For Organizations
Outplacement Versus Take the Money
Selecting an Outplacement Firm
Tips for Effectively Managing Employee Transition
For Individuals
Diversify Your Company
By Glenn Hunter
From Kansas City Small Business Monthly
Diversity is good. Better yet, using the latest industry jargon, "Inclusion is good." Business professionals hear this message consistently, and in today's global economy generally accept it as fact.
Problems arise when business leaders have to define what constitutes inclusion. From a human resources perspective, inclusion means creating a workforce that reflects various demographic characteristics and that reflect the business' marketplace.
When hiring, businesses need to be aware of Equal Employment Opportunity language that says a company cannot make decisions based on an individual's race, religion, gender, national origin, age, veteran status, disability or any other status or condition protected by applicable state or federal laws, except where a bone fide occupational qualification applies.
But, what exactly does that mean to the organization that needs to hire few people to keep the business growing and satisfy customers? The answer to the question focuses on creating a culture that satisfies a more diverse marketplace.
Hiring with Your Eyes Shut
Culture means your business has a certain set of values that are important. Mission and vision statements are important, and most business gurus strongly suggest that businesses have them. But even without them, the business stands for something. Customers bring their money to a business because they believe that it will provide something to them. So, whether the company's values are written or not, a set of values are communicated to the marketplace.
These same values are reflected in hiring. If customer service is a company's "middle name," then the employees need to demonstrate traits such as empathetic listening and problem ownership. If a language barrier keeps customers from recognizing the business' sensational customer service, then by all means hire people that can pierce the language barrier. The keys to success do not sit with the employee's skin color, religion, physical fitness or age. The key to success is to have as many customers, willing to spend as much money, as often as possible. When customers relate to the business' values and the employees who reflect them, the likelihood those customers will spend and spend often significantly increases.
New Employees, New Customers...New Customers, New Employees
If hiring according to values is good, where does the overworked, stressed out, where-did-today-go business manager find a diverse cross section of candidates with the required values?
First, look among your customers. Contacts from customers can yield potential job candidates. Second, diverse candidates can be found by contacting affinity groups. The Hispanic Chamber of Commerce, for example, can probably provide Latino candidates. The local job clubs may be able to provide old candidates, non-exempt and exempt workers, as well as managers who have been downsized. And, religious and civic leaders often are aware of candidates among their constituents who are actively or passively seeking their next career opportunities. These recruiting methods may be more cost-effective than conventional methods of recruiting new employees that meet diversity needs.
This inclusive approach extends beyond doing the right thing or opening the workplace to disadvantaged individuals. The bottom line is the bottom line. Having employees who are proud to work for a company that shares a common set of values means employees will tell their friends (who typically have a common set of values) about their employer, resulting in more business.
This formula works when employees know that both the cultural similarities they share with their employer and the differences are valued and appreciated. Furthermore, management must foster an environment where a common set of profit-focused values are driven throughout the workforce.
Finally, an organization that embraces employees with difference backgrounds and assumptions can expand into niches that may be waiting for the company's products and/or services, but no one bothered to tell them that their spending was welcome. As profit-centered business people, spending from new customers is always welcome.
Outplacement Versus Take the Money
By Laurence J. Stybel and Maryanne Peabody
From The Directory of Outplacement and Career Management Firms
“We are providing the job candidate with outplacement OR cash. What do you think about that?”
Some job candidates insist on having the option of cash or outplacement services. Is it a good idea?
The Value Issue
Some of the executives may say, “My last employer provided me with outplacement services. I didn’t find those services of much value. But I kept the training books and videotapes. Thus the money would be wasted on outplacement. I would value having the cash myself.”
I would say to such an executive, “Why don’t you first talk to a number of firms and see what they have of value to offer. You are assuming that if you have been a client at one outplacement firm, that is as good as having been a client at all outplacement firms. Give yourself an opportunity to first talk and then make a decision.”
The Tax Issue
Beyond value, there is the issue of the taxability of outplacement fees. Outplacement fees can range upwards between 15%-20% of terminated employees’ total cash compensation (salary plus bonus).
