Reduction in Force Selection Criteria: Who Stays and Who Goes?
Help me, I’m stuck.
Are you protecting your company and treating your employees as best you can when planning a workforce reduction?
Reductions in force happen for a number of reasons, like reducing costs, restructuring, moving operations, selling an operation, or switching to new technology.
Selection Pools
Creating your selection pools — i.e. the employees considered for reduction — is one of the key elements when planning for a reduction in force. When determining your selection pool, do you have defined, defensible criteria? Your selection criteria should be as objective as possible to ensure that employees are treated equitably and without bias. When mixing reduction in force selection criteria, things can get messy.
Selection Criteria Considerations
Some relatively risk-averse reduction in force selection criteria to consider are tenure and work elimination. For example, if tenure is your chosen criterion, it’s common to follow the "last in, first out" rule of thumb because it’s objective. The employees who have worked for you the longest will be in the safest position, whereas newer employees may be impacted by the reduction. Similar to tenure, work elimination offers a clear-cut means to selecting employees. If certain positions are going away or an operation is being relocated, the selection pool is easy to identify. There should be no room for subjectivity.
Riskier reduction in force selection criteria are things like employee performance or skill set. On the surface, these factors are more subjective, so it’s imperative that you have solid supporting documentation. This includes performance reviews, skills surveys, email, feedback forms, or other productivity measurements.
When choosing performance as your measure, key documents might be performance reviews, emails about performance that indicate consequences, and other data that shows the issues have been brought to the employee’s attention. It’s important that the employee is aware that they are a low performer in comparison to their peers.
Though somewhat controversial, some employers use stack ranking — or a vitality curve — to measure employee performance. Stack ranking rates employees based on any number of performance criteria, such as productivity, teamwork, attendance, etc. Ultimately, stack ranking yields a list that organizes employees from best to worst. This requires even more documentation to reinforce the fact that the employee is underperforming in whichever areas you are using for evaluation. Beware that some big-name companies have paid big dollars after being sued for their use of employee ranking.
Skill set is another tricky reduction in force selection criterion because you may need to prove the employee didn’t have the necessary skills. Skill profiles, which provide the opportunity for employees to acknowledge their skills and skill levels, are a helpful form of documentation. Additionally, assessments and tests can help substantiate decisions based on skill set.
Evaluating for Adverse Impact
When making reductions in force, it’s important to keep diversity and inclusion top of mind. You want to take measures to ensure you're not disproportionately impacting a particular employee demographic. If your decisions adversely impact a protected employee class, you will not only lose diversity of thought, but you also open the company up to discrimination claims.
For example, reduction in force selection criteria like reverse tenure (those with the longest tenure are the first to go) or largest salary put the company at risk of a lawsuit. Why? Because in these scenarios you are most likely impacting older employees, increasing the potential for age bias claims.
Regardless of your reduction in force selection criteria, it's helpful to complete an adverse impact analysis. This helps to ensure your pool is not unfairly impacting a particular protected class of your workforce. Evaluations often include statistical analyses like Fisher’s exact, chi-squared test / G-test, or Z-test.
A Few More Things…
When reductions in force are necessary, be sure you consider all perspectives because it’s just the right thing to do. Some additional considerations include:
Don’t devastate a family - This is one area often less contemplated. However, during large reductions, especially in more rural areas, it's a good idea to run an address report once you choose the people impacted. You may think differently about impacting people in the same household or significant others during the same action. Though no reduction decision is simple, you definitely don't want to harm an entire household at once.
Historical employee relations issues - While you might think this is a good time to get rid of Complaining Cathy, think twice. If she doesn't fit the selection pool criteria and has recently filed anything resembling a formal complaint, you're opening yourself up to a potential retaliation claim. Also, if you have someone on a performance improvement plan and are thinking, "I'll just add them to this action," stop right there. Unless they meet the criteria of the pool of impacted employees, they may have a claim that they weren't given an opportunity to improve. This is especially risky if the employee also falls into a protected class. Lastly, if an employee is out sick a lot, that fact alone does not justify selection. If there is an absenteeism issue, be sure the employee shouldn't be on FMLA leave or receiving an accommodation under ADA. Too many times HR Business Partners are surprised to discover that a person placed in the pool due to high absenteeism was not informed of FMLA rights or has another type of disability.
Leave of absence - If an employee whose position is being eliminated is on a leave of absence, you don't have to shy away from adding them to the reduction as long as they are clearly in the pool being impacted. If the employee on leave is outside the pool criteria and is on FMLA leave or another protected leave, they shouldn't be on your list.
Sample Checklist Questions
Reductions are unfortunate, but the best thing employers can do is be as thorough as possible when determining impacted employees. Ask yourself the more complicated questions:
Do you know who has filed a complaint in the last 6 months?
Do you know who is or has recently been on a leave of absence?
Do you have documentation for your underperforming employees?
Do you know and have documentation regarding who has been on a performance improvement plan?
Do you know if any of the employees in the pool live in the same household?
Have you completed your adverse impact analysis to ensure you are not adversely impacting a particular class of people (e.g., age, race, gender, disability status)?
A Recap
As you can see, a lot of consideration and analysis goes into a reduction in force. It's helpful to have as much information at your fingertips as possible to ensure you are keeping your company safe and treating employees fairly.
How Technology Helps Simplify Separations
Onwards HR’s separation platform helps Human Resource Business Partners and Legal teams collaborate to build and manage employee selections and justifications during a reduction in force. We also offer adverse impact analysis to help mitigate bias. Request a demo to learn more.
Written by Jen Bender, an HR executive with 20+ years of experience working in the industry, particularly on projects related to outsourcing and reductions in force
