Reduction in Force (RIF): Strategy and Tactics Dick Hoell Sun Microsystems May 1, 2002

Reduction In Force: Strategy and Tactics Areas to Be Covered Strategic Issues Selection Criteria Logisitics Communication Legal Issues Outplacement Support RIF's Outside the US Measurement Lessons Learned

Reduction In Force: Strategy and Tactics Strategic Issues Organizational Reason for Doing the RIF Financial (Cost Reduction) Lack of Work Skill Mix Change Site/Office Relocation or Closing Outsourcing Work RIF vs Redeployment

Reduction In Force: Strategy and Tactics Strategic Issues Organizational Impacts of a RIF On the culture Treatment of staff How decisions are made On the external marketplaces Labor Financial Customers

Reduction In Force: Strategy and Tactics Selection Criteria Balance Between Sense of "Fairness" and Disruption to the Organization Business Case Skills, Experience, Documented Performance Seniority Selection or Seniority Units "Bumping" Voluntary

Reduction In Force: Strategy and Tactics Logisitics Planning is the Key "Sweat the Details" Selection Approval Process Legal review Changes Notification Letter Preparation Resource Material Preparation Manager Training

Reduction In Force: Strategy and Tactics Logistics Notification Meeting Scheduling and Preparation Manager/employee at different locations HR support Security support "High Risk" employees Systems access cutoff Outplacement & EAP support Collection of Company Property Knowledge Transfer

Reduction In Force: Strategy and Tactics Communication Different Audiences External Directly impacted employees Remaining employees ("survivors") Managers Different Media Written/email Group meetings 1 on 1 meetings Websites 1

Reduction In Force: Strategy and Tactics Communication Issues/Challenges General pre-notification or not If pre-notification, then how long before notification? Ensuring all employees understand the business need Helping remaining staff regain focus and productivity Work unit level Larger organization level

Reduction In Force: Strategy and Tactics Legal Issues Worker Adjustment and Retraining Notification Act (WARN) Offers protection to workers, their families and communities by requiring employers (100+ employees) to provide notice 60 days in advance of covered plant closings and covered mass layoffs (or pay in lieu of notice) Covered plant closing – employment site closed down and 50+ employees experience "employment loss" during 30 day period Covered mass layoff – employment loss for 500+ employees at a site; multiple reduction events during 90 day period exceeding 500 employee threshold in total can also qualify

Reduction In Force: Strategy and Tactics Legal Issues Improper Selection Decisions Individual disparate impact Class action exposure - statisitically significent adverse impact ADEA Notification for Impacted Staff Over Age 40 Release and Waivers 45 days to sign 7 days to revoke after signing Severance pay contingent on signed Release and Waiver

Reduction In Force: Strategy and Tactics Outplacement Support External Vendor vs Internal Resources Opportunity to Process Feelings Re-focus to Finding Another Job Career change Job search strategies Resume/interview preparation support New skills development Networking/support group

Reduction In Force: Strategy and Tactics RIF's Outside the US Country-specific Legal/Cultural Differences Formal consultative processes Unions Works Councils Legally defined selection criteria Legally mandated severance packages Involuntary RIF's illegal in some countries (e.g. Japan) Time Between Decision to RIF and Actual Employee Sermination can be significantly Longer than US

Reduction In Force: Strategy and Tactics Measurement Reduction Target Achieved Process Errors in letters, notice/severance pay calculation, etc. Managers trained Consequences Grievances/formal legal actions Disruptive acts by impacted employees

Reduction In Force: Strategy and Tactics Measurement Survey/Focus Groups with Remaining Staff How well was the RIF managed? Have employees' perceptions of the company as an Employer of Choice been impacted by the RIF? Has the RIF impacted employee productivity? Has the RIF impacted the ability of employees to meet customer requirements?

Reduction In Force: Strategy and Tactics Lessons Learned Treatment of Staff is the Key If treated with respect and dignity then incidents of inappropriate acting out will be minimal if not non-existent Important to provide a severance/notification pay package that is perceived as "fair" Treatment of RIF'd employees will significently influence the performance of your remaining staff Pre-notification is Effective (Minimizes the Surprise), but Need to Ensure the Time Between Pre-notification and Notification is not too Long

Reduction In Force: Strategy and Tactics Lessons Learned You Can Not Over Plan The "devil is in the details" Ensure All Employees Fully Understand the Business Need Ongoing Communication is Very Important Cascading of consistent messages Use of different media Important to Provide Thorough Training to Managers Including the Opportunity to Role Play the Notification Meeting Help Remaining Employees Gain Closure and Re-focus