In one case, an employee was offered outplacement consultation or the cash value of that service. She took the outplacement service. In Private Ruling No. 8913008, the IRS held that since the cash payment would have been taxable, then the cash value of the outplacement should also be taxable. In this particular case, the IRS took the position that the outplacement service was of primary benefit to the employee and not of primary benefit to the employer.
The private letter ruling was carefully limited in its application by the IRS and stated that the ruling is “directed only to the taxpayer to whom it is addressed…and my not be used or cited as precedent.”
Structuring Outplacement Services to Avoid Being a Taxable Benefit to Employees
Despite the stated limitations, you should be concerned. The Association of Career Management Consulting Firms International is the trade association of the outplacement industry. It is also concerned and secured an opinion from Arthur Andersen & Company. A large outplacement firm also secured an opinion on the matter from a Washington, DC-based attorney. Both opinions stress that HR executives can structure the offering of outplacement services so as to minimize the chances that the IRS will construe it as a taxable benefit to employees. Have the company make it clear that it is deriving benefit from providing such service to the employee. It is common for companies to require terminated employees to sign a waiver of rights to sue in return for added severance arrangements. These severance arrangements must be greater than those severance benefits spelled out in the company personnel manual. Having such a document clearly is in the interest of the terminated employee at IRS audit time.
The Association of Career Management Consulting Firms International also suggests that companies eliminate the option of cash instead of outplacement. One can cynically take the view that the trade association is seeking to feather its nest. Our experience, however, is that some of the executives who most need outplacement services do not fully appreciate how difficult it is to effectively launch a job campaign or to start one’s own business. By the time they learn how hard it is, it is too late.
For an executive in the 30% tax bracket, it costs the company less than $10,000 to provide $10,000 worth of services, since the fee is deductible. On the other hand, outplacement services can be deducted as an “unreimbursed miscellaneous business expense.” It is deductible only to the extent costs exceed 3% of adjusted gross income. As a practical matter, outplacement costs are not deductible for the vast majority of executives. Few would spend enough money during the course of the year to reach this high threshold. It means that our hypothetical executive will have to pay $13,000 to receive the same $10,000 of benefits.
Senior executives are particularly prone to underestimating the complexity of the demands of securing a new job. We find they often request cash in lieu of outplacement in their own situations, and later come to regret that decision. The task of finding a new job or establishing a new business is primarily a marketing/sales effort—something with which some are inexperienced. Make it clear that the company is in control of how the outplacement money is to be spent. A company may be thinking of job seekers’ best interests in allowing the individual to comparison shop among various outplacement firms. Such shopping, however, makes it difficult to make the case that the individual is not in control of how the money is to be spent. This issue of control was a major concern of the Canadian Revenue Service. Having said this, it is a positive rehabilitative step to provide executives a choice over their career consultant. If the company allows terminated employees to shop among vendors, the HR manager would then write the terminated executive a letter instructing the employee to go to the selected outplacement firm.
Case-by-Case
The decision to allow the executive a choice in outplacement firms should be made on a case-by-case basis. With the maturation of the outplacement industry, firms within the industry are setting up highly focused niches. It no longer is appropriate for a sponsoring company to assume that “all outplacement firms are alike.”
Selecting an Outplacement Firm
By Jerry N. Boynton
From The Directory of Outplacement and Career Management Firms
Stress is always present when downsizing or termination occurs. These events, whether predictable or not, create change and stress as a consequence. Planning ahead of time to choose a professional outplacement firm to work with the people who are departing is a wise investment of time. Often, this important component of the severance arrangement is left to be decided at the peak of emotional stress for everyone concerned: the affected employee, the senior employee handling the termination and the human resources professional.
A decision for using a particular firm made in advance will benefit yourself, your company and the affected people.
In setting the framework for this article, it is important to understand that outplacement, as discussed here, means consulting services which are provided for executive- or senior-level people. Thus, when the term executive outplacement is used, it is being contrasted with group outplacement and those programs which are typically provided employees who do not occupy senior functional roles.
