a GS-9 job. The GS-9 has enough seniority to bump or retreat to a GS-5. Both employees have been in the job long enough to qualify for grade retention. That means for the next two years, the former GS-12 and GS-9 will not lose a penny. The person who goes out the door is a GS-5 making $40K per year. The job you abolished with the intent of saving $90K per year produces only $40K of savings. Once you add in the cost of severance pay and leave payout for the GS-5, the first year savings may drop to only $20K. Once the grade retention expires, the employees will receive pay retention. In most cases, they will never see an actual reduction in pay. They will simply get half of annual pay increases until their pay catches up. That will take years.
It is easy to see why a clean RIF is hard to come by. It can be done well, and it can be done in a way that does save money, but it takes time, careful analysis and planning, and a long-range view of consequences. I ran a RIF that affected more than 1,500 people and we had no reversals on appeals, arbitrations or complaints. That took a lot of work and it was painful. Jump into it without the right preparation, and the consequences will be ugly.
The truth is that there is no painless way to dramatically shrink an organization. Agencies faced with that daunting task will need to make decisions that best serve the mission, while doing everything they reasonably can do to prepare and to look out for the interests of the workforce. It is not going to be easy, painless or without risk, but it can be done.
Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.