1 tma europe conference 2012 labor & h.r. issues in european restructuring rethinking h.r...
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TMA EUROPE CONFERENCE 2012LABOR & H.R. ISSUES IN EUROPEAN RESTRUCTURING
RETHINKING H.R APPROACHES IN TURNAROUNDS – ITALY: A FRESH CASE
MARIO MASCIOCCHI - TMA ITALY
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Downsizing, wrightsizing, layoffs, headcount reduction
Weighing short term business strategy vs long term
Downsizing shall take place after the distressed company has revised its strategy and quickly revisited (not reengineered) its critical processes
Focus on cost of labor not heads ,and on value adding activities
Avoiding of “spreading the pain around” by requesting to Functions/Depts. Mngrs x% HR reductions. Allocation of resources will result inefficient most frequently
Show equality between organization levels. . F.e. executive perks, benefits. Etc
Keep the downsizing planning process as quiet as possible. When announced, the preliminary involvement of Unions Reps. is key, as during the entire process
6 golden rules
• Cost savings are significant• Increased productivity, principally if
are eliminated underperformers and “custodians of the past”
• Signal to employees of the seriousness of company’s situation
• Reduce decision time substantially, principally if layers of middle management are downsized.
• It can break barriers to change • It gains approval from investors and
banks who are attributing a greater credibility to T.M. for having made such difficult decisions
PROS CONS
• Increased cash-out front end due to severance, exit incentives, social benefits to be paid. A layoff will not pay for itself for 1.5 year, 2 years as a base.
• Increased individual/collective claims• Valuable expertises and institutional
memories will walk out the door• Substantial risk of strikes and/or breaks of
production which, even if absorbed, will damage company’s brand vs customers
• The survivors frequently deploy a loss of trust and commitment
H.R. REDUCTION – pros’ & cons’
The above comments have different economic and legal impacts according to countries legislations
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ITALY: a fresh case
150 employees Fashion Company: Top brand highly ranked in national /international market pyramid Competitive position in decline. Inadequate overseas share 2009 substantial loss; 2010 in b/e; 2011 improved margin/ modest profit High indebtness (D/E 1,7 vs 1.0), subject to a successfull financial restructuring/
l.t.consolidation based on 5 years Plan (art. 182 B.L.). Production processes outsourced (70% Italy ; 30% China) 2 Sites: HQT (G.M.–Styles–Sales Advertising &Communication)
Plant: ( Preproduction , Materials&Logistics – Support) highly integrated locally.
High employment seniority hourly/salaried, soft governance, weak personnel policies fairly unapplied
OBJECTIVE: RESHUFFLING PLANT ORGANIZATION27-40 exits vs 10-16 new hires -
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ITALY fresh case: programmed reorganization (option 1)
Confront with District Union Reps. on “Reduction and transformation of activities” and “Failure of achieving agreed restructuring Plan . Prepare a new “ad hoc” Plan.
Develop a basket of actions aimed to individual dismissals : (a) incentives for early retirements to employees missing up to 3 years (b) individual layoffs up to 4 employees every 4 months © Outsourcing of very focused small units/activities (maintenance, logistics, material etc) with absorption of some inside employees (d)Replacement with indipendent contractors (e) disciplinary lay-offs for breach of duties.
Advantages: selected new hires informally introduced/lower exposure to strikes and potential working –to-rule on a medium term.Disadvantages: period from 1.5 through 2.0 years to achieve desired target/ prolonging corrosive impact on morale/ higher individual claims /higher social turbulence short term.
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ITALY FRESH CASE: programmed restructuring by collective dismissal (option 2)
Implies a structured procedure leveraging on extraordinary factors and on a revised Plan including incremental investments
Will affect the whole Company (both sites). Shall be started and negotiated with Regional Labor Agency and Regional Unions
as “Collective Dismissal” of identified employees. Any agreement subject to employees’ approval. Lower exposure to individual claim
Some individual incentives as per option 1 to be used to blend the burden Any new hire restricted until final agreement.
Advantages: Shortening time required to achieve base exits (8/10 months) /Lower cost of the procedure/ Likely lower turbulence Disadvantages: Greater publicity vs . stakeholders and consumers’ perceptions /Some emergency organizational solutions to be adopted /Higher risk of loosing valuable people