For Future Success, Don’t Retrench, Retrain!

Retrenched Staff Training Australia

Rachel Hunter

By: Rachel Hunter – August 2015

The Global Financial Crises caused a huge ‘knee-jerk’ reaction in companies as, in the panic caused by financial institutions and markets collapsing around the world, many of them sort to safeguard there future, most often via drastic and rampant redundancy schemes.

There are several ironies about this, the most obvious one (although it’s fair to say that it wasn’t that obvious at the time) being that here in Australia we really didn’t feel the impact the way the US and Europe did (possibly as a result of the government’s fiscal stimulus but that’s a topic for another time on another site!), meaning many of the retrenchments were unnecessary and actually did more harm than good as companies struggled maintain service levels with a depleted workforce.

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Another is the actual cost of retrenchment both in terms of the payout amounts but, just as importantly from a business point-of-view, the negative impact it has on the remaining staff as they try to pick up the slack of their lost colleagues and deal with the stress of wondering if ‘they’re next’, engagement and productivity levels can drop like a stone in water. In extreme cases, the damage is so bad that when the market eventually (indeed, inevitably) picks back up, the good staff leave and the company is left in worse shape than ever.

Of course, things could be (and in rare cases were) done very differently…

Far from letting their skilled staff (the life-blood of any organisation) go, the smart companies (many of whom had learned hard lessons in the financial downturns of the 80’s and 90’s) chose to hang onto and retrain them, knowing that, when that inevitable market up-swing came, they’d be ready to capitalise on opportunities with an engaged, motivated, and capable workforce, whilst their competition scrambled to recruit (often untrained) people at no small cost.

Indeed, in a survey conducted at the beginning of 2014 it was found (somewhat paradoxically) that whilst 20% of companies surveyed were looking to retrench staff, over 85% of their executives firmly believed that their companies would survive the GFC, over 80% of them stating that employee retention and training would be ‘of benefit to their organisation’.

Aside from the obvious negative impact retrenchment can have on workforce engagement levels, it’s important for organisations to do the maths and work out if the cost of retrenchment pay-outs plus the cost of then having to recruit new staff when the market picks back up (as all markets do), not to mention the cost of lost productivity, is really lower than the cost of keeping the workforce and investing in their capability development!

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