The Frontier for Outplacement

Rebecca Battaglia recognizes that her situation is somewhat ironic. As assistant vice president in the human resources department of Philadelphia-based CoreStates Financial Corp., Battaglia is responsible for working with displaced employees, but as she points out, “We’re currently going through a merger process, so I may not even be here long.”

CoreStates has just been acquired by Charlotte-based First Union Corp. in a deal that makes First Union the nation’s sixth largest bank. Although Philadelphia will serve as headquarters for a regional five-state banking group, Battaglia expects a considerable number of CoreStates employees will be adversely affected, although she says the corporation is far from overstaffed. Outplacement is part of Battaglia’s responsibility, but so is inplacement, as CoreStates actively seeks new positions within the corporation for as many employees as possible.

According to Stacy Keefer, First Union’s human resources vice president of First Place Staffingu00e2u20ac”an internal temporary workforce that bridges the gap between outplacement and redeployment of employeesu00e2u20ac”mergers typically result in a reduction in employees.

“Because Philadelphia is CoreState’s corporate headquarters,” says Keefer, “you’d expect to find a lot of duplication in responsibility. For example, they have a whole marketing department there. Well, we have one in Charlotte. Typically the bank that is acquired is downsized because most of their staff functions are already in place with the acquiror. It goes all across the board: functions like accounting and finance, payroll and marketingu00e2u20ac”those are already in place here and it’s terribly cost-prohibitive to keep both of them functioning.” Having said this, however, Keefer still expects to add 3,000 positions in the CoreStates region.

The dilemmas shared by Keefer and Battaglia are similar: how to handle the employees who will be displaced by the merger. It’s not a new situation. Mergers, acquisitions, and downsizing have become commonplace, not only in the financial industry, but in others as well. As consolidations continue, companies involved can point to reduced costs and improved profit margins, but to employees it simply raises the spectre of job reductions. Helping employees through the experience is a major concern of human resources departments across the nation, and it is the main function of the burgeoning outplacement industry.

Listening to the coach

There’s a perception that outplacement services grew out of a so-called corporate guilt complex and bred on the gloom and doom of an industry in transition during the 1980s. As downsizing has become more routine, some believe that the life cycle of the outplacement industry may be petering out as managers seek to reduce outplacement costs. Others disagree and say that as the economy continues to strengthen and unemployment remains low, the outplacement industry is adapting to the changes by simply finding new ways to serve clients.

Edward K. Brady, vice president of human resources at United States Trust Co. of New York, sees the outplacement industry offering services that reflect the changing expectations and needs of the financial industry. “They’re trying to get more and more into counseling,” Brady points out. “That certainly has been a trend over the last five years. Counseling and coaching. Coaching for people who are still gainfully employed but need assistance for one reason or another.”

CoreState’s Battaglia agrees. “Coaching is remarkable. With the economy so good, outplacement providers have had to think about different ways of doing business and what additional value they can bring to companies,” she says. “A lot of outplacement firms consult with companies on coaching as well as on careers.

“For instance, say you’re in a new job as a manager,” she says, “and you were brought in because of your expertise in your field, but you’ve never been a manager before. So the company you work for will pay for coaching service with their outplacement firm. You can call them on the phone or sit down with them maybe once a week or whenever there’s a concern about how to handle a situation with one of the employees. They actually coach you through it, asking things like `What did they think about this, what did they say?’ or ‘ What did you say…?’

“I think it’s great and it would really be a good service for more outplacement firms to consider,” says Battaglia, who says that while the method used to be used mainly for the executive-level, now it’s trickling down.

“Some people now actually go out on their own to purchase it, because if you’re in a big company, who are you going to talk to about this new management role? Sometimes the problem is simply, ‘Hey, I know how to do this, but I need to know how you do it here.’”

Coaching services offered by outplacement firms can help bridge the gap between what experienced and productive downsized employees can offer to a firm and what the firm specifically requires.

According to John E. Scully, senior vice president of human resources at LaSalle National Bank in Chicago, “We recently went through a downsizing and most of our people had jobs before they even left us. I think that will continue as long as the economy continues as strong as it is, and there are more jobs than there are qualified people.

“We can’t find enough of the right people in the Chicago area. Even though there has been downsizing in banks, [some] banks are having trouble finding qualified people.”

