Turnaround strategies and retrenchments seem to go together like ...., no, let’s not start with corny clichés.
It seems that whenever an organisation experiences some form of financial problems, the first solution mentioned is retrenchment.
From a purely financial perspective, retrenchments usually make a lot of sense. From a people perspective, it must however be asked if people are commodities - like raw materials - that can be increased or reduced as budgets allow. Many years ago, the futurologist Alvin Toffler identified what he called a pulsing organisation. These organisations, such as the electoral commission, employ people when needed but when the objective is achieved, the employment is terminated. These terminations are not official retrenchments but rather end of contract terminations.
Numerous organisations employ "full-time" employees on contract basis thereby allowing the company to reduce employment costs. These contracts are sometimes routinely renewed when the contractual time-period ends. Financially this again makes sense, as benefits are often not included in the contracts. From a people perspective, the law stipulates that this is not a long-term option. When terminating contracts that have been routinely renewed is seen in the same light as retrenchments.
Retrenchment is a complex issue and not always linked to management as some want to believe. Various aspects can affect an organisation resulting in unavoidable staff reductions.
When done correctly retrenchment is a complex process that, if not done correctly, could result in long-term repercussions. The effects often manifest indirectly resulting in hidden costs.
This week (download below) we briefly look at the role of Organisation Development and retrenchments.