The new chairman of the board tells the chief executive there are way too many senior managers in what has become a top heavy organisation. The new board intends to bring in a more businesslike approach starting with a dramatic reduction in the number of management posts in line with similar organisations in the private sector. To show they mean business they require the chief executive to come up with a plan to cut very senior posts by a third. The chief executive reluctantly accepts there is no negotiation on this. He does however point out that most of these very senior managers have been with the organisation a long time and have been loyal and competent servants. The response is blunt and to the point "the good times are over, make the redundancies".
The chief executive returns with a plan drawn up by the head of HR which by making use of early retirements, voluntary redundancies and compulsory redundancies will result in the target number of posts being " disestablished". Which will of course result in significant savings in salaries. The chair asks about redundancy packages and pension costs and is told by the head of finance and the head of HR that these are in line with individuals’ contracts and the norm for this level of posts with in the sector.
A press briefing is shared outlining the number of very senior management posts being deleted as part of a radical downsizing of management which will see the organisation cut 25 percent of its management posts with a saving of £x millions.
Everyone is happy even those very senior managers losing their jobs until the end of the financial year accounts are published and the local press exposé the size of pay offs The press don't name individuals but they do list posts deleted and the size of redundancy packages and cost to the pension fund. Several very senior managers have walked away with packages which when they take into account pensions workout at over a £ million!
The public are outraged. The local MP raises questions in the house. But when the chair is interviewed on local TV he claims he did not know the detail of individual packages and that he and his board were assured that payments were in line with contracts and standard practice. However it turns out that the generous pay offs were maximum payments and more than double the statutory or contractual requirements. It is clear that the culture within the organisation is if you want very senior managers to go quickly and quietly you maximise their pay off.
The chief executive is bullish and points out the money that will be saved on salaries over the next 5 years more than covers the costs.
Blair McPherson author of People management in a harsh financial climate published by Russell House www.blairmcpherson.co.uk