Outplacement, Severance and Talent Management

Recently surveyed CEO's of the top 100 companies said they are spending as much as 60% of their time on "talent management" issues.* One would think their concerns would be with quarterly earnings, new product development, mergers, divestitures, acquisitions or the price of the company's stock. . . . but that isn't what they said. I was a bit surprised until I read further to find that although the company's vision and overall strategic responsibilities were on the shoulders of the CEO, people were a very big piece of the potential future.

Specifically CEO's were concerned with recruitment, the selection process, development of hard and soft skills, retention, succession planning and transitioning employees that would no longer have a seat on the "bus".  You would think these issues would end up on the desk of the senior HR professional instead of the CEO but just like the other functional areas of the business, the CEO doesn't generate all the ideas in a vacuum, but works with several people to establish best practices.

In today's world executives are in a constant battle to keep up with new knowledge, trends and innovative approaches to become more profitable.  As an executive search professional, most searches today are driven by the company wanting to upgrade their existing executive team.  Acquiring talent is a key component of a CEO's overall talent management strategy.  This may come as a surprise, but what happens to those executives that are no longer needed and how they are treated is equally as important to the future of the company.

When a decision is made to terminate someone, not for cause, but because a different skill set or experience is needed for the position, I offer some thoughts for consideration.

During the hiring process, the candidate and the company are euphoric with all kinds of positive feelings about the future.  If one were to measure the company culture at this moment in time likely the participants would provide the greatest review possible.  Everyone knows nothing stays the same and new opportunitities and challenges will always come along.  How the company and the CEO react to these new challenges and opportunities are a critical part of what the "corporate culture" is really like.  The true test of a company's culture comes to light when a decision is made to make changes that result in termination of long term or outstanding executives.  The actions taken by the CEO and the management team of the company towards the departing executives as well as their treatment of the "survivors" who are still employed, have a very large impact on retention and succession plans for the future.

Yes, how an employee is terminated and how the employee is treated after leaving the organization affects who you can hire and how people will feel about working at your company.  Properly transitioning someone by providing severance and outplacement that is meaningful to the displaced employee may be one of the best investments you will make for the future of your company.

While executives will not be at work on a daily basis after they are terminated, they will remain friends with many that continue to work at the company.  Chances are when your previous executives are doing a job search, they will be interviewing with your competitors who are also making evaluations for themselves about what it's like to work for your company.  Our world is not getting larger but it is shrinking every day because of all the communication channels available.  All the hard work a company invests in creating a positive corporate culture can be lost by not having an effective transition policy connected to terminations.

Figuring out a severance package for someone is relatively easy because often they are tied to years of service and/or for many executives severance is already written into an employment agreement that was signed when the offer was made.  Often companies say they will provide outplacement career transition services but fail to spell out exactly what is going to be offered.  In the outplacement world, many of the firms providing services have programs so cheap that companies can say they offered services but they are not meaningful and end up being a waste of time for the people receiving the services.  In addition, it's a waste of money for the company now and harmful for the company's future.

Some companies offer outplacement along with a severance package but there is a stipulation that if the individual finds a new position the person's severance will be terminated.  This is an interesting twist because on the one hand the company is providing a bridge for the terminated employee with a severance package and the training to help in finding a new position; however the company cuts off severance if the person lands in a new position, effectively penalizing the person for finding a new job!  I know if I was in that position I would be hesitant to tell my former employer I found a new position and my feelings about my past employer would not be altogether positive.  My guess is many people will wait until the end of the severance period before finding a new position rather than giving up their severance.  The bottom line is, terminated employees and companies are both better off when the departing employee finds a new position quickly and moves on with his/her life.  By putting these two benefits in "conflict" with each other, companies lose sight that severance is paid for years of services and outplacement is provided so a person can have support and assistance in not only finding a new job, but finding the right new job.  Penalizing someone who finds a job quickly doesn't send a very encouraging message and defeats one of the reasons for even offering the service.  If a CEO is going to demonstrate leadership and concern for all employees, paying attention to termination processes and programs is equally important in assuring the company's brand and reputation remain intact.

*McKinsey's 'The War for Talent' Survey, 1997

Dan Portes
President/CEO
Management Resource Group, Ltd.