No matter how unpleasant this essential HR process is, there’s a big difference between doing exit ‘professionally’ and doing it with the interests of the business at heart. And, let’s not beat about the bush, it’s almost a universal failing of HR to do managed exits ‘properly’.
Don’t get me wrong, the process of ‘managed exits’ – as many HR professionals euphemistically like to call it – is at best a painful one. Employees who face being axed are always – understandably – upset. They question ‘why them and why now’, of course, that’s human nature. In fact, I’d argue that not only do HR professionals fail to get this process right, they buckle under the pressure of doing it. In my experience, exits seem to have created a whole new, ‘back-of-a-fag-packet’, negotiation culture, that shouldn’t even exist. HR comes to the table, the employee comes to the table and what follows is a round of negotiations that ends up producing a quick outcome deal, but often an expensive one too. You only have to read the news in the last six months to see that huge payouts for failure, such as at the BBC, are now rife.
The process that got to these and other payouts, that HR brokered, may well have been conducted professionally, i.e. politely, following due process and procedure with lawyers involved on both sides. But even in the best case scenario, HR is not an equal partner, and in the very worst cases, I’ve seen HR professionals actually give departing employees the extra scope – which of course they gratefully accept – to actually bolster their nice, fat settlement payouts. In simple terms, HR professionals are at risk of conducting exits, by negotiating from a position of weakness. Sometimes they start the process by saying to those due to be exited that ‘it’s not my decision’ or ‘there’s nothing I can do about it’. But this is unprofessional, they’re not taking proper ownership of the issue and employees are making hay out of the process. It’s now come to a point where we’re seeing HR sign off huge settlement payments giving away substantial amounts of money, amounts the employee should never really have expected to get and to which no tribunal would ever have agreed. And yet, by not changing their ways, staff being exited do now expect to get rich quick. It’s a vicious circle that I’m deeply uncomfortable about.
What is strange is that, in these still fiscally constrained times, where it’s never been more important to get managed exits right, these sort of large payouts should not be happening. It’s even more worrying that these ‘golden goodbyes’ happen, when we consider that HR is supposed to be a business function. HR professionals themselves want to be viewed as commercial business partners but, by their own actions, seemingly don’t operate as such.If they did, they would be controlling the negotiating position far better than they currently do. So, where are they going wrong? I understand that there is a certain amount of pressure heaped on HR at the point of the managed exit – the business wants a fast resolution and will often simply go to HR and ask what an exit will ‘cost’ them. The line of conversation will very much start about the money, and getting staff quickly ‘off the books’. The irony, however, is that in following this modus operandi this behaviour is self-fulfilling and repetitive. HR will get a sense of achievement in reaching a quick – albeit expensive – deal and feel it’s done something wonderful, but the only people that will ever know if this is true are those who review whether the deal was value for money, and this hardly ever happens. I believe that the root of the problem is not really at this last hurdle, the final moment where HR is under pressure to come up with a solution fast. The reason HR is failing to manage the process of exits is because the root of the problem is far more fundamental to that and can be traced back, literally, to the start of the employer/employee relationship.
It’s my view that exits go wrong at the very end, because HR is getting it wrong at the very beginning and hasn’t established what the ‘rules’ are. This is because HR loves to be all about ‘employee relations’ – the fluffy, caring image, the company nurturers, and the department responsible for training and developing staff. But the problem this creates is that, when an exit has to happen, employees are naturally thrown into a situation that seems to be counter to everything HR has been about. That’s why exits then become so difficult. This is HR creating and then following the wrong path; one that infers too much of a personal relationship. The only way to solve this is to establish the rules of employment early. HR needs to move away from thinking it’s about ‘employee relations’ and start seeing itself as being about ‘employment relations’. Whilst, on the surface, this might not appear too different, this subtle change is enough to reposition HR as being the function that supports people’s employment. It relates only to the relationship between the employee and their employment. After all, the employment relationship is formal and requires proper governance.
Having proper governance creates the conditions HR needs to manage exits properly. It might sound draconian but it is not incompatible with pursuing other important HR concepts, such as creating the right conditions for employee engagement or wellbeing initiatives, or a sense of a strong company culture. It simply creates rules that everyone can follow and which, crucially, they have understood from the word go. Only by having an open and transparent policy around the governance of exits, established from the outset, can the process of doing them be clear to all parties. Most importantly, however, it gives HR the audit trail and the authority it needs to enable it to have control in exit negotiations. Furthermore, if the business comes to HR with a problem, like having to take control of people’s exits, it needs to be prepared for the commercial accountability of this task. In fact, I believe HR actually has to go a step further, by being part of an executive committee that considers and approves managed exit pay and arrangements properly. For public sector employers, managed exit type committees should be independent to stop the golden goodbye arrangements at the expense of the tax payer.
These people need to monitor and make HR accountable for the cheques it signs off on behalf of the business to ensure these cheques aren’t blank. They need to ensure that settlement agreements are made in the interests of the business, and not solely in the interests of the person receiving the payout. Yes, it could well be that you want to pack someone away with a year’s salary but, unless it’s debated properly, the business won’t know if it’s in its best interests to do so. An honest HR professional should be able to say that they don’t know what the appropriate payout is to someone exiting the business. I’d far rather they say that than have them be scare-mongered into accepting over-inflated compensation payouts from an employee’s lawyers, where they have been intimidated into submission.
Am I bashing HR too hard? I may sound harsh, but I am genuinely sympathetic to its plight. Managed exits are an area that is often fraught with legal-speak. Most HR directors are good with people and they’re not (quite rightly) employment relations experts; and a legal update as an email feed to them does not equip them with the knowledge they need in real-life situations. But this doesn’t mean they can’t add value to the commercial reality that is involved with the people side of business. Most of their knowledge on exits, will have been what they’ve learnt on the job; of coming to some form of agreement. Those that have at least taken some advice will be more knowledgeable than others about what can be done. These HRDs, with the inquisitiveness required not to accept the status quo, need to become the majority rather than the minority.
First published in theHRDIRECTOR, May, 2014. Reproduced with permission.