Two things stand out in importance when you determine the consulting firm you use. Of equal importance are the quality of the consultants and the design and delivery of the process. Many times, outplacement companies use different individuals to market their services from those who handle delivery, the consultants. It is a good idea for you to take the time to meet the people who are responsible for delivering the service. Interview them. Take time to understand the company's process while you assure yourself that the consultants possess the core competencies and the life experiences to work effectively with executive-level people.
Are the consultants, for example, contract workers? There are many high quality people who work on a contract basis, but you need to know if they can deliver the firm's process with consistency and quality. How thoroughly are they trained and what are their processional experiences? Executive outplacement must be offered by consultants who can handle the rigors of dealing with people who are possibly undergoing significant emotional peaks and valleys. Handling those swings demands patience, sensitivity and understanding. Keeping a candidate on track through the job search requires intelligence, creativity, stamina and reality.
Consultants must be capable of meeting the needs of several candidates simultaneously. A good question to ask the provider is, How many candidates is each consultant responsible for at a given time? Quality follow-up can be accomplished with only a manageable number of candidates.
Many outplacement firms are set up so that the same people deliver consulting services are also responsible for marketing services. Be sure the consultants have ample time to make themselves available for the important work of follow-up with candidates.
Often, outplacement firms are asked the average time necessary for the candidates going through that particular company to find a job. Unfortunately, that question can't be answered in a meaningful way. Averages mean little in terms of the outplacements provider's "success rate." market conditions, specific job function, experience, and the initiative of the individual in the job search impact the length of the search.
As the outplacement business has matured, many providers have attempted to diversity their business in order to sustain themselves. Some providers have increased marketing effort to create new relationships. Some have downsized their staffs. Others have initiated pricing policies which are more aggressive in terms of capturing new corporate client relationships. Increasingly, some firms have reemphasized the importance of the office layout, technology offerings (both personal computer and video training) and, in general, those things which might be more impressive to a potential corporate client touring the premises. You will need to get a good understanding of the process, which should always be inviolate. Redundantly, we suggest that you learn the process and feel comfortable with the consultants' delivery of it.
Has the firm shifted its emphasis away from outplacement due to reasons stated earlier? If so, has it caused diminution in any of the elements? Some companies are investing more resources in career management consulting; thus, you should know if the firm is offering outplacement as a leading or trailing product. How available are the consultants in the follow-up consulting phase (when the job search is actually underway)? Are they available to consult by telephone beyond traditional office hours, from their homes? And finally, it is important to check corporate references. as for client companies which have been utilizing the provider for five years or more.
Differentiation is important in finding a job. If one goes through outplacement only to launch a search similar in nature to that of others who haven't received outplacement, the effectiveness is questionable. Thus, outplacement process differentiation is significant in provider selection. How is networking taught? Are individual needs being met if sessions are conducted in group fashion? Is spousal consulting included and what does it accomplish? Is the outplacement firm teaching how to write a resume, or is the resume draft being prepared totally by the consultants? The latter approach is helpful in dealing with executives since many have never attempted resume preparation and find it a stress-inducing exercise. Every facet of outplacement should decrease stress in every way possible.
Some companies believe they are doing their employees a favor by allowing them to "shop" outplacement firms to make their own choice. There are several problems in taking this approach. The purchaser of the service is the corporate client; thus, sales efforts should be directed exclusively toward the sponsoring company. The executive candidate should not have the burden of the decision. The outplacement firm is put in the position of selling its services to the candidate, instead of doing its appropriate job of consulting with him or her. choosing one's own firm also increases stress and delays the process from getting started as soon as possible after separation from the former employer. Even if a large severance is part of the executive's separation agreement, it seldom diminishes the importance of getting the outplacement process started right away. And to some extent, shopping has similarities to retail outplacement (services that can be purchased by individuals). If an individual makes his/her own choice, there is a chance that the expectation level from the candidate's perspective will be affected by the outplacement firms' aggressiveness in convincing the person to chose that particular firm.
