Tania de Decker, Managing Director—Global Strategic Accounts, Randstad Enterprise Group02.28.24
One of the most difficult times for any organization is when workforce downsizing is a must. How layoffs are managed reflects a company’s culture and approach to talent. For some, it’s a process guided by compassion, transparency, and support, while others do so in a caustic and indifferent manner. While the end result in either approach is reduced labor costs, their outcomes couldn’t be more different.
Companies that plan workforce reduction strictly on costs are at considerable risk. This is because the fallout from such a poorly considered strategy can do long-term damage to an organization’s brand among jobseekers, employees, and customers. In an industry that chronically struggles to find skilled workers, medtech employers cannot afford to be tagged as unsympathetic and callous, especially when competing for high-demand skills.
Reductions in workforce during the past two years have increased in frequency, Randstad RiseSmart research has found, and this trend should have human capital leaders in the medical device industry concerned. The 2023 Randstad Enterprise Global Severance research found, among all life sciences companies surveyed, all reported taking a downsizing action in the last year. In addition, while 65% said layoffs to reduce labor costs were managed well, 82% said these measures led to negative sentiments. So, while most believed they provided thoughtful, compassionate care to those affected by layoffs, there was still unavoidable fallout.
Our research found more than a quarter (27%)—a plurality—of life sciences companies surveyed expect engagement to be most affected by layoffs, followed by 23% citing retention. This indicates even more than negative brand attention; the consequences of a poorly executed reduction in force can have significant morale and performance effects on a business.
Beyond the business impact, however, good ethical and professional behavior should always be observed when undertaking reductions. The impact on lives and livelihoods can be enormous to the affected, especially for those who regard their jobs as more than just a paycheck and as being a part of a community, or their life’s purpose. Organizations have a responsibility to provide support in the form of severance, outplacement, and reskilling to help former employees to redeploy to another job—either within or outside of their organizations.
But what constitutes good practices that both maintain an employer’s downsizing strategy while supporting the needs of outplaced workers? How can businesses straddle a fine line between appearing uncaring while meeting their financial objectives? There are many examples of poor executions but few stellar ones. Ultimately, every decision and communication associated with layoffs are second-guessed and criticized. The only path companies can take is one that adheres to their core values while being compliant and supportive.
Despite being a leader in severance practices, most life sciences companies (62%) say they wish they had the capacity to provide more support to terminated employees, although not necessarily more financial support. The resources they would most like to provide more of are outplacement services (37%), health benefits continuance (34%), and retirement benefits and life insurance (32%). Additionally, 41% of companies that recently enhanced their severance benefits added retraining support. Clearly, the focus for many companies is on ensuring worker wellness and readiness for the job market.
With the medtech sector facing an uncertain year in 2024—McKinsey is predicting slight growth after a decline in 20231—organizations will surely be cautious in their workforce planning. This may mean more layoffs and attrition in the days ahead. Even so, supporting affected workers and protecting the employer brand must remain a priority; failure to do so can lead to considerable loss of talent and inability to recruit new workers due to employer brand erosion. To be employers of choice, device makers should take action in three areas.
1. Be Transparent and Authentic
This is a cornerstone of any employer brand strategy, and it must also guide the actions of downsizing. Employees deserve clear and direct answers, and employers should be ready to explain the reasons for their decisions. Workers understand every business is affected by changing market needs, economic cycles, and shifting skills requirements. By articulating their decision-making, business leaders can help minimize negative sentiments.
2. Remain Vigilant of Prevailing Practices
Providing fair and prevailing severance packages is something workers expect, but many companies often aren’t aware of best practices. For example, we found that across all industries, the most common practice (36%) is four weeks of salary for each year of service, followed by three weeks at 22%. Just 12% provide two or fewer weeks of pay, and 20% provide six or more weeks. While downsizing is often driven by financial pressure, medtech companies should consider the long-term benefits of competitive severance and other forms of support.
3. Ensure Support Is Comprehensive
While every employee desires maximum severance pay, they also need a wealth of other types of support. Outplacement should include end-to-end services that not only help people transition out of the company but also provide a network of professionals who can help them search for new opportunities, update their CVs and interviewing skills, obtain new job skills, and offer wellness benefits.
References
Tania de Decker is the managing director of global strategic accounts for Randstad Enterprise Group. She works with Fortune 500 companies to develop and implement processes that improve and drive recruitment and retention solutions. de Decker has more than 28 years of recruitment experience and has worked more than 18 years with life sciences companies. The emphasis has always been improving the quality of her clients’ talent acquisition.
Companies that plan workforce reduction strictly on costs are at considerable risk. This is because the fallout from such a poorly considered strategy can do long-term damage to an organization’s brand among jobseekers, employees, and customers. In an industry that chronically struggles to find skilled workers, medtech employers cannot afford to be tagged as unsympathetic and callous, especially when competing for high-demand skills.
