Hard Times 2009 Part 1: The Workplace

Only bereavement and divorce can match the misery of sudden unemployment. Paul Vallely learns how the recession is reshaping real lives

In 1854 Charles Dickens published his novel 'Hard Times'. It held up a mirror to the social and economic concerns of its age. What would Dickens have discovered if had attempted to do the same today when, after a period of careless prosperity, the nation has once again fallen upon hard times? In a six-part series, Paul Vallely revisits some of Dickens's themes – work, education, poverty, escapism, emotional health and migration. This week, he discovers whether the modern culture of workplace redundancy is any less callous in disposing of unwanted individuals than were the capricious millowners of Dickens' Coketown.

"You can finish off what you're at," said Mr Bounderby, with a meaning nod, "and then go elsewhere."

"Sir, yo know weel," said Stephen expressively, "that if I canna get work wi'yo, I canna get it elsewheer."

The reply was, "What I know, I know; and what you know, you know. I have no more to say about it."

From Hard Times, by Charles Dickens

Tim Holden is a serious-looking young man in a suit with a broad pinstripe. He has a shaven head, but that that only adds to his image as a cutting-edge young executive, especially since the group he's addressing are employees of a small graphic-design company, every one of whom is clad in tie-less black. The firm has just made 20 per cent of its workforce redundant.

Holden, an employment consultant, is talking to those who remain about "survivor syndrome". After redundancy has hit a firm, he explains, those who are left behind may experience pressures as serious, and unexpected, as those who have had the chop. Workloads increase, stress rises, morale may dip and productivity can fall.

He is in the offices of Bulletpoint in the Design Exchange, a chic mill conversion – opened by Prince Charles in the happy era in which boom-and-bust had been abolished – in the Little Germany urban village district of Bradford. It has, or rather had, a staff of just five. But as the current recession began to bite work began to fall away. "Marketing is one of the areas where companies feel they can afford to cut back," says its "creative MD", Paul Kerfoot. Hard decisions had to be made.

The 20 per cent of the workforce who did not survive was their office manager, Tracey Parry. Her story, and those of her former colleagues, are illustrative of what has been taking place across the UK, where the rate at which people are losing their jobs – 45,000 in the last quarter alone – is now the highest since records began. One in three companies are still expecting to make more people redundant, according to a survey by the Chartered Institute of Personnel and Development. By the end of the year, 3 million Britons could be without a job.

Since redundancy is the most psychologically damaging experience that a person can face – aside from bereavement or divorce – the toll of that on the nation is immeasurable. Particularly if it is true that, as survivor syndrome suggests, those who are left behind can be profoundly affected too.

***

Tracey Parry was on sick leave when she was told she was going to lose her job. Paul Kerfoot rang her at home and asked her to come into the office to see him on a Sunday, since she wasn't due back at work for some time. "Business was bad," he explains. "Clients began holding back on projects we'd talked with them about. Printers began ringing me touting for business, which is always a sign times are getting hard. We won an award for the best stand at a trade exhibition but got zero business from it. The final straw was when a project which produced about 20 per cent of our entire income – and took up half of Tracey's time when she wasn't managing our three designers – was put on hold for three months, and then again for another six.

"I had a few sleepless nights. But this is the third recession I've been through and I knew the signs. I knew I had to do something quick if we were to survive."

Parry had been off for a few weeks with a viral infection. "I asked her to come in; I wanted to do it face-to-face," Kerfoot says. "I showed her the letter from the client and then I told her." Because she had not been with the firm for quite two years, she was only on a week's notice, which meant she only got the statutory redundancy pay of a week's money for every year of service. "She was very quiet. She wasn't well, which made me feel even more guilty."

There is no easy way to make people redundant, experts in personnel management say. "It's always difficult, but there are ways of making it less traumatic, says Mike Emmott, the employee relations adviser at the Chartered Institute of Personnel and Development. These include asking for volunteers, consulting workplace representatives or union officials, following official grievance procedures, allowing those who face the axe to show their emotions, allowing "wiggle room" by showing flexibility over timescales, giving individuals time off to look for a new job, and providing them with outside expert assistance – "outplacement" in business jargon – to help them do that .