According to a recent article in the Wall Street Journal, much of the banking industry’s job availability can be traced to a strong housing and commercial real-estate market and the expansion of banks into investment banking and non-credit-card consumer-finance products. Advanced technology and increasingly sophisticated database systems are also driving the demand for employees with specific qualifications.

Building inner fortitude

Counseling offered by outplacement firms frequently helps displaced employees learn to think outside the box, tap into their own hidden resources, and gather the fortitude to consider applying for positionsu00e2u20ac”even in new career fieldsu00e2u20ac”they might otherwise have dismissed as being beyond their realm of experience.

Battaglia calls it the “ah ha” effect. “Outplacement firms do wonderful things because the service they provide to an employee who has been displaced renews that employee’s self-esteem and helps them find, in themselves, the skills they need to be valued and make contributions elsewhereu00e2u20ac”so they can move along. That’s getting to ‘Ah ha! I can do that too. Just because my company downsized doesn’t mean that I have no value!’”

Glenn Simmons, executive vice president of human resources at Silicon Valley Bank in Santa Clara, Calif., believes the need for counseling for displaced employees will continue. “We have the highest employment of any area in the U.S. that I know of,” he says. “But even in a healthy economy there’s still stuff that happensu00e2u20ac”reorganizations, changes.

“1997 was a very strong year for the outplacement firms that I know about. I think their job was easier because there’s so much available out there. Their job now is getting people stabilized. That’s a very important thing you shouldn’t overlook, either. The people we use really help with the family, with self-imageu00e2u20ac”the psychological side. That’s really important for us,” Simmons says.

“We try to keep people really together emotionally and in terms of self-image while they’re making the transition. That’s the biggest criteria we use in choosing an outplacement firm. So, the outplacement firms provide the counseling that’s necessary and they get the people directed. Once they get them directed, the opportunities are so numerous.”

Help for the top tier

Flexibility of services seems to be another trend in the outplacement industry. A variety of services can be provided depending on the institution’s need. “Basically it’s coming up with a standard template for services and then being able to customize,” says Keefer.

A recent survey of 200 of the country’s largest banks showed that most human resource directors felt that low-level, non-exempt employees were most likely to do well without extensive outplacement services. Two or three-day seminars on how to look for a job and assistance with resume preparation and interviewing skills are especially useful, according to Scully at LaSalle National. “They need assistance, but most of them just don’t need an office, because the job market is so tight right now that it favors the employee,” he says. “Most of our nonexempt people usually find jobs very quickly.”

The survey also showed that levels of assistance banks seek from outplacement firms range from three to six months for mid-level exempt employees to unlimited assistance for senior-level executives, the group that survey respondents agreed benefited the most from outplacement services. First Union’s Keefer estimates that about 30% of the employees displaced as the result of a merger or acquisition are in this category. “When you get to the executive levelsu00e2u20ac”probably six figures plusu00e2u20ac”the opportunities are much more limited within a given market,” she says. “Then more of a nationwide search is usually conducted. We have the ability to unbundle services, so if we need more customized services or components of one of the programs we’re able to obtain that. That’s typically negotiated per situation.”

Some outplacement firms even provide assistance to management in delivering the news of layoffs, a tactic referred to in the industry as an “executive pickup.”

Although customized services are undeniably valuable, Peter Gurney, human resources managing director at Bankers Trust Co. feels the strategy can weaken a firm’s effectiveness. “In the past some companies got into a real supermarket of outplacement services. I think those days have kind of waned. The good firms are back to having from two to six solid programs that they know really work and that focus on the guts of outplacement, as opposed to being boutiquish and hokey. There’s one national firm that I think met its demise as a result of trying to be too cute and developing all sorts of tailor-made situations for its customers. Most were insufficient.”

Understanding feedback

Another trend that will affect the outplacement industry concerns the increasing demand on the part of their customers for more uniform accountability. With institutions continually looking at ways to increase profits and cut costs, knowing how cost-effective outplacement services are is a paramount concern. To ensure satisfaction, both industries need to agree on standardized reporting measures that can be used to compare services and assess the effectiveness of the outplacement firms.

“It’s hard for me, as a person who buys outplacement, to know if we really get any value out of it,” says Craig Hill, senior vice president and director of human resources at Fulton Financial of Lancaster, Pa. “Sometimes it’s really hard to measure the effectiveness of outplacement. I think for an outplacement firm to be effective with companies like ours, they need to show us more of what we’re getting for our money. The problem is that when you pay your money to an outplacement firm and give them the displaced employee, you’re virtually out of it. You really don’t know what impact the outplacement services had in the person getting the job. You just don’t know what’s going on on a day-to-day basis.”