Reductions in workforce during the past two years have increased in frequency, Randstad RiseSmart research has found, and this trend should have human capital leaders in the medical device industry concerned. The 2023 Randstad Enterprise Global Severance research found, among all life sciences companies surveyed, all reported taking a downsizing action in the last year. In addition, while 65% said layoffs to reduce labor costs were managed well, 82% said these measures led to negative sentiments. So, while most believed they provided thoughtful, compassionate care to those affected by layoffs, there was still unavoidable fallout.
Ethical and Brand Considerations
Workforce reductions have always posed thorny challenges for employers, but in today’s hyper-connected environment, the difficulties are exponentially amplified. News of layoffs and personal recountings are analyzed, judged, and shared across these networks nearly instantaneously. Any missteps by organizations are sure to result in a severe backlash that can reverberate for years, negatively affect workforce engagement and productivity, and severely diminish workforce retention. Moreover, the impact can even lead to loss of business when customers are concerned with splash damage.Our research found more than a quarter (27%)—a plurality—of life sciences companies surveyed expect engagement to be most affected by layoffs, followed by 23% citing retention. This indicates even more than negative brand attention; the consequences of a poorly executed reduction in force can have significant morale and performance effects on a business.
Beyond the business impact, however, good ethical and professional behavior should always be observed when undertaking reductions. The impact on lives and livelihoods can be enormous to the affected, especially for those who regard their jobs as more than just a paycheck and as being a part of a community, or their life’s purpose. Organizations have a responsibility to provide support in the form of severance, outplacement, and reskilling to help former employees to redeploy to another job—either within or outside of their organizations.
But what constitutes good practices that both maintain an employer’s downsizing strategy while supporting the needs of outplaced workers? How can businesses straddle a fine line between appearing uncaring while meeting their financial objectives? There are many examples of poor executions but few stellar ones. Ultimately, every decision and communication associated with layoffs are second-guessed and criticized. The only path companies can take is one that adheres to their core values while being compliant and supportive.
Life Sciences Leads in Severance Practices
This means providing opportunities to redeploy internally when possible and helping others to find new roles. These efforts should include outplacement services such as career coaching, CV review, and job search resources. Additionally, severance should be pegged to prevailing practices in the industry. Our research revealed that among all sectors, life sciences is the most generous; more than half (51%) of organizations provide severance to all employees—significantly higher than banking and financial services (39%), high-value manufacturing (37%), and technology (35%). The sector also leads all others in providing severance immediately after termination. While one to two years of service was the most common response for life sciences at 25%, 18% require no qualifying period of tenure. The technology sector follows at 13%, banking and financial services at 12%, and manufacturing at 7%.Despite being a leader in severance practices, most life sciences companies (62%) say they wish they had the capacity to provide more support to terminated employees, although not necessarily more financial support. The resources they would most like to provide more of are outplacement services (37%), health benefits continuance (34%), and retirement benefits and life insurance (32%). Additionally, 41% of companies that recently enhanced their severance benefits added retraining support. Clearly, the focus for many companies is on ensuring worker wellness and readiness for the job market.
With the medtech sector facing an uncertain year in 2024—McKinsey is predicting slight growth after a decline in 20231—organizations will surely be cautious in their workforce planning. This may mean more layoffs and attrition in the days ahead. Even so, supporting affected workers and protecting the employer brand must remain a priority; failure to do so can lead to considerable loss of talent and inability to recruit new workers due to employer brand erosion. To be employers of choice, device makers should take action in three areas.
1. Be Transparent and Authentic
This is a cornerstone of any employer brand strategy, and it must also guide the actions of downsizing. Employees deserve clear and direct answers, and employers should be ready to explain the reasons for their decisions. Workers understand every business is affected by changing market needs, economic cycles, and shifting skills requirements. By articulating their decision-making, business leaders can help minimize negative sentiments.
2. Remain Vigilant of Prevailing Practices
Providing fair and prevailing severance packages is something workers expect, but many companies often aren’t aware of best practices. For example, we found that across all industries, the most common practice (36%) is four weeks of salary for each year of service, followed by three weeks at 22%. Just 12% provide two or fewer weeks of pay, and 20% provide six or more weeks. While downsizing is often driven by financial pressure, medtech companies should consider the long-term benefits of competitive severance and other forms of support.
3. Ensure Support Is Comprehensive
While every employee desires maximum severance pay, they also need a wealth of other types of support. Outplacement should include end-to-end services that not only help people transition out of the company but also provide a network of professionals who can help them search for new opportunities, update their CVs and interviewing skills, obtain new job skills, and offer wellness benefits.
Conclusion
Workforce downsizing is never a pleasant exercise for organizations or their employees, but managing layoffs with care, compassion, support, and fair severance practices can help medical device makers protect their employer brand and future access to great talent.References
Tania de Decker is the managing director of global strategic accounts for Randstad Enterprise Group. She works with Fortune 500 companies to develop and implement processes that improve and drive recruitment and retention solutions. de Decker has more than 28 years of recruitment experience and has worked more than 18 years with life sciences companies. The emphasis has always been improving the quality of her clients’ talent acquisition.