How to implement at the same time a more agile organization and a headcount reduction program?

June 1st, 2020

In the current economic recession that we are facing, most companies are working on how to adapt their organizations; for many of them, it is a question of survival.

Having said that, companies must take into consideration their specific situation:

• For some of them, reducing headcount is not the priority. On the opposite, they want to keep talents. Their quest is more about gaining competitiveness and agility, often by developing short-time work, to cope with the decrease in publicly funded furlough and the slow rebound in the demand which is expected in many industry sectors.
• Many companies will find it impossible to avoid reducing headcount and the question will be more on which scheme fits best: voluntary vs involuntary, collective vs individual, transactional or forced lay-offs

Workforce adaptation possibilities have been on for ages in most Continental European countries, they usually require collective agreements to be signed with unions delegates and confirmed with works councils; the content is mostly about necessary actions to maintain competitiveness and  prevent collective redundancies and forced layoffs (working time adjustments, up-skilling, re-skilling, conditions for voluntary departures, bridges to retirement, salary freeze, bonus cuts, etc);  quite often, to sign agreements with unions, management has to commit to keeping the activity/the site open and refrain from launching collective dismissals, at least for some time.

The problem with these traditional measures negotiated pre-Covid is that they fell short on what is required today.

So we see more and more companies wanting to combine both headcount reduction and collective agreements on working time and other compensation-related items, in order to:

• Find ways through collective bargaining, to develop a more agile organization (working time, compensation flex) and to keep and secure certain talents which are in short demand,
• Reduce headcount, to adjust to declining demand.

Doing both at the same time is legally possible, but requires some thoughts as well as a realistic planning:

• The choice will be determined by the financial situation of the company, the sense of urgency for cost reduction and the cash situation
• The choice will also be influenced by the chances of getting a reasonable agreement with unions, which itself is based upon the level of trust, of pragmatism within unions and the counter-parts that they will insist on;
• The risk for companies to be seen as blackmailing unions and employees, if the number of dismissals increases in case no agreement is reached on working time, for instance.

Developing a sense of urgency within the whole company will be essential; it will have to be based upon sharing information with works councils and unions on the current situation, on the outlook if nothing is done and on working hypothesis for the rebound strategy.