"It is important to use objective criteria to select individuals, including appraisal records, and allowing appeals," Emmott says. Many employees are sceptical about such talk; objective criteria, they insist, are just a front; the plain fact is that managers just select the members of staff they do not like.

But Dr Lea Brindle, an occupational psychologist who has advised big-name clients like Bank of America, Fuji, Mars, the Home Office & the BBC on handling redundancies, insists that it is possible to select people for redundancy in an objective way. "You focus on performance, you use structured interviewing techniques and psychometric testing," he says. "Managers need to avoid prejudice, because the better they select, the stronger the workforce will be afterwards." Left to their instincts, he believes, managers "make safe decisions, tending to want to avoid mistakes rather than seek out potential".

If an employer follows such best practice, those who are left behind tend to survive better, Mike Emmott believes. "An employer is more likely to retain the staff he wants to keep, and keep them motivated, if he is seen to have been fair in how he handled those who were made redundant. By contrast, if management goes the wrong way about a redundancy, they are breaking the implicit psychological contract which employees believe is implicit in their relationship with their employer. Part of that is job security, and if they feel the employer is violating that deal, they feel they cannot trust the management, which can have serious repercussions later on."

So how did Bulletpoint Design manage against such criteria? "Making Tracey redundant while she was off sick wasn't a great way to do it," says Tim Holden, the employment expert from a firm called Fluid Consulting, who has been brought in from Leeds to advise Bulletpoint on its post-redundancy strategy. "But Paul Kerfoot was in a corner. A large organisation might absorb the cost of someone's salary while they are off sick; but a small one finds that harder. It comes down to how much balls you have".

Paul Kerfoot is a larger-than-life character, who at work styles himself "Paul the Bulletman" after a 1940s US comic superhero, as part of the image promotion of his design business. But he is feeling decidedly unheroic over the redundancy decision; though he feels he had no choice, but is feeling guilty. "The worst thing about running a business is making people redundant," he says, "because in a small business you know the people you are dealing with well, and that they have families, babies, mortgages and that they need their money."

How did Tracey Parry take it? "It was a bit of a shock," she says. "I used to do the invoices and had access to the accounts, so I knew things were down a bit. And I knew that the project that took about half my time had been put on hold, but I thought we'd be able to hang on and turn it round. We had just employed a part-time trainee, so I would have expected that he would have been the first to go, on a first-in-last-out basis. But he was a lot cheaper than me.

"Being called in on a Sunday while I was off sick made it worse. But it was the end of the month, so it made sense from his point of view. I took it quite hard at first. My hobby is riding and I have three horses. I have two children, one at university. My money pays for all that. It looked like I'd have to give up the horses, which have always been my passion."

***

When a worker is made redundant, they go through a cycle of emotional responses similar to those which hit the recently bereaved. During the last recession, Professor Sue Cartwright ran a series of workshops for people who had lost their jobs. She noted a predictable series of reactions, which began with shock and then moved through disbelief, anger, denial, depression, guilt and, finally, acceptance. Sometimes people move through the cycle more than once.

"At the start there is anger," she says. "People ask: 'Why is this happening to me? What did I do?' Even though it is the job that is made redundant not the person people take it personally. Some people get stuck in anger for months and it starts to affect the way they talk to themselves internally; it comes out in interviews they [undergo] to get a new job."

To avoid that, John Lees, a career coach and author of How To Get A Job You'll Love, recommends that people who are made redundant should take a two- or three-week break to come to terms with the loss of their job before approaching recruiters, headhunters or anyone in their professional network. Otherwise you risk going in "with a very negative story, which will turn employers off," he insists. Just say you were made redundant when your organisation was restructured, he says. "Any more detail – such as the injustices you suffered – and that's all they'll remember."

