| There is an economic chill in the air. | | | | discussions often involve representatives from |
| Despite low unemployment rates in the United | | | | Finance, HR, and Legal meeting to discuss risk |
| States, there is a sense that corporate layoffs and | | | | management and cost factors. All three functional |
| employee layoffs will once again take place. One level | | | | perspectives are important. They are also incomplete. |
| of decisions facing leaders is "who stays/who goes." | | | | In examining risk factors, the voice of marketing and |
| A second level of decisions revolves around "how do | | | | strategy need to be at the table. |
| we treat people who leave?" This second level of | | | | We employ a framework like the one below to help |
| decisions puts leaders in a dilemma between being | | | | structure the conversation. |
| generous to people that you are harming versus | | | | TERMINATION THREAT ANALYSIS ONCE |
| being prudent with owners' money during times of | | | | NON-COMPETITION AND NON-DISPARAGEMENT |
| economic stress. | | | | AGREEMENTS LAPSE. |
| At one end of the termination continuum, many | | | | Rate each factor on a 0-9 scale. A score of "0" |
| associates who enter partnership track at the | | | | means that the factor does not apply. "1" means |
| international law firm of Bingham McCutchen may not | | | | "minor threat" whereas "9" means a "significant |
| be elected to that role. Whatever their reasons for | | | | threat." |
| leaving the firm, one of the things that make | | | | SCORE FACTOR |
| Bingham stand out is that it considers former | | | | Ability to harm M&A objectives over the next |
| associates to be future resources. End of | | | | 36 months. |
| employment is the start of membership as Bingham | | | | Ability to harm strategic alliances over the next 36 |
| McCutchen Alumni. The firm goes out of its way to | | | | months. |
| assist departing professionals and maintains an active | | | | Ability to negatively influence sales over the next 36 |
| alumni group. | | | | months. |
| At the other end of the employment termination | | | | Ability to negatively influence talent we seek to hire |
| continuum are companies that treat departing | | | | over the next 36 months. |
| employees with the same corporate rationale as they | | | | ** |
| treat office refuse: Remove it with as little cost as | | | | We used 36 months as a framework because many |
| possible and do not involve us in litigation. We don't | | | | critical business decisions in building product lines, |
| care what happens to our refuse or our former | | | | acquiring companies, or being acquired require that |
| employees after exiting the facility. | | | | type of time perspective. |
| These two approaches represent extreme ends of | | | | The above is a framework for discussion during the |
| attitude towards end of employment decisions. | | | | termination planning stage and can apply to group as |
| Where does your company fit? Where should it fit? | | | | well as individual termination decisions. |
| The purpose of this article is to provide leaders with | | | | The people around the table have different areas of |
| a framework for helping them decide where on this | | | | competency to evaluate these marketing/strategic |
| continuum their company ought to be. And we want | | | | issues. HR and sales can best discuss the impact on |
| to provide a framework with a more business-like | | | | attracting and retaining talent. But strategy people |
| rationale than, "It's nice to be nice." | | | | can best discuss M&A plans. |
| In planning for terminations, it might be useful to look | | | | In applying these and other risk factors, the |
| at the threat analysis framework developed by the | | | | objective of the meeting is for the group to |
| 2005 Nobel Prize for Economics winner, Thomas C. | | | | determine if the end of employment decision |
| Schelling. Schelling is professor of Economics at the | | | | approaches the Goodbye end of the continuum or |
| University of Maryland. He received his Award for | | | | the Aufwiedersehen end of the continuum. |
| applying game theory to conflict. His focus was on | | | | In moving towards the Goodbye end of the |
| the weapons issues but we have applied his ideas to | | | | termination continuum, a company should pay |
| the design of executive termination packages. | | | | departing employees severance fees no greater than |
| Schelling says "uncertain retaliation is more efficient | | | | median relative to other companies its size in the |
| than certain retaliation" when bargaining and "the | | | | industry and should keep outplacement costs to a |
| capability to retaliate is more useful than the ability to | | | | minimum. There would be no follow-up with |
| defend." Now let's get practical. | | | | employees once they leave the building other than |
| GOODBYE SCENARIO | | | | what is legally required. The company message is: |
| As a verb, "Goodbye" denotes parting. Saying | | | | "Good bye. We want to give you a running start on |
| "goodbye" assumes that once employees leave the | | | | your job search." |
| building, they will never be a factor for the firm's | | | | In moving towards the Auwiedersehen end of the |
| future. The relationship was transactional and the | | | | termination continuum, a company should pay |
| transaction is now over. If the firm defines | | | | departing employees severance fees and |
| termination as a goodbye scenario, the firm should be | | | | outplacement programs using the median as a |
| guided by a business model that says, "What's the | | | | starting point. At the extreme end of |
| least expensive way of terminating this relationship | | | | Auwiedersehen, former employees would be called |
| consistent with reducing legal risks?" | | | | Alumni and there might be a section on the company |
| AUWIEDERSEHEN SCENARIO | | | | website for Alumni to learn about what is going on |
| "Auwiedersehen" is a German word that is often | | | | with the company and to communicate with other |
| used when people depart. But Auwiedersehen is not | | | | Alumni. At the same time, those who frequent the |
| "Goodbye." It literally means, "Until we meet again." | | | | Alumni section are useful targets for the company's |
| Saying "Auwiedersehen" assumes that once | | | | sales staff. Alumni would be invited to reapply for job |
| employees physically leave the building, they have | | | | openings the company would have in the future. The |
| only physically left the building. They can continue to | | | | company message is: "We would like to see you land |
| be factors for the company's success or failure. For | | | | on your feet in the wake of this termination decision |
| example: | | | | and we want you to know that you are still a |
| Once their non-compete agreements end, they may | | | | member of our business 'family.' We are sure that |
| join other firms in your industry. Will they be | | | | our paths will cross again." |
| opponents of your M&A plans or attempts to | | | | COMPANY CULTURE |
| foster industry-wide standards or strategic alliances? | | | | As someone who works with leaders in their |
| As you seek to attract new talent to your company, | | | | departure from organizations, we love working for |
| are the people you terminated considered thought | | | | client companies that treat departing employees with |
| leaders in your physical or industry community? Will | | | | dignity because it is integral to their culture. Our |
| they caution new talent about joining? | | | | perspective in this article, however, is a |
| Once their non-compete agreements end, they could | | | | contingency-based approach to managing end of |
| work for customers or potential customers and | | | | employment decisions. Our framework suggests that |
| encourage customers to go elsewhere. | | | | representatives from marketing and strategy be |
| Each of these scenarios assumes capability of | | | | present when termination decisions are made and |
| retaliation plus degrees of uncertainty about that | | | | some specific questions be raised to examine threat |
| retaliation. This is the Schelling scenario. Signing a | | | | from a broader perspective than a strict legal |
| Waiver of Rights either does not reduce these risks | | | | perspective. |
| or reduces it for a defined period of time. From a | | | | End of employment decisions can be oriented |
| company perspective, the two questions are:o How | | | | towards the Goodbye scenario or oriented towards |
| much higher than zero is the probability of | | | | the Auwiedersehen scenario. Where your company is |
| retaliation?o Does it matter? | | | | on that continuum should be a carefully thought out |
| ARE COMPANIES EMPLOYING TOO NARROW A | | | | business decision. |
| PERSPECTIVE ABOUT RISK MANAGEMENT WHEN | | | | REFERENCE: Thomas C. Schelling. THE STRATEGY |
| MAKING TERMINATION DECISIONS? | | | | OF CONFLICT. |
| With many of our client companies, termination | | | | |