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Think Creatively when Facing Major Cutbacks

25th January 2016 | Jo Cumming, Ian Hall

A Case Study in Producing Positive Outcomes from a Crisis

9780749475468-1.jpgA university in England received harsh treatment by the government in a wave of reductions across universities in the UK. Compared with a 5% average budget cut at other universities, 44% seemed excessive.

The newly appointed Vice Chancellor (CEO) convened a meeting of the Senior Leadership Team the weekend after the cut was announced. This was held in an informal setting and everyone was encouraged to contribute ideas to the burning issue “What are we going to do?”

In terms of university cost structures, staff salaries account for 60-75% of the total cost. No matter which solution was chosen, staff numbers would have to be reduced.

Faced with the crisis and needing a major organisational change, it was tempting to look at redundancies as the only way forward. However, the team concluded that the money from the government was not enough and just cutting costs would destroy the university. They needed other funding. This was a vital strategic decision that contributed to the successful outcome from the crisis.

The team set out to utilise their network of people and organisations sympathetic to what the university was trying to achieve. Through their efforts, within a year only 50% of the university’s budget came from the government grant.

The team also decided that the people whose jobs were at risk needed to be handled with respect and compassion. This was important, not just for their own sakes, but in order to create a positive atmosphere at work for those who would be staying. The first tactic to reduce numbers was appealing for early retirement. The second was asking volunteers to work on a part-time rather than full-time basis. Finally, an appeal went out for voluntary redundancies. A significant decision was to ask each person who volunteered if they wanted to continue their connection with the university. For those who did, they were asked which areas they were really interested in: teaching, research, innovation, or administration. Where possible, they were offered a one-day-a-week contract in their preferred area. This retained experience and made people feel valued while still reducing costs.

Despite the effect of the budget cut, there remained a positive buzz. Although difficult decisions had been made, staff appreciated the care that had been used in the process and they felt valued and treated with respect.

In contrast, another university with a 20% cut brought in an ‘axe man’ to reduce numbers as the main solution. That was achieved but it took many years for staff morale to recover. The problem with poor morale is that it has a negative effect on performance. Downsizing is never easy but the impact can be lessened by taking care over the way people are treated.

When facing major cutbacks think creatively of ways to avoid whole scale redundancies as the only option and treat people with the respect they deserve. This way, you are more likely to end up with an organisation that is fit for the future.

About the authors: Ian Hall is a partner at Glentruim Change Agents and was formerly the Director of the MSc in People & Organisational Development at Salford University. Jo Cumming is an applied psychologist and Partner at Glentruim Change Agents. She was previously a Director of The Keil Centre, one of the largest applied psychology organisations in the UK. Ian and Jo are co-authors of the Change Management Toolkit, which helps companies deliver organizational change in an effective and coordinated way.

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