A blog by Tony McKone - Director McKone Consultancy Ltd
These are all different terms used to identify that a business is changing its organisational structure and that this may have a direct or indirect impact on employees.
An employer/business owner is entitled to determine how they want to structure their business, however when this may impact on their employees the Employment Relations Act 2000 requires the employer to act in good faith toward those staff who may be impacted. This means providing employees with information about what the employer is proposing and giving the affected employees a genuine opportunity to comment on that information before a decision is made.
This expectation is enshrined in the duty of good faith under section 4 of the Employment Relations Act 2000. This states that the employer and employees must deal with each other in good faith and must not, whether directly or indirectly, do anything to mislead or deceive each other or that is likely to mislead or deceive each other. More importantly if the employer is proposing to make decision that will or is likely to have an adverse effect on the continuation of employment of one or more employees, the employer must provide the affected employees with access to information, relevant to the continuation of their employment, about the decision and provide them an opportunity to comment on that information before a decision is made.
To ensure that the employer complies with their good faith obligations the Ministry of Business Innovation and Employment (MBIE) sets out the process to follow when considering a change in structure that may potentially affect some or all of your employees.
The steps they recommend are:
Document your business case;
Document your proposal;
Present your proposal to your employees;
Gather employees feedback on the proposal;
Genuinely consider the feedback you receive;
Confirm the final decision;
Implement the final decision.
Each of these steps has more detail in it that you can access here.
MBIE’s guidance is a great starting point, McKone Consultancy strongly recommends that you do not treat any restructuring process as a simple tick box exercise. The process is dynamic and needs to be flexible.
Before you share any proposal to change your structure, you are entitled to think through and determine what your needs are before you have to share your proposal with staff and their representatives. In some respect this is the least disruptive way to approach a change in structure as it will be unsettling enough when you finally share your proposal. If you share your thinking too early, before you have made a decision on what you propose to do, this can be very disruptive to your workplace.
On top of MBIE’s process, we recommend considering the following points to have in mind when going down a change in structure, regardless of whether this is to reduce or increase you staffing numbers.
Ensure that you have a genuine reason for making the change. Your proposal should not be a “sham” designed to remove or target individuals. If you have a “problem” employee then you should use performance management or your disciplinary processes to deal with them. A change proposal should never be used to address staff performance or behaviour problems.
If the reason for your change is related to financial reasons, then you must share relevant financial information to support your reasoning.
If you are downsizing the number of positions in a role held by multiple people, then ALL those people in the role are affected. You cannot target selected job holders.
You should have clear criteria to determine how you will decide who stays and who goes, and that criteria should be shared in your proposal document and affected staff should have the opportunity to comment on the criteria.
If your workforce is unionised, you must include the union(s) in the proposal when you share it and give them the opportunity to represent their members and give members feedback.
When it comes to feedback, do not be shackled to your proposal. Genuinely review the feedback and test that feedback to see if it might provide a better outcome for you and staff.
Be prepared to change your proposal based on the feedback you receive.
If you do change your proposal, then you should consult again on the changed proposal – it is important that everyone who is likely to be affected by the proposal knows what you are considering and not be surprised by a change in direction that they did not know about.
Do not be tied to your timeline. If you need to extend time for feedback, do not be unreasonable about providing an extension. Also, if as a result of feedback you need to re-set the timeline for when a decision and/or implementation might occur, do not be afraid to do so. Rushing a process to meet your initial timeline could, if your process is ever challenged, be seen to amount to predetermination and lack of genuine consideration of feedback.
·Communicate often with affected staff. Keep them informed of any delays and any extensions to your timeline. Encourage them to ask questions and share those questions and answers with all affected staff.
Meet with staff face-to-face and allow them to openly discuss their feedback and concerns about your proposal – and when you do this, listen to what they say, question them to understand what they are saying. Don’t be defensive.
Summarise feedback and share this summary with affected staff – this lets them know you have heard what they said.
Allow people to give verbal feedback on the proposal – don’t expect everyone to put their feedback in writing. Letting staff talk you through their feedback provides you an opportunity to explore and better understand what they are telling you.
Either way, summarise what they tell you.
Explain why staff feedback changed or did not change your proposal.
Meet with the affected people to tell them the final decision and explain what impact that has for them.
Remember that your change process could be challenged so it is important that your proposal, and final decision are substantively justified and that your process with affected staff is procedurally fair.
Lawyers Morrison Kent suggest asking yourself the following before embarking on a change process:
Does your proposal actually fit what needs to be achieved?
Are the right roles/number of roles being targeted?
Tailor and adapt your rationale from the start (it’s not a one size fits all process)
Consider the staff; how might they react? What can be done to mitigate risk?
Once you have made your final decision and it comes to implementation, remember that you must follow whatever procedures you have in your employment agreement and HR policies.
Where your final decision results in a reduction of staff, you must act fairly and have good reason for not redeploying redundant employees to other vacant positions.
Make sure you understand what each employee is currently doing and what transferrable skills, training, and qualifications they have to assist you with redeployment discussions.
Depending on your circumstances, be creative with how you might consider your final decision.
The following may be options that help you retain staff in some capacity:
Independent contracting opportunities
Redeployment to other locations or other roles
Always seek professional advice before embarking on and during each stage of the restructuring process.
Contact McKone Consultancy for advice and support for your next change proposal.
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