Managing Layoffs: Surviving the Transition
It was one of the most challenging things Billy McCarter ever did as an insurance carrier CIO, and he admits to having butterflies as he walked up to the podium. The venue was business-like rather than opulent, in order to suit the occasion. It was also large enough to accommodate the roughly 550 people in the audience. These were McCarter's employees, and he was about to tell them that they no longer would be his employees and that some of them might be out of jobs.
McCarter, now SVP, delivery, for MajescoMastek (Edison, N.J.), faced the audience in 2001 as SVP and CIO of Fireman's Fund (a subsidiary of Allianz). The Novato, Calif.-based carrier was embarking on a 10-year outsourcing relationship with CGI (Montreal) that would affect hundreds of jobs in the insurer's technology organization. McCarter's experience throughout the outsourcing transition demonstrates several best practices, and his address to the affected employees exemplifies perhaps the most important management activity during such transitions: communication.
Once we had decided to do the outsourcing, we told them what was going to happen -- as well as we knew, at that point -- rather than springing it on them after a lot of secretive meetings," McCarter explains. "I outsourced 536 positions, and of those, not everybody got jobs. I got them all in a room at the same time rather than tell them in small groups and let the news travel and get distorted. I wanted it all to come from me directly."
McCarter recalls that he gave a scripted description of what the insurer was embarking on, explaining that all present would be affected one way or another. A panel of the carrier's leadership participating in the outsourcing program was present to answer any questions that might arise during the session. McCarter told the affected employees what to expect over the coming weeks and months and explained that communications would be ongoing, on both a formal and informal basis, including updates on decisions that were being made and how they would impact employees in the long run.
"I had weekly stand-up meetings with all the people who were impacted and gave them an open invitation to approach me," McCarter elaborates. "I told them I would be in a certain room at a certain time every week, and they were welcome to come in and dialogue on what had happened in the previous week, what was ahead in the coming weeks."
For any significant outsourcing arrangement, McCarter recommends that the CIO work with a communications specialist to properly script messaging. It is important to tell employees both what you know and what you don't, and to be very specific and precise, he advises. "Employees will hang on every word, and anything you say can come back to you later on," he cautions. "If you misspeak or say something that could imply a commitment to an employee, you'll have a challenge on your hands."
McCarter also advises that CIOs focus sooner rather than later on benefits questions. "We tried up-front to rationalize the benefits between the two organizations so we could communicate, 'If you go over there, here are the kinds of benefits you'll have -- you'll be kept whole: we'll figure out a way to compensate you for any lost benefits.' For people whose jobs were being eliminated, we told them we would help with outplacement and that there would be severance pay," he relates. "Be willing to deal with benefits early and do your homework on issues such as seniority, medical coverage, seniority and 401(k)."
CIOs should also focus on retaining key employees through the transition period, McCarter counsels. "It's important not to assume that that the leadership that managed internal teams are the same people who can manage the service provider," McCarter warns. "Managing external teams is very different than managing internal employees."
It also is critical that the CIO communicate intensively with the business and secure buy-in for all the moves that concern business leaders, McCarter adds. That includes agreement about the program's goals and anything that requires consensus. This will avoid misunderstandings and increase the sense of partnership between the two camps, he says. CIOs have a built-in advantage, in that they are undertaking challenging work that should benefit the business significantly.
McCarter explains that as a consequence of his management of the CGI outsourcing arrangement his stature rose at the insurer. "I gained credibility because I was willing to deal with some difficult problems and help reduce costs," he says. "Everybody knew it needed to be done, but nobody ever wanted to tackle it before."
The ambitious CIO, however, should appreciate the severity of those difficulties, McCarter implies. "I had to work to keep relationships intact with people who were very good friends of some of the people I had to let go," he relates. "Managing the people issues post-transaction was as important as managing them pre-transaction."