After anger comes denial, says Prof Cartwright. "People try to tell themselves: 'It was all a mistake and I'm going to get a phone call asking me to come back'. In the last recession some people pretended they hadn't been sacked and would go out to work at the same time every morning in their work clothes, though that kind of thing is less likely this time since society attaches less stigma to redundancy now."

Next comes depression. "A sense of hopelessness overtakes them," she says. "It can last a long time, though if people are still depressed six months on, they need professional help. But some people work through all this quickly; the more times redundancy has happened to you the less you panic. They key thing is to remember that though your job has gone, that's not a rejection of you personally. But you must be realistic about the prospect of getting another similar job. If your sector has contracted, you may have to move on and think of alternative areas in which you can make a living. If you get a reasonable pay-off, it's a chance for a major rethink and to ask whether there is something else you'd rather do with your life."

The experience of Tracey Parry bears out these expert views. "After I was given the news I felt really down, wondering how I was going to manage. I was constantly on the internet looking for jobs, and sending off my CV. Most people just didn't reply, which is very demoralising. Others said: 'You're too qualified, you won't stay'. I began to think I was too old at 40."

That was despite the versatility her CV revealed. She had been a PA at board level since she was 19. Working in an ad agency, she had been promoted to account handling. She had next been a marketing manager and then a manager in a local government debt collection department before joining Bulletpoint on two-thirds of the salary of the managing director.

Yet when it came to looking for a job, her experience seemed as much of a hindrance as a help. "I was getting really disheartened, just sending out two or three new applications every day and then making phone calls to chase jobs I'd applied for on previous days. It got to the point where you scanned the internet but you were just seeing the same jobs; often four or five agencies were all offering what turned out to be the same job."

But Tracey Parry was fortunate, in two ways. "My Mum lent me money; a lot of people don't have that to fall back on," she says. "And someone I met at my horses' stables offered me some interim work. It was only earning a quarter of what I'd had before, but it was better than doing nothing and claiming benefits." It ran out after eight weeks, so she then got some work as a teaching assistant at a local school.

This was a shrewd strategy, according to Prof Cartwright, who is now the director of the Centre for Organisational Health and Wellbeing at Lancaster University. "The worst thing when you are applying for a new job is to have a blank on your CV. You are better off doing a different job, doing voluntary work (at the Citizen's Advice Bureau or local Oxfam shop) or going back to education to do a Masters or a PhD. You will gain a skill and give time for the job market to improve." But the benefits are more than that. "Volunteering gives some of the things that work does – it may not give money but it provides structure and purpose. And volunteering your professional expertise to a charity can be a good way to stay motivated."

The alternative, Tracey Parry found, is demoralising. "The longer you sit at home on your own looking at the computer the more disheartened you get," she says. You stay up later at night, on the internet or watching TV; and then you get up later in the morning because there is nothing to get up for. "You turn into a nocturnal introvert, closing more and more in on yourself. But if you're out there it's amazing how many people you meet who say they've seen a job that would suit you. If there's any chance of doing something, even if its unpaid, do it." It worked for her.

***

One way that employers can seek to repair the psychological damage done to their relationship with staff who survive redundancy is by making systematic efforts to help those who have been made redundant in their search for new jobs. The jargon that personnel managers use for this is "outplacement". It involves an outside firm developing a relationship with outgoing employees over a period which can extend for several months.

The sessions involve reviewing the sacked person's past career and their future prospects. The experts help by refocusing the job-seeker's CV and training them in the skills they need in a job interview – a process they may not have had to go through for many years. Outplacement consultants also develop job search skills and target the most productive areas in the contracting employment market.

But the advice is more than practical. "You have to develop a relationship with the redundant executive and help them work out what their skills enable them to do," says the occupational psychologist, Lea Brindle. "A good part of it is just being a friend to them, and keeping morale up. Without that people lose faith." Outplacement consultants also give advice on how to cultivate social and professional networks. "The higher a candidate's salary, the more effort it will take to find a new job, and the unadvertised job market is where most jobs are obtained."

