Sharing Your Staffing Pain

In recent months colleges and universities have been scrambling to address a dire economic situation in a manner that places educational mission first while still recognizing the need to significantly reduce expenditures. On average, college endowments experienced a loss of 3 percent at the end of the fiscal year ending June 30, 2008, and an additional 20 percent from July through November 2008. First-quarter numbers for 2009 show an estimated loss of between 25 percent and 40 percent. In addition, public institutions are experiencing massive cuts in state funding, more students are vying for student aid, and foundations are having difficulty meeting pledge goals. Needless to say, institutions have been busy assessing strategies to cut costs and reduce expenses—including those directly related to staffing.

A recent NACUBO webcast, "Difficult Choices: Strategies for Cutting Faculty and Staff Costs," identified options for reducing staffing expenses, developed a framework for managing layoffs, and examined potential legal risks of layoffs and how to mitigate them. The April 28 event was moderated by Andrew Evans, vice president for finance and treasurer, Wellesley College, Massachusetts. Presenters included Allison Vaillancourt, vice president for human resources, University of Arizona, Tucson; Frank Vinik, senior risk counsel, United Educators; and Martin Michaelson, partner, Hogan & Hartson. Cosponsored by NACUBO, the College & University Professional Association for Human Resources (CUPA-HR), the National Association of College & University Attorneys (NACUA), and United Educators, the event offered a unique perspective from various areas of campus administration.

Modest to Deep Cuts
For its part, Wellesley College has reduced its administrative and union staff by 10 percent (95 positions eliminated). Other cost-cutting measures will reduce the institution's FY2011 budget by $20 million, including a further reduction in workforce, explained Evans.

During the webcast participants indicated the percent by which their institutions have reduced their budgets since the start of the recession:

• By as much as 5 percent (43 percent of respondents).
• Between 5 percent and 10 percent (28 percent).
• Between 10 percent and 15 percent (11 percent).
• By more than 15 percent (17 percent).

Somber Moods
Vaillancourt described Arizona's situation as "depressing, but in a better place now." The state has endured two budget cuts since summer 2008, with more expected in coming months. As a result, UA has eliminated 600 state-funded positions (through attrition, layoffs, and contract non-renewals). The university also issued a hiring freeze for state-funded positions and recently formed a partnership among its colleges of Science, Social and Behavioral Sciences, Humanities, and University College. The new academic unit, called the Colleges of Letters and Science, has been developed as part of UA's transformation plan to build on interdisciplinary strengths and reduce administrative and business expenses.

According to Vaillancourt, the central question behind the merger was this: Is there a way to bring people together so that they work in a better way to advise and offer a consistent message to students from college to college? There was also strong interest in consolidating communication, development, finance, and other areas of administration to reduce infrastructure and save money.

Vaillancourt suggested a variety of options leaders can consider to reduce staffing expenses. Among them:

• Temporary furloughs.
• Permanent or temporary FTE reductions.
• Early retirement incentives.
• Phased retirement plans.
• Voluntary separation plans.
• Voluntary leaves of absence that allow time off while still providing health insurance.
• Hiring freezes or delays.

An option of last resort is layoffs and contract non-renewals, noted Vaillancourt. She also offered these cost-cutting measures:

• Eliminate faculty and staff raises.
• Renegotiate faculty workloads.
• Reduce or eliminate retirement contributions.
• Reformulate employer benefits contributions.
• Offer low- or no-cost work/life balance opportunities.

While the situation has at times seemed dismal, Vaillancourt and her team have successfully managed to harness employee morale while implementing staff reductions and streamlining expenses. Through the process, she and her staff have stood by the motto that treating people well during this difficult period will likely produce loyalty when the economy picks up. Conversely, when you treat your people poorly, expect a mass exodus of talent.

Among the lessons learned by UA's HR staff:

• Don't let your policies lock you into making bad decisions. Instead, modify your policies as needed to support good decisions.
• Implementing a number of change initiatives simultaneously makes it difficult for opponents to mobilize against a single action.
• Transparency is essential. Be forthcoming and honest, treat people like grown-ups by sharing difficult information, and invite feedback.
• People are willing to make sacrifices if they feel they are being treated fairly.
• Take the opportunity provided by a difficult circumstance to pursue change that was already needed.

Minding the Law
In addition, institutions should have a clear understanding about the legal implications of any staffing-related actions they take. For instance, hasty layoffs can cost the institution almost twice as much as well-thought-out, strategic staff-reduction plans. Vinik stressed the importance of sound planning and deliberation. He and Michaelson combined their knowledge as attorneys in this arena to provide 10 useful tips for institutions to enforce during staffing-reduction periods.

1. The Golden Rule is a strategy, not a tactic. Reputation for integrity is the institution's most valuable asset, so above all, ensure credibility. Anticipate distrust, rumors, and second-guessing, and know and follow the rules.

2. Document the institution's financial condition. Develop a one-page summary for the public. Choose an administrator who can explain finances to the media and a jury. Retain documentation of all alternatives considered.

3. Develop a team-based approach to decision making. At a minimum, include your attorney, business officer, HR officer, and a communications specialist. Examine financial and legal implications of alternatives. Consult faculty even if no faculty are being laid off. And check collective bargaining agreements to determine which parties must be consulted.

4. Examine cost-saving alternatives. College employees often assume life-time employment. If you have to implement layoffs, make sure to show what alternatives have been considered or addressed, and solicit suggestions from faculty and staff.

5. Use an attorney experienced with RIFs. There are many tricky laws involved in reducing your workforce. The greatest risk for many institutions is age discrimination litigation. Most lawyers who do RIFs have good releases already drafted, so don't reinvent the wheel.

6. Develop a communication plan. Clear, consistent communication is critical. If employees get different answers from different administrators, they will quickly sense that something is wrong. Likewise, employees who read of their fate in the newspaper before they hear it from administration will surely resent the institution. Always stay ahead of the story. Establish contacts with local media, and keep them informed as appropriate. Don't wait for employees to go to the media with their version of the story. Anticipate questions from employees and the larger community, and be prepared with consistent responses.

7. Make one-time cuts. Multiple rounds of layoffs create paralyzing fear and talent outflow. It is better to conduct your RIF based on a pessimistic scenario. Properly done, laying off many is less risky than a poorly enacted layoff of a few.

8. Use layoffs as an opportunity to restructure. Don't look at short-term budget needs only. Downsizing can be a time to evaluate structural changes. Try to cut what you value the least, and strive for long-term efficiencies that reduce the likelihood of future layoffs.

9. Coach supervisors who conduct terminations. The exit interview can be a dangerous moment. Supervisors who feel uncomfortable can make key errors. Beware of stray remarks that could become evidence. Provide training and a script to supervisors involved in layoff conversations.

10. Care for terminated employees and RIF survivors. Often, the first thing people who are terminated worry about is health care and how they will find a new job. Invest in good outplacement services, and have information on COBRA immediately available. As for those who are left to stay, the experience can still be traumatic. Some institutions require all supervisors involved in laying off employees to attend a debriefing. While you don't want to move too quickly from conception of your plan to implementation, do think in terms of moving as quickly as possible toward the positive—the opportunity for institutional renewal.

Finally, while difficult choices are inevitable during a severe economic crunch, it is critical for institutions to know the facts. Consistent, open messaging and fair information can save chief business and HR officers ample time and painful headaches. As in every case, leaders should consult their legal and benefits counsel to determine the best approach for their institutions, since laws vary by state.

Tadu Yimam is a policy analyst at NACUBO. E-mail: tadu.yimam@nacubo.org.