If the firm uses testing, understand what it is and determine its purpose. Testing should not be used as a method for expediting more people through the program. Although tests might be useful to some, many executive-level people are beyond deriving tangible benefit from them. The firm must be able to discover the make-up, values, skills, and abilities of the individual whether by testing or other means. You should determine in what way testing actually helps the firms' candidates in planning their job search.
Technology has contributed significantly to the outplacement process over the recent past. For example, when technology helps candidates by exposing them to new and better ways of search, or more efficient ways to use resumes as a tool it has added value. On the other hand, technology should not replace important consulting time in order to move the candidate through on a more self-directed path.
Role-playing is important in teaching the methodologies of job search. One-on-one video taped role-playing between consultant and candidate is a useful part of the outplacement program. Even the more senior candidates usually need assistance with networking discussions and interviews. Reviewing the videotape for evaluation and constructive criticism helps improve the confidence of even the more seasoned candidates. The outplacement firm should use consultants who are skilled interviewers and are capable of coaching and offering suggestions which will improve the candidate's skills and techniques while also building confidence.
Select a company that you believe will be equipped to develop a sustaining relationship with you over time. If the consulting firm knows the culture of your company and something of your company's history, it can more quickly meet the individual's needs. The firm should customize its process delivery to meet those needs without having to question the executive excessively to understand the company and its actions.
It is very helpful to rely on your outplacement firm's assistance prior to the actual termination. The firm can be used as a sounding board, offering helpful suggestions for the techniques of severance which might benefit both the affect executive and the employer.
Unfortunately, in a few instances, competitive pricing has had a profit impact on some companies, which has prompted cost conservation measures. Consulting costs are a target for reduction and, in some cases, consultant pay is insufficient to attract and retain high quality staff. Part-time consultants are used, and just as in every other type of professional consulting, low pay might yield less than desirable consulting results. Use those firms which can show you that their consulting quality is the heart of their business.
Executive outplacement is a serious investment for your company. The selection of the right firm means that your human resources staff must do sufficient due diligence before making a choice of the right firm to use. When your company retains other types of consulting firms, their work is generally easy to appraise because their activities are integrated with the ongoing work of your company and its people. The nature of outplacement places the consultants' work beyond your corporate boundaries. You do not see them working nor are they involved with the ongoing success of your company. But when you entrust your former executives to the consultant, you are vouching for the quality of work they will receive. This makes it even more important to know what they can expect.
Devote sufficient time and energy to select a firm you feel good about. Changing firms is time-consuming and inefficient. Chances are if you are comfortable with your choice, you will accelerate successful closure to an employee severance as well as strengthening the potential of a promising future for the individual receiving the outplacement services.
Tips for Effectively Managing Employee Transition
By Jeremy Brenner, Director of Business Solutions at HRMC & The Delta Institute
Plan Effectively
- First, determine who, why, how and when.
- Second, plan to effectively communicate necessary information with eliminated AND retained employees. The second part is critical since your retained workforce will determine the future success or failure of your company.
- Third, when plans are in place, don’t drag your feet. Make the necessary cuts and refocus on business success. Elongating the process will create employee unrest and distrust, and could result in the loss of key employees.
- Fourth, have a firm contingency plan in place before even one person is terminated. Be ready to immediately reorganize your workforce and get back to work, or face the pain of lost productivity.
Be Upfront, Be Honest, and Be Successful
- Continuous, forthright communication will reduce the “surprise” effect during a period of job elimination. Modern technology affords the ability to easily communicate with your workforce, so take advantage. Keeping your employees in the loop on the company and the industry will save you a lot of “catch-up” time and avoid a feeling of asymmetric information.
- Retained employees need to feel secure that their jobs aren’t next on the chopping block. Open lines of communication will create a feeling of security, as opposed to uncertainty, and will prevent loss of key employees to voluntary separation.
- Know your employees and evaluate their skill sets. Although their position is being eliminated, they may still be an asset to the company in another role. Retain key employees to develop bench strength.
- Support Your Terminators
- Managers should receive professional training in managing the transition process. How they communicate with both retained and displaced employees is vital to the continued success of the organization. They need to energize their troops to achieve their goals. If you don’t support your managers, they too may choose to leave.
- How your company deals with retained talent will determine whether positive feelings will be restored or negative ones will linger. Providing severance and outplacement to displaced employees is actually a key step in healing the wounds of survivors. Other measures include refocusing on company success and planning teambuilding exercises to create camaraderie.
- In a time of change, keep as much consistent as possible to ease the tension on retained employees. Conduct the transition in a way befitting the culture your company has already established. In other words, manage the situation in a manner your employees have come to expect.
- A reduction in workforce does not mean a reduction in work! Ineffectively managing transition leads to either loss of productivity or rehiring, both of which are costly to the organization. Before employees are terminated, know how you’re company is going to get back to business, and who will assume responsibilities of those displaced.
The Plans Have Been Changed
By Marlow C. Embree, Ph.D.
From The Directory of Outplacement and Career Management Firms
Achieving success in any venture is difficult if you approach today’s challenge in terms of yesterday’s rules. In a world of designer nerve gases and microwave stun guns, an army that goes into battle wearing chain mail and carrying longbows is doomed to annihilation. In an economic environment dominated by smart cards and multimodal encryption technology, a trader offering spices for pieces of eight is unlikely to build a positive net worth. When it comes to the job search process, too, the plans have been changed dramatically in recent years.
In a world where new trails are blazed daily, a conventional road map is of no use. What is helpful is a set of general governing principles by which navigation is rendered manageable. Think of the following as Ten Career Management Commandments for the new millennium.
1. Walk Like an Entrepreneur
The walls between self-employment and working for someone else have never been thinner. Various in-between forms of work unheard of 20 years ago are proliferating as businesses seek a new balance between consistency and flexibility. Those seeking to draw a regular paycheck would be well advised to adopt an entrepreneurial mindset. This includes identifying one’s market and customers (some of whom were called bosses or employers in the old model). It involves specifying one’s current product or service mix in terms that connect to the needs and language of the marketplace. Above all, it means remembering that jobs exist so that problems may be solved. The true job title of an employee who does not solve any problems during his or her work week is “Turf Protection Specialist.”
2. Be Nonlinear
The old world of work rewarded linearity and vertical progress. “One life, one job” was the order of the day; “Take care of your employer, and he will take care of you” its governing principle. In the new world, change is an asset, not a liability. The average American can now expect to change jobs 8-12 times in his or her working lifetime. Radical career shifts are becoming normative and desirable. For many, this means explicitly lateral growth paths, career veering and tacking, and working outside the box. The organizational chart of the future may consist largely of overlapping, cross-connected, dotted lines.
3. Think Ecotonically
In biological terms, an ecotone is a region where two distinct living systems meet. These narrow, fragile zones of change and stress are where the action is. The same is true in the world of work. Most market needs, and most viable new jobs, exist along or within a socioeconomic ecotone. To carve out a viable career niche for the new world of work, seek out the fault lines that divide old categories. In the old world, job security was a carrot doled out from above by a generous employer to those willing to play the standard game. In the new world, job security is carved out in the trenches of daily economic life through finding needs that only you, as a person who can uniquely straddle two or more specific worlds, can fill.
4. Diversify
In the new world of work, the person who sings only one tune is in serious trouble. After decades of rewarding narrow specialization, the economy is finally moving toward the valuation of generalist skills. More technically, the brave new world is crying out for people with deep pockets of current, cutting-edge depth, but ones that are linked seamlessly together with invisible bonds of cross-functionality, adaptability, people skills, street smarts, and a rock-solid customer focus. In an Internet-driven information age, a kindergartner with a mouse and modem can become an overnight expert about matters that only Ph.D. candidates knew of a generation ago, so there’s no excuse in the new era for lagging professional development or reliance on yesterday’s knowledge.
