Articles

An ethical redundancy?

17th May 2024 

In March 2022 P&O Ferries announced some staff redundancies. That, in itself, wasn’t particularly newsworthy - organisations make people redundant every day. But theapproach that P&O took was quite shocking, and dominated the headlines for days. With no notice, the P&O workers received a video message terminating their contracts with immediate effect, and explaining that they would be replacedby agency staff who would be paid less than half the national minimum wage.

Anyone with an ounce of empathy could see how many mistakes P&O made, and I hope that we can safely assume that 99% of redundancies are handled far more ethically than that. But whilst P&O Ferries were able to show us how not to do it, there aren’t really any evidence-based widely-used guidelines for best practice in this field. So, what does an ethical redundancy look like? And how can organisations make sure that they avoid a PR disaster, and do what they can to minimise distress?

Redundancies perhaps inevitably will have some negative consequences, most obviously on the workers themselves who lose their jobs. Losing a job can be one of the most stressful life events and research has shown that it leads to the same stages of grief that people experience when facing a bereavement (Blau, 2006). But the negative ripples of redundancies go beyond the individual. On top of the emotional, psychological and practical distress felt by those being let go, there is a significant negative impact on the remaining employees who have witnessed the whole process. They can experience survivors’ guilt, and often feel that their confidence in their employers and the security of their own jobs has been eroded. If it is not handled carefully, the redundancy can lead to widespread reputational damage, which can have an impact on share prices and future recruitment. Indeed twelve months after the P&O debacle hit the news headlines, their business still hadn’t recovered and now, more that two years down the line, they are still in the news, justifying and apologising for their poor practice (BBC, May 2024).

Thankfully, there are some psychological theories at hand, that can help us to understand how we can manage the process of redundancy more smoothly and help to ease the pain.

Eby and Buch conducted some research into what makes an ethical redundancy. They drew on Integrative Social Contracts Theory which describes two different unspoken psychological contracts that employees have with employers. These are both unwritten and not explicit, but they are widely shared and as employees, we feel them quite deeply. The first is a transactional contract which basically boils down to: if I work hard for you, you will pay me fairly and give me job security. The second is a relational contact, based on mutual support and mutual respect between the employee and employer. Eby and Buch argue that redundancies are painful because they violate these two contracts and show that whilst these kinds of organisational change are perhaps almost bound to cause some distress, there are some things that employerscan to do minimise the damage.

• Getting the timing right - the sooner the better: Announcing the threats of redundancies well in advance will ease the pain. Advance warning of redundancies has been shown to link to a shorter period of unemployment, less financial strain and less anger towards the organisation. On top of this an extended notice period allows the individuals involved to develop coping strategies which leads to reduced stress overall.

• Offer a good rationale: The decision itself and process involved in making the choice about who leaves and when they leave must be fair and must be seen to be fair. This seems to benefit everyone. The people communicating the bad news find it easier when they have a convincing, genuine rationale; the survivors feel less guilty about being the ones who are staying, and are more positive about the organisation they are continuing to work for; and most crucially, those facing redundancy find it easier to make their peace with the whole process when they understand why it has happened. A good reason for the redundancy allows for an external attribution for the situation which helps the employee to gain a sense of control. It helps to buffer the shock for them, and leads to less self-doubt and easier emotional acceptance.

• Communicating clearly, empathically and authentically: The research clearly shows that the actual message of redundancy needs to be communicated by the line manager and in person, both of which make the process feel less dehumanising and less stressful for the person facing redundancy. The line manager needs to be authentic, and communicate empathy, acknowledging the employee’s feelings, but alongside this they should try to identify and communicate some positives. The research offers a number of specific techniques that help, for example, a phrase like ‘the news is not good’ seems to be better than ‘bad news’ – the phrase is still clear, and doesn’t minimise or invalidate the employee’s negative feelings, but it steers away from catastrophising.

• Support: The organisation needs to do what it can to support the outgoing employees. Institutional support such as outplacement provision can help both in practical terms – helping people to find better work more quickly, and with the relational contract – showing that the organisation does genuinely care. But often this kind of outplacement support is seem as performative – just paying lip service to the problem. So beyond that, the organisation needs to offer some personalised, tailored support, that really sends the message that they care.

It’s not rocket science to work out that giving people some notice, some support and some explanation will soften the blow of redundancy. But in practice, it doesn’t often happen, with research indicating that only 9% of organisations implement this kind of ethical redundancy - organisations can be so eager to get the nastiness dealt with and to move on, that they can forget to focus on the individuals. But actually, it’s not that difficult to get it right, and of course, it’s a strategy that will help to minimise the negative impact of redundancies across the whole organisation – those closely involved and those on the sidelines watching it all unfold.