Mabati Ltd, which dealt in iron sheets, had not been doing well for some time, due to low business, precipitated by the coronavirus pandemic. Kiso, the CEO after going through company finances, finally decided to slash certain expensive positions as one measure to bring down costs. He called in the Human Resource chief, Ms Mpola, whom he asked to come up with a list of those positions not considered critical but bloating the payroll. “We need to save money and save the business,” he directed her with a sense of urgency. “Get me that list before end of the week so as to inform those we can no longer have here not to report back next month!”
“But sir!” Mpola, the Head of Human Resource felt uneasy. “Whatever list we come up with we need to first look at their contracts and make sure we abide by the employment terms. Then we need also to prepare them for the eventual exit before announcement. Perhaps you may share how the business has been slow.”
“Am I getting you correctly!” wondered the CEO with some annoyance. “You mean we need to first call in these staff and talk sweetly to them about their rights before releasing them!”
“Yes,” agreed Mpola. “And not only that I suggest we also provide counseling services for those who may not easily embrace their termination, as some are quite hardworking and their esteem might be affected. There are specific training programmes we could also provide for exit transition like Financial Literacy and business development.”
“You are getting things muddled up,” Kiso waved at his HR chief. “First of all we don’t have the time and then neither are there resources for these additional expenses.”
“Well, my fear is if we don’t do it the right way,” advised Mpola, “it might end up costing us more!”
Against the advice of his HR chief, once he got the list, Mr Kiso called in over 100 staff for an urgent meeting and without wasting quickly informed them, “The company has decided to release you. Your services will no longer be needed next month and plan to hand over. Here are your termination letters.”
There were loud moans of disbelief from the gathered staff. One hypertensive staff almost fainted. After a tense moment one person shot up his arm with a question. But Mr Kiso got up abruptly. “I have another meeting to head to. You can talk to HR.”
In the following week one staff after another queued up at HR office to discuss terms of disengagement. It soon became clear not much thought had been given over the fact that there were different contractual terms to be considered for each staff. The termination letter had been too general without spelling out clear severance terms. Mr Kiso was not available to discuss anything. Soon the affected staff decided to go to court. Mabati Ltd was found guilty of not adhering to her contractual terms. She was fined heavily. The news went out to the public, generating a lot of negative press, which the company hardly needed at the time, affecting her business revival.
As CEO of a struggling company, Mr Kiso, might have had his reasons to downsize staff payroll. Yet, it was important that he should have heard from his HR chief and adhered to best practices. In this particular case, it was not only important to first revisit the contracts with the affected staff and determine how to properly severe off relations, but it was also important for the sake of company image, release staff in the most friendly manner possible. The suggestion by Miss Mpola, to go beyond and offer counseling and other personal development programs like Financial Literacy, was a good one. These programs where they have been offered during staff lay off, have ended up creating a good spirit far from an acrimonious and costly exit as we see here.
Weather it is the Covid -19 pandemic or any other development affecting normal business progression, this should not be an excuse to forsake best labor practices regarding staff termination. Failure to adhere to such might prove too costly.