Sometimes people need to be supported in rejecting an offer which is not right for them. "It takes a lot of bottle not just to take the first thing that turns up, which is a common mistake," says Dr Brindle.

The theory is that it is not just those who have been thrown out of work who benefit. It also makes those who have survived the cull feel better about the company for which they still work. That notion has migrated into British employment practice from the United States.

"Too many companies came through the massive downsizings of the late 1980s and early 1990s with their surviving employees guilty, paranoid, demoralised, overworked, underproductive, and waiting for the other shoe to drop," says Tom Serleth, managing director of the San Francisco-based consultants PowerTransitions, which specialises in what it euphemistically calls "change management" services. "Using outplacement demonstrates to your employees that lay-offs are not capricious bloodbaths undertaken on a whim but rather a necessary part of the company's strategy for change and growth. Outplacement also demonstrates that compassion, fairness and consistency remain a part of the corporate culture, even after a lay-off."

Now, people such as Tim Holden, the managing director of Fluid, are importing these principles to Britain. "Retaining talented employees is critical," he says. "Managers will need to put in place measures to reassure, motivate and reward their key people. And outplacement can also reduce the tendency of those who have been made redundant to go around bad-mouthing their former employer, which is damaging to the business and damaging to the person who has left, who needs to move on emotionally to be successful in getting another job."

***

Chris Roberts, the design manager at Bulletpoint, is supposed to be demoralised. That's what the psychologists who have specialised in observing "survivor syndrome" would have you believe, at any rate.

Those who survive a redundancy round, says Professor Cary Cooper, Britain's leading organisational psychologist, tend to engage in behaviour which swiftly proves to be bad for them and for their employers. "They have lost colleagues who were part of the structure that gives meaning to life. They feel insecure, fearing that another round of redundancy will claim them before long," he says. "They begin to engage in self-protective behaviour. They try to demonstrate commitment by consistently working longer and longer hours, coming in earlier, staying later. But they also increasingly playing organisational politics, withholding information from colleagues, attending unnecessary meetings to impress the boss.

"The increased time they put in does not necessarily mean greater productivity. They take fewer risks. Some will say we've got to row harder or the boat will sink, but others want to punish their organisation for its behaviour. And unhappiness, like happiness, is contagious."

Stress levels rise. Some 48 per cent of employers said individual staff workloads have increased as a result of the credit crunch, according to a joint survey by the accountants KPMG and the Chartered Institute of Personnel and Development earlier this year. All but 2 per cent of them said that employee stress levels had increased as a result. This is a serious increase in a country where, in normal times, more than 13 million working days are lost every year because of stress. Stress triggers 70 per cent of visits to doctors and 85 per cent of serious illnesses, according to the Health & Safety Executive. It contributes significantly to heart disease, strokes, high blood pressure, irritable bowel syndrome, ulcers, diabetes, muscle and joint pain, miscarriages, allergies and even premature tooth loss.

But there is another serious consequence for those remain after a redundancy round. Their faith in the company is shaken and they become unsettled. "The status of the job may feel diminished. The job will not feel as sexy as it once did," says Cary Cooper. "People feel that though they may have survived, they no longer have the same sense of control over their lives," adds Sue Cartwight. "To reassert that, they begin to look round for another job. They leave anyway, without any redundancy payment. And the people who go are often the ones the company wants to lose the least." Around 10 per cent of survivors leave in this way, she estimates, and in some firms as many as 50 per cent of the remaining staff go in the two years that follow the redundancy round because they don't like the changes that follow.

