Layoffs: Avoiding Implosion

October 30, 2006

Reductions in Forces (RIFs) are a fact of life in most industries. Over the years we’ve read of large reductions in employee numbers. To make them more palatable, it may be called “downsizing” or, to make leaders feel better, “right sizing”…. I don’t feel the employee being asked to leave ever feels like it’s right sizing.

RIFs are unfortunately a fact of life. In health care, we take our employee layoffs very emotionally, as we should. Other industries are much more accustomed to these layoffs. However, even the smallest RIF in health care has a huge impact that ripples throughout the entire organization.

In health care, when reductions are imminent, organizations have an opportunity to either move the organization forward or implode. The size of the reduction, while important, isn’t the biggest factor on how those that stay with the organization react, but the manner of communication is. The communication to the staff and physicians is crucial.

If not done well, the most common immediate reaction by the front line staff is that the reduction is the administration’s fault. However, in my travels and observations of reductions, the senior leaders have fought like heck to avoid them. They’ve spent days, nights, and weekends looking at options to keep the reduction as low as possible. The senior leaders only look at reductions after other efforts to achieve desired outcomes have been tried. RIFs can take place even in well-run organizations.

Why do RIFs occur? Here are few reasons:

  1. Technology changes. A new device makes a procedure obsolete. Staff in those areas is impacted. At the very least, more care is done on an outpatient basis. An upgrade in the information technology means more efficient operations. Either way less staff is needed.
  2. Migration of hospital services to physicians’ offices. Technology, grouping of physicians thus access to capital means that what hospitals did before now can be done in physician offices or other health care entities such as imaging centers. Again this means less staff is needed at the hospital. Some staff may move to these new settings but pay and benefits may not equal what they had in hospital.
  3. Increase in competition as other hospitals expand their services. A hospital is the only heart surgery hospital and then a nearby hospital starts a program. While one hospital is hiring heart staff, the other is reducing staff.
  4. Expense creep that may follow good years. FTE’s may gradually increase when the revenues are up and staff was hired. Now with patient volume down less staff is needed.
  5. Bad debt and charity care increases meaning more care but less collections. Something has to give. It can mean some jobs will go.
  6. Streamlining. In health care our DNA calls for us to always look for ways to improve operations, sometimes improved efficiency means less people needed.

Can senior leadership rollout these reductions without imploding but gain trust with staff? Yes, I’ve seen it done. Here are some tips:

  1. Don’t exaggerate the reduction. There is a tendency to include in the numbers those positions that are already unfilled or may be lost to natural attrition so as to let some stakeholders know you have dug deep. Keep the list to actual people that will be asked to leave.
    • For example, I spoke with a CEO who said they were reducing their force by 120. When I asked how many bodies, it was less than 40. The large number included current vacancies that were not going to be filled but in budget, and others were being done through attrition by not replacing staff who were retiring or leaving for other reasons.
  2. Audit where reductions are made. May not seem right and won’t change some front line staff layoffs but reductions in senior leadership and other management areas must make up some of the reductions. Otherwise front line staff feels that management is not also sharing the pain.
  3. The CEO must make sure senior executive team is on the same page and understands the communication plan. They must know the key talking points – what to say, to whom and when. If one senior leader gets out in front of others, then the feeding frenzy begins. Also have a prepared response just in case there are any calls from the media to reassure the community. Or if you feel media will be interested, integrate media as part of the process.
  4. The CEO needs to rollout the plan to the managers, key physicians and then immediately personally to all employees. He must first share what has been done to lessen the reduction so that staff understands their efforts haven’t been wasted.
    • A CEO I know shared the reduction but also went over the positive actions over the past 4 years in new program growth, reduction of agency, etc. He showed that it was sad that reductions were being made, but the number, which was under 50, could have been as high as 300. Thus, their hard work kept 250 people working. By working together they may not avoid reductions due to things outside their organization’s control – like reimbursement issue and new technology – but they can keep reductions lower by continuing their progress.
  5. The CEO also explain what would happen if the RIF wasn’t implemented – financial losses, loss of market share and even larger staff reductions.
  6. Outline specifically where the reductions will be and what the managers will be doing. Give them a timeline to reduce anxiety of when people will hear and how.
  7. Explain what is being done for the employees who are being let go. Outline how the people exiting will be treated, such as severances, out-placement, etc. This is crucial for staff that will be thinking of those leaving, but also wondering what if this was me. One CEO had other healthcare organizations come onsite and set up interviews with those being let go. This was a huge win for everyone.
  8. Let the employees left know what they can do to make the organization stronger, such as improve physician services, select and orient new hires better and reduce patient no-shows for visits.

