Strategic Planning for a Reduction in Force (RIF) - Key Tactics & Best Practices

1. Reduction in Force (RIF): Strategy and Tactics Dick Hoell Sun Microsystems May 1, 2002

2. Reduction In Force: Strategy and Tactics Areas to Be Covered • Strategic Issues • Selection Criteria • Logisitics • Communication • Legal Issues • Outplacement Support • RIF's Outside the US • Measurement • Lessons Learned

3. Reduction In Force: Strategy and Tactics Strategic Issues • Organizational Reason for Doing the RIF • Financial (Cost Reduction) • Lack of Work • Skill Mix Change • Site/Office Relocation or Closing • Outsourcing Work • RIF vs Redeployment

4. Reduction In Force: Strategy and Tactics Strategic Issues • Organizational Impacts of a RIF • On the culture • Treatment of staff • How decisions are made • On the external marketplaces • Labor • Financial • Customers

5. Reduction In Force: Strategy and Tactics Selection Criteria • Balance Between Sense of "Fairness" and Disruption to the Organization • Business Case • Skills, Experience, Documented Performance • Seniority • Selection or Seniority Units • "Bumping" • Voluntary

6. Notification Letter Preparation Resource Material Preparation Manager Training Reduction In Force: Strategy and Tactics Logisitics • Planning is the Key • "Sweat the Details" • Selection Approval Process • Legal review • Changes

7. Reduction In Force: Strategy and Tactics Logistics • Notification Meeting Scheduling and Preparation • Manager/employee at different locations • HR support • Security support • "High Risk" employees • Systems access cutoff • Outplacement & EAP support • Collection of Company Property • Knowledge Transfer

8. Different Media Written/email Group meetings 1 on 1 meetings Websites Reduction In Force: Strategy and Tactics Communication • Different Audiences • External • Directly impacted employees • Remaining employees ("survivors") • Managers 1

9. Reduction In Force: Strategy and Tactics Communication • Issues/Challenges • General pre-notification or not • If pre-notification, then how long before notification? • Ensuring all employees understand the business need • Helping remaining staff regain focus and productivity • Work unit level • Larger organization level

10. Reduction In Force: Strategy and Tactics Legal Issues • Worker Adjustment and Retraining Notification Act (WARN) • Offers protection to workers, their families and communities by requiring employers (100+ employees) to provide notice 60 days in advance of covered plant closings and covered mass layoffs (or pay in lieu of notice) • Covered plant closing – employment site closed down and 50+ employees experience "employment loss" during 30 day period • Covered mass layoff – employment loss for 500+ employees at a site; multiple reduction events during 90 day period exceeding 500 employee threshold in total can also qualify

11. Reduction In Force: Strategy and Tactics Legal Issues • Improper Selection Decisions • Individual disparate impact • Class action exposure - statisitically significent adverse impact • ADEA Notification for Impacted Staff Over Age 40 • Release and Waivers • 45 days to sign • 7 days to revoke after signing • Severance pay contingent on signed Release and Waiver

12. Reduction In Force: Strategy and Tactics Outplacement Support • External Vendor vs Internal Resources • Opportunity to Process Feelings • Re-focus to Finding Another Job • Career change • Job search strategies • Resume/interview preparation support • New skills development • Networking/support group

13. Reduction In Force: Strategy and Tactics RIF's Outside the US • Country-specific Legal/Cultural Differences • Formal consultative processes • Unions • Works Councils • Legally defined selection criteria • Legally mandated severance packages • Involuntary RIF's illegal in some countries (e.g. Japan) • Time Between Decision to RIF and Actual Employee Sermination can be significantly Longer than US

14. Reduction In Force: Strategy and Tactics Measurement • Reduction Target Achieved • Process • Errors in letters, notice/severance pay calculation, etc. • Managers trained • Consequences • Grievances/formal legal actions • Disruptive acts by impacted employees

15. Reduction In Force: Strategy and Tactics Measurement • Survey/Focus Groups with Remaining Staff • How well was the RIF managed? • Have employees' perceptions of the company as an Employer of Choice been impacted by the RIF? • Has the RIF impacted employee productivity? • Has the RIF impacted the ability of employees to meet customer requirements?

16. Reduction In Force: Strategy and Tactics Lessons Learned • Treatment of Staff is the Key • If treated with respect and dignity then incidents of inappropriate acting out will be minimal if not non-existent • Important to provide a severance/notification pay package that is perceived as "fair" • Treatment of RIF'd employees will significently influence the performance of your remaining staff • Pre-notification is Effective (Minimizes the Surprise), but Need to Ensure the Time Between Pre-notification and Notification is not too Long

17. Reduction In Force: Strategy and Tactics Lessons Learned • You Can Not Over Plan • The "devil is in the details" • Ensure All Employees Fully Understand the Business Need • Ongoing Communication is Very Important • Cascading of consistent messages • Use of different media • Important to Provide Thorough Training to Managers Including the Opportunity to Role Play the Notification Meeting • Help Remaining Employees Gain Closure and Re-focus