The true costs of redundancy can be much higher than is general appreciated, says the Chartered Institute of Personnel and Development, which has come up with an elaborate formula to help employers calculate the full cost. The true cost of redundancy = (n × R) + (x × H) + (x × T) + ny(H + T) + Wz(P – n), it says, where *equals number of people made redundant, R = the redundancy payments, x = the number of people subsequently hired, H = the hiring costs, T = induction and training costs, y = the percentage quitting post redundancy, W = average monthly staff salary, z = the percentage reduction in output per worker caused by lower morale and P = the number of people employed prior to redundancies. Got that?

What it shows, the organisation says, is that redundancies which look like a good short-term solution can impede quick recovery when the downturn ends. Redundancies and restructuring, it insists, should be undertaken with a view to the long-term growth prospects of the company, rather than short-term cost-cutting.

So given all that why is Chris Roberts of Bulletpoint not demoralised, as the experts predict? Perhaps because his boss, Paul Kerfoot, decided to bring in an outside expert to help him handle the redundancy process. Between them Kerfoot and Tim Holden – whose experience in the area ranges from working with a small engineering company in Bolton to massive multinationals, such as Hilton Hotels – came up with a number of strategies to keep the mood at Bulletpoint positive.

The firm undertook a total makeover of the décor of the office – all black beams, white walls and artful spotlights bringing out the warmth of the natural wood of the old mill floor – and persuaded Bulletpoint's landlord, the local council in Bradford, to pay for it. "The redecoration was important," one employee told me. "It re-energised the place."

Kerfoot put in place some fun, team-building exercises, involving a jokey restyling of the image of the individual designers, who were all given jocular superhero nicknames to echo his own Paul the Bulletman alter ego.( Bulletman is characterised by his chemically-induced super-strength and intelligence; his comic nemesis was an ally of The Joker called The Weeper). "Bonding is really important in a small office," he says. "So we had outings to the cinema and went out for meals. It sounds trivial, but it works." He allowed additional flexibility on hours worked, home-working and people taking time off to study or go to the gym."

Most importantly, Kerfoot called on open meeting to ask the staff how the place should be reorganised to run without an office manager. "It meant everyone, including me, taking on new tasks, some of them very menial, to do everything which had been done by Tracey, who was very versatile. It was one of the strangest meetings we've ever had, but it worked. And everyone came up with extra ways of saving money. We're surprised at how much more efficient we are. "

The Bulletpoint boss also presented Tim Holden's arrival as an opportunity for free career counselling for the staff. The strategy worked. "Of course it was unfair to Tracey," Chris Roberts admits to Holden, as they pair sit apart from the rest of the staff for Roberts' one-to-one counselling session. "But the simple fact of a decision being taken made me feel much more positive. It also pulled us back into a flatter structure. Tracey had freed up my time for more creative work but we had become less of a team and [were] each working on individual projects."

The consultant guides Roberts, the most senior staff member, through a reflection on his 10 years with the company. The work has been rewarding, he says, but a key factor has been the flexibility that his boss showed over working hours, particularly in a period when his child turned out to have a serious medical problem.

Holden then does the same with Dan Madden, Bulletpoint's most junior employee, a young designer not long out of university. "I now have to do invoicing and filing," he tells Holden. "But I came here to learn to develop my business skills. My creative work I developed when I was at university. But my aim is to start my own business eventually and I'm acquiring the skills here to do that."

Holden asks him about those skills. "Right from the start," the young man replies, "I was thrown in the deep end – networking, learning how to promote the business, talking to CEOs, developing my personal skills, increasing my confidence." Will the extra things he now has to do augment that, Holden asks, or detract from it? "If I was just wanting to be a designer it wouldn't be brilliant," Madden replies, "but if I want to be running my own business in 10 years it's important. So I see it as a silver lining rather than a booby prize." Holden reinforces this with talk of transferable skills.

Had the session been a help, I ask Dan Madden privately afterwards, or was it just management guff? "No, it was useful," the 21-year-old replies. "He's confirmed I'm heading in the right direction and made me feel good about where I'm at."

