10 Tips For Predicting Impending Redundancy

Do you have nightmares about being laid off? Is your company about to have (another) round of redundancies? How will you know if you might be next? Even if you are working for a profitable, market-leading multinational, your job may not be secure. Just like a change in the weather, the trick is to be prepared by reading and correctly interpreting the warning signs.

Top 10 Warning signs of impending redundancy:

1) Industry in decline

Market forces, new technology, even fashion can cause whole economies, geographical regions, specific industrial sectors, or individual companies to decline. If the entire industry is in decline (as for example the IT industry during the “dot bomb” that followed “Y2K”) then your job, and possibly also your career are at risk. This is a general risk to all in the industry, not just you, but you might want to start thinking about “what if?”, thought there is no reason to panic just yet.

2) Profits shrinking, or worse: losses

If the company you work for shows a slow down in profitability, or starts making a loss, then you should start considering your options. If the trend continues, you can be sure that redundancies will follow. No job is secure in the modern global economy, but you may be able to keep yours if you are able to prove your profitability to your employer.

3) Share price continues sinking for six months

This is when management of a publicly traded company will start to feel the pressure from shareholders. Frenzied selling by panicking shareholders will drive prices lower, exacerbating the problem and increasing the risk to your job. Thanks to the internet enabled modern stock market, many – if not most – share traders have little or no financial knowledge. Often they rely on rumors or self-proclaimed “industry pundits” for their investment advice.

Huge drops in the share price may force management to “do something”. In their desperation to placate the market, that “something” might be to lay off a percentage of the workforce.

4) Multiple “Reorganizations”

If the board of management decides to change the organization structure, and then does it again within the year, you can be sure that they are flailing about trying to solve a problem that they cannot get to grips with, nor properly understand. This is not necessarily due to incompetence – it is incredibly difficult to fix a broken organization. Changing the structure might well work in some rare cases, most likely due to the “Hawthorne Effect”.

More than one reorganization every few years is a sign of desperation – doing the same thing repeatedly and expecting a different result is not rational. Employee morale will often drop after any but the first reorganization; so will productivity, customer satisfaction and finally profit. Redundancies are almost sure to follow.

5) Turbulence at the top (Board level changes)

Changes at the top of stable organizations are rare. Several board level changes, often prompted by infighting or pressure from shareholders, is a tell tale sign of instability, and may be a symptom of a deeper malaise. The business is in trouble so new blood is called in to remedy the situation. Just as after any regime change, there will certainly be a period of “ideological cleansing” to follow. New management will want to be seen to be making bold, broad changes, and will want to mark the territory as their own. The old guard’s pet projects, grand schemes or favorite part of the organization may follow their ex-leader out of the door in a round of lay offs.

6) Budgetary restrictions – For example: “No travel”

When the pantry starts to look a little sparse, it is time to be frugal, and tighten the belt. If the restrictions work – great. But often there is a culture of free spending that is hard to curb, especially in companies that had been very profitable for several years. Some employees may never have had to think about how much they were spending, and how effectively that spending generated profits.

If the budgetary restrictions are inconsistent, not applied uniformly to all, or there are obvious “scapegoats”, this may provide clues as to whose salaries are likely to be next on the list of “unnecessary expenditure”.

7) Competitors announce layoffs

As soon as this bad fashion trend gets started, everyone in the “peer group” feels they need to follow. Hopefully your company is different, but do not rely on it.

8) “Non-strategic” projects shelved

What is “strategic” and what is not may well change from one week to the next, particularly if there are organization changes at board level. Your secure job on an important project may suddenly be seen as “overhead” to be trimmed. If the project sponsor is gone, you can almost bet that the project will go too. Having your fingers in a few different pies by having your time divided between several projects, in different parts of the organization may lower your risk exposure.

9) Layoff rumors denied by management

In isolation, this sign probably means nothing, but coupled with one or several of the others listed above, you might be wiser not to trust management assurances that your job is secure.

10) Layoffs announced by management

It is a certainty there will be at least one round of layoffs. One a company has gone down this pathway, they reduce the amount of organizational inertia that needs to be overcome to do it a second time. As with multiple reorganizations, repeated rounds of layoffs lead to lack of morale, lower productivity, and only make the situation worse. Ultimately, whether you are made redundant or not, you might want to consider carefully whether this is the right place to be spending your time and energy.

Don’t panic!

Of course, these signs may NOT mean that there are about to be a round of layoffs (except the last one!), and even if there is, you may be fortunate enough to avoid the chop. Be realistic about the risk as it applies to you specifically, not to the industry as a whole or some other vague description of a group that may include you (or people a bit like you). You are not defined solely by your job title, although it may be an important component of your identity If your company has been making a loss, or even if their profits have just declined, but most assuredly if their share price is falling, you are at risk. I worked for one of the Big Five IT companies, at the time incredibly cash rich (US$5bn) and making a profit, when I was laid off in their third round of redundancies in 2004. Management were “reacting to the shareholders” and “following the market”. So much for being “a market leader” and “our greatest assets are our employees”.

Fortunately for many in the IT industry, their careers did not disappear, although their earning potential certainly changed. Many were out of work for a long time, and some of us changed career. I used my redundancy package to help support my full time study for my new career. For several entrepreneurial groups of employees, redundancy was the opportunity to start their own business building something they cared about, unrestricted by corporate politics. Some of these start-ups were acquired a few years later by the very same IT companies that had the layoffs.

The visionary ex-employees, whose creativity may well have been stifled before the layoffs, now found themselves receiving recognition, elevated position and salary. Some earned millions from the acquisition of their companies – far more than their share options or salaries might have made in the same period of time. So try not to see only the negative consequences of redundancy, but be open minded to all the possibilities.

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