Managing Layoffs: Surviving the Transition

Outsourcing and layoffs not only affect the employees who may be transferred or let go, they also present hazards for the effective functioning of IT organizations after the transaction is completed.

It was one of the most challenging things Billy McCarter ever did as an insurance carrier CIO, and he admits to having butterflies as he walked up to the podium. The venue was business-like rather than opulent, in order to suit the occasion. It was also large enough to accommodate the roughly 550 people in the audience. These were McCarter's employees, and he was about to tell them that they no longer would be his employees and that some of them might be out of jobs.

McCarter, now SVP, delivery, for MajescoMastek (Edison, N.J.), faced the audience in 2001 as SVP and CIO of Fireman's Fund (a subsidiary of Allianz). The Novato, Calif.-based carrier was embarking on a 10-year outsourcing relationship with CGI (Montreal) that would affect hundreds of jobs in the insurer's technology organization. McCarter's experience throughout the outsourcing transition demonstrates several best practices, and his address to the affected employees exemplifies perhaps the most important management activity during such transitions: communication.

"Once we had decided to do the outsourcing, we told them what was going to happen -- as well as we knew, at that point -- rather than springing it on them after a lot of secretive meetings," McCarter explains. "I outsourced 536 positions, and of those, not everybody got jobs. I got them all in a room at the same time rather than tell them in small groups and let the news travel and get distorted. I wanted it all to come from me directly."

McCarter recalls that he gave a scripted description of what the insurer was embarking on, explaining that all present would be affected one way or another. A panel of the carrier's leadership participating in the outsourcing program was present to answer any questions that might arise during the session. McCarter told the affected employees what to expect over the coming weeks and months and explained that communications would be ongoing, on both a formal and informal basis, including updates on decisions that were being made and how they would impact employees in the long run.

Open-Door Policy

"I had weekly stand-up meetings with all the people who were impacted and gave them an open invitation to approach me," McCarter elaborates. "I told them I would be in a certain room at a certain time every week, and they were welcome to come in and dialogue on what had happened in the previous week, what was ahead in the coming weeks."

For any significant outsourcing arrangement, McCarter recommends that the CIO work with a communications specialist to properly script messaging. It is important to tell employees both what you know and what you don't, and to be very specific and precise, he advises. "Employees will hang on every word, and anything you say can come back to you later on," he cautions. "If you misspeak or say something that could imply a commitment to an employee, you'll have a challenge on your hands."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio