The finance function and the real costs of redundancy

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Working with non-finance teams, I’m usually thrilled at bringing the numbers to life and telling a story to the wider business.

Once in a while though, I wish there wasn’t a story to tell, and definitely one that didn’t involve real-life employees.

Redundancies are a regular headline nowadays. Tesco, Avon, Lloyds, M&S, Npower: these are a few of the corporates who have been laying off staff recently, not to mention the many smaller firms who don’t make the national press.

When I see lay offs being announced, my sympathies lie immediately with the staff who are at risk of losing their jobs.   

But I also feel for the directors who are having to make the staff cuts.  

Those who are swinging the axe are often regarded as the baddies. Yet, in the case of struggling businesses, there is often a stark choice: change strategy or go under.

Changing strategy may mean reducing or changing a portion of the workforce. Going under means everyone loses their job. At this point, it makes logical sense to lay off some staff in order to save more jobs and the company.  

Logically it might makes sense; emotionally, it’s still incredibly hard. For the directors faced with making the tough decisions, there are often feelings of guilt and failure and of letting down their staff. How do directors prepare for such a situation?

Believing in the driving factor behind any redundancies is key. If you know that changing your workforce is critical to keeping your company alive, then once you’ve made the tough decision, you are looking to the future and working to safeguard the prospects of your remaining employees. The short term turmoil is bearable if you have a longer term goal and purpose.

Sharing the situation and goal with your employees so that they understand the decision to restructure is important in order to maintain staff confidence in the leadership team.

It won’t make your staff like the situation any more, but if they can understand and respect the logic, it will make the process easier across the board and help the remaining staff settle down into the reshaped company.

Having a strong HR team beside you is vital. An HR team who can fairly and openly administer and run the redundancy process, keeping the transition period as short as possible, will instill confidence in the remaining staff. Having a supportive package for the leavers, such as CV support or training options will also demonstrate that the company cares for all of its staff.

Some might cynically say ‘Don’t bother, they’re leaving anyway’ - but your remaining staff will see how you treat the leavers, and this will colour their opinion of the business and whether they wish to stay. The last thing a business needs after a round of redundancies is for the remaining staff to decide they are quitting.

Being the messenger bearing bad news of job cuts is never easy; being the decision maker behind the cuts is even harder.

Having a strong purpose, such as company survival, and a future strategy mapped out can give directors the strength of mind to see them through the emotional side of the situation. It’s quite likely that a number of the directors are facing redundancy themselves, once they have finished restructuring their teams.

Redundancies are tough on everyone: the leavers, the remainers and the management putting the plans into action. However, the remainers and management get little consideration or share of the sympathy pot as they still have jobs. They will still have faced huge levels of job insecurity and emotional turmoil.

When you factor in these parties, you realise that the numbers of people impacted by redundancies are far, far higher than the number of those who lost their jobs (9,000 at Tesco, 2,300 at Avon, 1000 at Lloyds Bank in 2018). Remember to spare a thought for these people when the next job loss headline comes out.



About Kate Coles

Kate Coles

Kate Coles is a chartered accountant, business consultant, trustee and co-founder of, a coaching and mentoring business for FDs by FDs.


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05th Feb 2019 12:40

my sympathies only lie with those losing their jobs.

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07th Feb 2019 19:02

A lot of times the management are to blame (for the need to downsize) , they let down the stakeholders , through their foolishness in various ways.

My advice is , it's not a terminal illness , life is good when it throws up change, even though its initially uncomfortable.

Interview your next employer as well as they interview you!

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