5. Make Chaos a Friend
Change is viewed by many as a threat to the established order. Yet, opportunities abound at precisely the time when old life structures are challenged. Without risk, there can be no potential for gain or growth. Rather than giving in to old fears, make friends with the productive disorder of chaos. Learn to make tactical decisions rather than seeking permanent answers. Adopt a contingent, “this is for now” orientation, with zigzag progress as your goal: “eager to stay, yet ready to leave.” In the old world, this would have represented disloyalty; in the new world, it’s just plain common sense.
6. Think Small
After decades of extolling the virtues of “bigger is better,” Western culture has finally awakened to the joys of the small. For the past several years, microbusinesses have been the engine of job creation in America. Learning how to play the tiny-business game is an essential survival skill for the new world of work. Major is the ability to wear multiple hats, creativity and adaptability, real-time responsiveness to actual customer needs. Eliminate death-wish phrases from your vocabulary: “I can’t do that,” “I’ve never done that before,” “That’s not my job.” (In the new world of work, everything is your job.) If you don’t know how to do something, learn or partner with someone who knows how and wants to do some informal cross-training.
7. Maintain Balance
Ours has always been a culture of extremes. We work hard and play hard, live hard and die hard, and pay the price in a host of stress-related illnesses. A better way is to seek a balanced life. Don’t make the mistake of thinking that your job is your life, or that you are what you do. (If that were true, when unemployed you would be nobody.) Invest in your career, yes, but also in family, community, hobbies, your faith or spiritual life. Maintain balance, too, between idealism and practicality. Careers are about two things: earning a living and making a life. Find ways to do both, with some rational balance between the two, but don’t expect that the two sides will always be fully integrated. If all your next job does is fund your real life and enable you to continue your life-long quest, that’s saying a lot.
8. Connect and Reconnect
Networking was king in the old world of work and hasn’t been dethroned in the new, but the rules have changed somewhat. In the old world, things were run by a monolithic good old boys’ network, which tended to deprive bad young girls from their rightful place at the table. In the new world, a bewildering array of micronetworks has proliferated, based on common interests, common experiences, common values, a common heritage, or a host of other considerations ranging from the sublime to the absurd.
Surf the Net for newsgroups of like-minded folks and you’ll see how easy it is to connect with others based on anything. Take advantage of this new openness to informal linkages between people to identify your core interests, values, passions, knowledge areas and use them to connect with others. The enthusiasm and commonality generated by such common threads are a far better way to build meaningful bridges with others than is old-style “hard sell” networking.
9. Adopt a Personal Style
When it comes to the job search, one size doesn’t fit all. Don’t swim upstream against your personal uniqueness; instead, embrace it and find ways to make it work for you. Know yourself well enough to identify your strengths and weaknesses, your motivational patterns, your personal style. Know what makes you tick, what turns you on (or off), what launches you into the heights of effectiveness or buries you in the depths of numbing dysfunction. Most important, know what kinds of problems you are good at solving and enjoy solving. Once you do that, it’s a tiny step towards finding who cares about having those problems solved and is eager to talk with someone who can offer them viable solutions. That’s one small step for a job seeker, one giant leap toward the success of your ongoing, lifelong work/life management.
10. Break the Rules
The principles above don’t have the same universality and stringency of the original Decalogue; that’s why they were written using a word processor, rather than on tablets of stone. If one or more of the rules above doesn’t fit you, forget about it and invent one of your own that does. Since the responsibility for the outcome of your career transition falls squarely onto your lap, let your own internal radar be your guide. Separate the wheat from the chaff, harvesting what works and trashing what doesn’t.
Having decided what rules apply to your situation, don’t just think about them, pondering the beauty of precision of those ideas. Instead, put them into practice in the nitty gritty of your actual life. “If you know these things,” the wisest of all once told his followers, “blessed are you if you do them.” Implement these rules, learning as you go, and you may be surprised to find that the plans have indeed been changed—to your advantage.