(a) Is HR being locked on done deals?
(b) What is the role of HR when it comes to corporate restructuring?
By Shadreck Zangairai
Corporate restructuring is often undertaken in response to extreme financial crisis and the organisation’s survival if it’s at stake. However, more generally firms restructure even in good economic times to improve their financial performance or exploit new strategic opportunities, the core reasons would to attain profit and sustainability. Whatever the reason and circumstances, Simmons (2015) argued that human resources practitioners must deal with certain issues that arise from these events and actions by management. Human resources practitioners can help management by providing information on the options for restructuring, the methodology for the selection of employees in the restructuring process, costs and payments that can be expected in restructuring, the timing of restructuring, potential litigation and claims assessments, obtaining effective releases and the retention and motivation of the remaining workforce.
a) Is HR being locked on done deals?
Yes, to a lager extent HR is being locked on done deals when it comes to corporate restructuring in Zimbabwe. HR is not or in many instances never involved in determining whether to restructure of not, and that is the reality in Zimbabwe. For instance, in public organisations in Zimbabwe, it is even worse because most of critical decisions especially on restructuring are made by the Executive, Board of Directors, the permanent secretary of the responsible ministry and the responsible Minister where there is less or no representation of Human Resources. For example, the Minister of Information, Media and Broadcasting Services at one point indicated that ZBC was overstaffed and as a turnaround strategy to resuscitate the Corporation he recommended retrenchment of five hundred workers in his capacity as the responsible Minister. The Minister in his capacity also said that ZBC managers were too many and need to be reduced from fort-three to twenty-five even though there was much ignorance on the operations of the national broadcaster. HR at ZBC in this situation were only being used as a tool for implementing the restructuring decisions which they did not participate in. There was no stage in this process where ZBC HR was consulted or involved to determine the process of restructuring. Therefore, basing on the above, HR was locked in a done deal and was only used as an instrument to implement the restructuring process which they did not participate.
Looking at another example, in 2015, the Daily News of 14 April reported that the Minister of Finance and Economic Development in Zimbabwe announced that the civil servants performance bonuses has been suspended for the year 2015 and 2016 and was to be revised in 2017. This decision followed the government’s intention to tame its ballooning wage bill and create fiscal space. The government’s salary bill was by then standing at a staggering US$260 million per month. Earlier on the Minister had indicated his intension to downsize the government workers (civil servants) due to lack of funds which had left the government struggling to pay salaries. A close look into this intended decision is that it’s a political-economist’s decision that does not take human capital as strategic partner for economic development. In this case, HR was only involved in the process of retrenching the workers since it was not represented at highest levels. Therefore HR was locked in a done deal. Instead of being a strategic partner, HR is used as an administrative instrument to implement decisions not agreed to.
In addition, the Ministry of Health and Childcare also impacted on a restructuring exercise that did not involve the HR practitioners but the same was now tasked with implementing the process. This demean the functionality of the HR department. Why HR is not included in the planning process is of great concern and this has led to unsuccessful exercises which might not solve the intended purpose. Hence in most restructuring processes, HR are being locked on done deals.
However, it is not always like that since in some organisations HR is involved in deciding whether to restructure, especially Human capital restructuring. For example, the City of Harare was represented by the Director of Human Resources who sits in executive meetings and in their 2014 retrenchments, HR was not locked in a done deal because there was representation at the highest level.
b). Role of HR in restructuring
In restructuring processes, human resources practitioners provide management with some options besides the termination of employees in connection with a need to reduce costs. For instance, human resource professionals can suggest reduction in non-personnel expenses, reductions in pay or hours, work sharing, holidays, freeze on recruitment and forced vacations, whether paid or unpaid. As an example, before a forced reduction occurs, a voluntary exit incentive is often worth considering. However, human resources professionals must be careful how voluntary exit incentives are structured and communicated to avoid claims of constructive discharge, especially by older workers. While management often wants to move very quickly, one of the key factors to consider is the “decision window.” It is good practice to provide a decision window for employees to consider a voluntary exit incentive.
Human resources practitioners also assist in explaining and documenting the basis for reducing the workforce. Management may have the operational skills to cut payroll and keep the business running, but often management is not able to express what otherwise would be a legitimate business reason for reducing the workforce. Human resources practitioners as experts help management to handle the restructuring process in a manner that avoids litigation since inconsistent explanations from various members of management can create an increased risk in litigation. The starting point in a workforce reduction is to determine the business reason that drives the need for the reduction. Once business reason has been determined human resources help with the identification of the sections of the organization that will be affected, the categories of the jobs that will be affected, the timing and the types of selection criteria that will be used for the identification and selection of the affected employees.
It is important to begin as early as possible in the planning process to determine the business reason for reducing the workforce and it is important that human resources practitioners be involved in this process. Early planning will aid in determining any bargaining obligations and strategy if a union represents affected employees and will further aid in anticipating any notice obligations under the Labour Act of Zimbabwe. Early determination of the business reason for a reduction-in-force will also aid in maintaining consistency in the decision-making process. Once a decision has been made that the workforce must be reduced, the method must be selected. Some obvious first questions to be asked would then be how many employees must be terminated and can this be accomplished by attrition along with a hiring freeze or a voluntary incentive program (termination for package). If these options cannot achieve the needed result, then the focus must turn to an involuntary retrenchment.
A common question that human resources experts must address is how managers should go about selecting the employees to be retrenched. There are several different options human resources professionals can recommend to management, such as the least important jobs with least needed skill sets, the lowest productive or those workers with discipline problems. Whatever the selection criteria, human resources authorities must act as gatekeepers to ensure that the criteria are legal and are applied fairly and consistently.
Simmons (2015) indicated that a key process in preparing for downsizing the workforce is to analyze whether the proposed reduction will cause a significant risk for litigation and exposure to an adverse judgment. Human resources practitioners therefore conduct the assessment themselves or facilitate in obtaining a litigation risk assessment by engaging expert risk assessors. Simmons further emphasised the use of statistics if workforce reduction involves retrenching a large number of workers. It is the responsibility of Human Resources to ensure compliance to legal requirements as stipulated under sections 12C and 12D of the Labour Act Chapter 28:01.
When downsizing the workforce by retrenchments, it is the responsibility of human resources practitioners to ensure that the retrenchment packages are negotiated peacefully and fairly. Also Human Resources is responsible for advising on all available options of calculating exit packages and to ensure that the packages are well communicated to employees in clear language and when the pay-outs would be paid. If there is a collective bargaining agreement in place, HR should ensure that the terms of that agreement are followed unless the union agrees to something else. Further, depending on the reason for downsizing the workforce, the employer may have to bargain over the decision to have a workforce downsizing.
In a nutshell, in some cases, HR is taken as a strategic business partner where it is represented at high levels of management and make strategic decisions. In some instances, HR is not strategic but just play an administrative role of just implementing decisions made by others. If HR does not occupy a strategic position in decision making, then it is likely to be locked in done deals where it works only as an operative or administrator and not as strategic thinkers. The recognition of HR as a strategic partner in the development of an organisation is the solution to this challenge. HR should be positioned at a strategic position in the structures of organisation such that it influences some restructuring decisions by providing expert experience where employees are seen from a human resources eye.
Disclaimer: Shadreck Zangairai is the Principal Human Resources Officer at Masvingo Provincial Hospital. He writes in his personal Capacity
(sh***********@gm***.com)