While reductions are gut-wrenching experiences, they are, at times, necessary to assure the organization has the ability to continue to fulfill its mission to provide care. In fact, to not make such moves may put the organization, thus its mission, in jeopardy.

We all work to build a sense of team, and reductions in workforce can erode the trust and confidence levels in the organization. The above suggestions may not cover all the points on how to deal with this difficult task, but they are a solid start for your communication plan.

If you would like us to put you in touch with an organization who has handled this situation without losing its forward progress, please e-mail me direct at quint@studergroup.com.

Also, please add your comments to this blog and share with our readers your experiences with reductions in forces – what worked and what didn’t. We can all benefit from each other’s experiences.

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9 Responses to “Layoffs: Avoiding Implosion”

  1. Rodney Scott Says:

    I have experienced downsizing(right sizing)as the person intiating the downsizing. I agree with not exaggerating the numbers of how many are downsized out is important, but it is also important to identify who is being downsized. During this period you risk losing employees you want to retain due to fear of further reductions. I feel maintaining confidence with the employees is near impossible. Unless the industry is accustomed to layoffs(down sizing) the workforce does not recover and loss of several high performers may occur.
    I downsized a plant of 50 workers to 30, and eventually lost several key employees due to fear of more downsizing. They were evenyually correct, and nine months later all were downsized or transferred to a different location in a neighboring state. Be prepared to replace fleeing employees after down sizing.

  2. Sue Pearce Says:

    One of the learnings of our organization this year was related to the experience of closing one unit and “consolidating” it into another one across town. While management staff did everything you noted and honestly worked very hard to reduce the impact, there was still a groundswell of negative response. I think the learnings included two main items: Don’t minimize personal new outcome of the changes for people:if there are major changes to people’s schedules, don’t say “We have been able to place staff so no one will be laid off”. People who previously worked full time night shifts suddenly had to look for part-time day shifts, etc, so the personal net impact was far greater than presented by management. The second learning was to be honest and direct-many staff said that had management just acknowledged the personal upheaval but said that in the long run it would mean work for people rather than actual layoffs,they could have processed it better and been ready for the culture changes of working different shifts in different areas of the hospital.

  3. Peggy Westerfeld Says:

    Having witnessed one lay off a a hospital and be laid off in the second round, I find this article quite good! Communicating openly is very important. Rumors fly. There is a season of mistrust on all levels until CEO communicates the truth and the facts. Timing of this process is critical to staff morale – for example end of year lay offs are right before the holidays. It is very hard emotionally on staff not being laid off when hospital spends large sums of money on a Holiday Party that could have kept several jobs. Healthcare workers are “family” and the bonds between coworkers are very strong. The staff might have solutions to cost reductions that have not been considered by the bean counters on higher levels. On going consistent communication between upper management and front line staff so important to making a smooth transition in this difficult situation. Thanks Quint for this great tool for Administrators.

  4. JoLyn Says:

    Having just been a “victim” of RIF, I have seen where the situation was not handled well in the organization. Downsizing occured without any preparation of the infrastructure to support the changes. Now I hear frequently from many of my former colleagues that things are so bad, and the work load is so incredibly awful, that many of them are looking for options outside of the organization. How you handle the issue with the people being layed off is extremely important, but you need to be prepared with a strong infrastructure to support those that are left behind to do the work.