Holden has a private session with the boss, Paul Kerfoot, who admits that he is now working longer hours than ever. "My wife has started to call me the lodger," he quips, but draws a veil over his counselling session with Holden. Personnel experts say that the executive who handles the redundancy process can often end up as the individual who is most psychologically distressed by the termination process.

Back at his office in Leeds Tim Holden reflects on the Bulletpoint experience. "The three dominant words I noted that kept coming up in the conversations were guilt, trust and communication. Paul, the boss, was the one who felt the most guilt about Tracey's departure; the others mentioned it but had taken it in their stride."

That was not surprising, he believes, in the light of the other factors. "Paul is a big character with all the Bulletman image and all the rest of it. It's a very personality-driven place, as small organisations often are," he says. That can rescue small firms from the sense of drift survivors of redundancy can experience in a large organisation, where an air of despondency can develop.

"With Paul, it's love him or leave him. Some will find him too full-on, too in their face," says Holden. "But those who choose to stay with him like him because he's sympathetic and flexible. He knows his staff well and he consults them and communicates well with them. In response they offer him real loyalty and commitment. They trust him. And you feel a passion from them about what they do. The place is, even in these hard times, buzzing and dynamic. What I'm trying to do is reinforcement that."

***

Unlike so many episodes in the current recession, the Bulletpoint story has an upbeat ending, which is perhaps why those involved were prepared to talk so openly about the process; most firms are much more secretive about the redundancy business.

Five months after she was made redundant Tracey Parry got a new job, thanks to the temporary low-paid work she took on as a teaching assistant. A job vacancies leaflet from the local authority arrived at the school where she was working. It advertised a post as PA to the managing director of Education Bradford, a private company that provides support services to the area's schools. Coincidentally, it is one of Bulletpoint's best clients.

She applied. "It was a nerve-racking business," she says. "I had forgotten how to be interviewed, because I was head-hunted for all my most recent jobs. There was a long application form, a personal profile and psychological testing, and then I had to do a 10-minute presentation and an hour's work-prioritising test. It was scary." But she did well, and Paul Kerfoot had given her what he describes as "a glowing five-star reference". So, she says: "I ended up with a job that I enjoy even more than my old one."

Things are looking up for Bulletpoint Design, too. In the time that Tracey Parry was managing the firm, Paul Kerfoot took the opportunity to develop new kinds of business. "Tracey bought me the time to do that," he says, "and I grew two new areas." The first was as a consultant in the public sector, with government projects working on helping small businesses develop. The second was in education; he developed a new "Design Your Own Superhero" course for the "Creative and Media" component of the new 14-19 diploma the Government is introducing, linked to both art and English options.

"We've aligned ourselves more with areas which are not being quite so badly hit by the recession, and we're doing quite well. So much so that before long I might be looking at taking on another member of staff, though with a different skillset to the one Tracey had."

The fees charged by Fluid will be more than repaid in all that, Kerfoot says. "Tim's method of working through social networks will save us the cost of advertising through normal channels and will target the kind of people we want better. We are in a business where good sales people and good creatives are hard to come by at any time."

***

Tracey Parry's is just one story. There are more than 2 million other people who have been thrown out of work in Britain today. By next month, official statistics are expected to show there are half a million more people walking through the doors of jobcentres, and another half million are expected to do the same by the end of the year. Because unemployment rates drag someway behind the contraction in the economy – the experts call it a "lagging indicator" – some fear the total number of people without a job could rise to a staggering 4 million by 2012.

"When you lose your job, you blame the person who's sacked you," Tracy Parry says, "especially if he's still got his big house and his nice car. But even then you know it is better for one person to go than for the whole company to go under, with five times the number of casualties. Anyway, it's all turned out well: I've got a job now that I love doing, with flexible hours, and I'm earning a lot more money, so I've come out of it better off."

Not all the stories of these hard times, of the first great recession of the 21st century, will have such a happy ending.

Next week, Paul Vallely looks at education, and asks whether the focus of learning is narrowing in this time of recession – and considers what a modern education is for.