“I think it creates kind of a negative impression of outplacement firms,” says Hill, “because the product that they sell is so difficult to get your arms around. Even to the degree that they can tell you the employee will get an office and a secretary and all that, you still don’t know the quality of the people they’re interacting withu00e2u20ac”or their connections or how helpful it was. I think it would help if the displaced employee could be interviewed afterwards. The people who have gone through the process would probably be the only people I’d trust to provide data.”

According to Keefer at First Union, feedback is what you make it. “The challenge for us has been that the process has been so decentralized and we have not had formal contracts in place. Now we’re finishing and finalizing the contract piece and I think from a reporting standpoint I’ll start getting more of a corporate overview. It really hasn’t happened to a great extent because we’ve been all across the board. But when we’ve asked for it, we’ve certainly gotten the feedback.”

John Scully agrees. “I use four firms and one of the things I do with those firms is require feedback as part of the agreement. Two of them give me telephone feedback every two weeks and two give me written feedback monthly. I ask them to tell me how my candidates are doing. We don’t maintain contact with the employee. Unless the employee calls me, I don’t do any follow-up.”

“Do we maintain contact with the [displaced] employees? Absolutely,” responds Peter Gurney. “Do we ask them how they feel about the outplacement firms? You bet your life.

“I’m satisfied with our feedback.” Gurney says. “Without breaching any confidentialities regarding ex-employees, we require our firms to provide us with reports monthly, but we both know that we are going to talk about some specific individuals more frequently than monthly. I think that if companies wish to get good feedback, they have to own that process, to make it work. Outplacement firms deal with a lot of individuals, and to be really up-to-date on everybody all the time is something that takes extra effort on their part. My feeling is that if we’re going to send the people to them, I want them to make the extra effort…at least for us.”

Rebecca Battaglia receives quarterly reports about the status of each employee in the outplacement program. “They let me know who is interviewing and who is waiting to hear, or that so-and-so is working on understanding themselves better and aren’t sure what industry they want to move to. I have no direct contact with employees. The outplacement firms survey employees, and I receive a report that shows who’s in the program, what percentage landed jobs, how many are active, how many had their services expire before the outplacement firm knew whether they had landed a job, and so on.”

Stacy Keefer has observed a trend among large corporations to reduce the number of outplacement firms used. “Another seems to be longer-term contracts,” she says. “I think the fewer suppliers you have, the better pricing you can negotiate. The pressure is on the supplier to come up with more cost-effective programming to maintain the pricing, because we look for the best price we can negotiate. The reason we use four suppliers is basically geographic.”

She also feels that outplacement firms are taking more time and putting more effort into familiarizing themselves with the culture at client banks. “I think that’s a critical point when you’re dealing with outplacement. Knowing the culture and understanding nuances about the climate within the company is essential for knowing what type of services and what levels of service to provide and how to customize services to meet those needs.”

Getting more out of life

One of the new, emerging areas that outplacement companies are just beginning to address is the whole movement toward the entrepreneurial side of the fence. One reason banks are having problems locating qualified people with professional and technical skills for certain positions is that those peopleu00e2u20ac”having in some cases been downsized by more than one firmu00e2u20ac”are now opting to go into business for themselves.

Until recently, outplacement firms were concerned primarily with placing people back into the traditional job market. However, the counseling and self-assessment exercises they provide are helping many make the decision to go out on their own. This is especially true among the harder-to-place senior executive group who have a high net worth and can afford to experiment. Many people are reconciling themselves to the fact that the job market doesn’t mean lifetime security any more, and they want to control their own destiny, as good or as bad as it may be.

Glen Simmons points out that many downsized executives choose not to stay in the financial industry. “There’s such a glut of people out there now, and the financial industry has consolidated so much that a lot of people are looking at alternative careers,” he says. “Another thing that’s happening is that people who have stayed kind of safe now find out more about themselves, and they end up actually having richer lives in some cases. Getting jolted out of a really safe position and getting counseling in the outplacement process gets people looking at new possibilities and opportunities.

“I know a guy who was just devastated when he was outplaced in Seattle,” Simmons says. “He started a pizza business. He now has two great gourmet pizza locations and he’s working real hard, but he’s making probably five times what he was making in the banking business.”