  5. Mike McAvoy Says:

    At my previous healthcare organization, we prepared to downsize due to budget issues about 2-3 years ago. We defined the dollar amount needed to right size the place, not the number of FTEs we would reduce. We did not know what FTE number we were looking for, or what it would amount to. Being a partner with the Studer world, we had recently gone through the process of coaching all our employees through the High – Medium – Low process. Hence we had a great starting point. We gathered the leaders and asked them to identify what processes should just stop, what processes could be combined, and who among their staff just needed to leave based on performance. We chose to reduce only low performers regardless of age, seniority, title or salary amount. (This efficient process might take more turns in a union environment.) We ended up selecting 52 individuals to get to our dollar goal. Some were entry level, some were professionals, with high salaries. It was all based upon performance. The day we pulled the trigger, and for two days after, we had large employee forums, where we defined the criteria we used and the process, stated we were lining their former co-workers up with outsourcing support, there were no more layoff planned, and that we had chosen low performance as the criteria to make the cuts. The remaining employees were reassured, and many were grateful that we had finally pulled the trigger on the low performers. The remaining staff also learned that we were serious about job performance, and if they continued to do good work and moel good behaviors, they had little danger of being selected to return to the community. It went quite well

  6. Ang Law Says:

    Your recommendations regarding the Communication plan and consistent talking points are 150% correct. I have experienced implosion as a result of poor communications, and also the opposite, an actual increase in sense of teamwork where staff rose to the occasion during this uncertain time. Instead of “heading for the hills”, the remaining staff “circled the wagons”, “took care of their own” (their words) and maintained a positive forward looking attitude. The leaders’ proactive communication frequency, depth of message and explaining “why” are critical defining moments/opportunities in an organizations ability to move forward during a tough time of change. Do or do not – there is no “try” – Yoda

  7. KEN SHADE Says:

    This article hits home with respect to how RIF’s should be handled. Number one is communications for the purpose of reducing rumors and causing undue stress on the entire orginazation. That communication should almost always come from the CEO first to staff. Yes, management must know that it is coming but the publice statement should made by the CEO. I think that management should look to the areas or departments that technogoly affects first to see if any employees within the identified area can be retrained to work in other areas and if so identify said empolyees and afford them the opportunity to take advantage of available training. This keeps the employee in whom the facility has already made an investment within the organization rather than laying them off only to have to hire new people from the outside. while low performers can be weeded out in this manner often times good quality people are lost too and this would afford the facility the chance to hold on to them and not lose them to compition. Upper management should be looked at in the same manner. Employees will often tell you that management takes a hit in RIF’s but usually within a twelve (12) to (18) month period those positions have again been filled either as the same designated position or under some new title and that makes harder the pill that staff is being asked to swollow.

    Finally I think that the most important thing hospitals should do is to ask for, listen to and look at ideas presented by employees within various departments. It is my opinion that no one knows better how to do a job or how to make it more effecient than the person doing it. Often times many of the simple suggestions submitted can save a only few thousand dollars a year but many of these little things, when combined with others, can amount to astronomical savings for an orginazation.


  8. The Department of Radiology underwent the typical downsizing due to technology : Film Librarians for PACS. The key for a successful downsizing is communication – to all employees about the rationale, plan and timeline. We found that many staff were at retirement and opted for that solution versus watching their less senior peers loose their jobs. We also shifted work assignments and upgraded many librarians into patient access roles, replacing other vacancies in the organization through preferential recall. Overall, 18 FTE were reduced in the Department, 15 of which were re-assigned to other areas where vacancies existed. Due to the communication efforts, we believe the integrity of management grew through this experience – we did what we said we would do and followed through with staff involvement.

  9. Bill Young Says:

    Your article on RIFs was very good. After reading the article I thought back to an RIF we did last year and discussed this with some of my Leadership Team. We realized there are a number of things we did well but we also identified somethings we could improve upon. Unfortunately, a month ago we were faced with the need to reduce hours at one of our free standing emergency rooms. Before we did anything my team and I reviewed your article. It provided some great ideas on how better to present this change to our staff and organization. We learned from our past experience and incorporated your thougts on how to do things differently to maintain the trusting relationship with our employees. As you noted in the article, these types of changes are very difficult. They effect the lives of our employees who we care about. By following your ideas to improve how we do things we were more organized in our approach, our entire management was better informed of the change which helped them to support us with their employees, and the staff effected had a better understanding of what we had done in the past and why needed to do this now. They still did not like the change but they felt like we did the best we could for them and the organization. I am confident this will help us continue to build and maintain a trusting relationship with our employees throughout the organization.


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