Response to redundancy and life transitions.
There are times in the lives of most senior executives when they take stock and consider what next.
Sometimes this is triggered by a major life event: a serious health scare, the children finally leaving home or a break down in their significant personal relationship.
Sometimes it is internal, like the soul searching after being passed over for that perfect promotion. And sometimes it is external, like the pandemic of 2020.
Or the company may trigger it through a round of restructuring, re-sizing and retrenchment.
I recall hosting a dinner party for a group of colleagues and friends. As the conversation flowed, it came to light that every single one of us had been made redundant at some stage in our career. And a handful had been made redundant two and even three times.
The 3 Rs: Restructuring, Re-sizing and Retrenchment are normal features of the career landscape in the modern world. As devastating and as personal as it may feel at the time, we will all be impacted by these events at some stage.
Consider these two case studies:
Case Study: Preparing for life transitions
Ann* is 49 years old and, as an executive director for a Top 50 ASX-listed company, she is the primary breadwinner at home. Her husband is an in-demand local builder. With no kids, no mortgage, a healthy nest egg in super, cash and shares, Ann’s situation would seem under control.
However, sadly, she lives with inoperable cancer.
Ann has been given the option to take voluntary redundancy.
The question she has is simple:
“Can I afford to leave the company and chase my dream of becoming an advocate for equitable access to cancer services for all?”
Case Study: Preparing for redundancy
Helena* is an executive in her late 30s, married with two children. She believed her role was at risk of being made redundant and began preparing for the inevitable six months in advance.
Firstly, she found an employment lawyer to coach her through the negotiations, review the redundancy calculations, and terms and conditions. The $5,000 she spent on legal fees will result in a $50,000 increased payout and a greater sense of satisfaction that a fair deal had been achieved.
Helena invested in her skills by undertaking some short courses relevant to her next career step. She reached out to connect with her network and industry contacts and updated her LinkedIn profile.
She engaged a financial advisor to determine her preferred timing for triggering the redundancy event. To ensure the continuation of her income and life insurance – unencumbered by her employer.
“Doing the best at this moment puts you in the best place for the next moment.”
Oprah Winfrey
Because she took charge of the moment, Helena maintained her relationships with the CEO and the board, and left the company on her own terms. Her insurances continued and she stayed in control of the timing. She was ready to take the next career step when the redundancy offer was made.
Response to redundancy and life transitions
If talk of redundancies starts making its way through your organisation, have a pre-emptive strategy in place. It will assist when navigating the change to finances, career, family and lifestyle. It also gives you control of how the redundancy is managed and, crucially, the timeframe in which it occurs.
Many high potential women initiate their own career change. But when the transition is forced by redundancy, there are several key steps that will help you maintain your sense of security, while negotiating the next phase of your life and career.
The first step is to break down your situation into short- and long-term goals.
Short-term
Assess your immediate financial situation, and work out what stop gap arrangements need to be put in place to support your lifestyle and commitments such as the mortgage and school fees. What are your day-to-day cash flow requirements? Break it down into what you owe and what you own.
Unencumbering yourself from your employer with super, insurance and shares may also be beneficial in the lead-up to your redundancy. Finally, try and put a timeframe around how long you think you might be in this situation.
Long-term
Proper planning for your lump-sum redundancy payout is crucial. A professional financial advisor can help you make the most out of it long term, and may also be able to negotiate a payout with your employer that is better in the long term. Depending on your age, there are other decisions that need to be made. Will you cash out any or all of your superannuation, or use your payout to invest in your super? You also need to be clear about the make-up of your lump-sum payout and the tax obligations for each component.
More often than not, people experiencing forced career transition or redundancy battle with financial stress, family pressures and fear of the unknown. But planning after retrenchment is too late. Starting a business or consultancy, changing your industry or profession, or securing another senior management position – most of which are not advertised – takes time and planning.
“You can’t make decisions based on fear and the possibility of what might happen.”
Michelle Obama
Nine-point checklist for managing redundancy
The most empowering thing you can do when facing a possible redundancy is to be informed.
- Think about what professional advice you may need. Such as an employment lawyer, financial advisor, tax advisor or career coach. Do this as soon as you suspect that your job may be at risk, and start to develop your redundancy strategy.
- Entitlements – determine what benefit entitlements are coming your way. This may include any outstanding annual or long service leave due to you, pay in lieu of notice, and of course, payments you receive as part of your separation payment or golden handshake. Re-read your original employment contract.
- Insurance – find out if there is a continuation option with your insurance cover. Most people’s insurance cover is through their employer’s superannuation fund and will cease when their employment ceases.
- Tax implications – understanding the tax liability on your payout is important. Issues that can affect a payout include whether the redundancy is ‘bona fide’, taxes on lump sums and the tax treatment of any super monies you plan to withdraw.
- Debt management – having a comprehensive budget can go a long way in managing your cash flow, expenses and financial commitments. Know your fixed and variable expenditures.
- Savings – assessing the liquidity of your assets is integral in planning ahead.
- Protect and maintain your professional relationships. Invest time in your professional networks, raise your profile and learn to network online – graduate jobs are advertised, most senior management positions are not.
- Invest in yourself – self-care is vital for riding this out.
- What next…? – Whether you are looking at re-employment or re-inventing yourself, allow sufficient time and space for reflection, knowing that the people who come out of these situations happier, more fulfilled and more successful than ever are the ones who take action now to create the life and career of their dreams.
The psychological effects of redundancy
The late Apple boss Steve Jobs said in his 2005 address to Stanford University that being let go from the computer giant early in his career was “the best thing that could have ever happened to me”. He went on to form Pixar, finally had time to find his soul mate, and would eventually return to his former employer to turn it into one of the most successful businesses in history.
Unfortunately, it can be difficult to see the happy ending when you are in the middle of the job loss story. In the immediate aftermath, most people feel an overwhelming sense of loss, anxiety and anger.
A study in the UK medical journal Organization Studies[1] was drawn from formerly senior, highly paid male and female managers – aged 49 to 62 – who had lost their jobs in hostile circumstances. It found that those who fared best after being made redundant were those who saw the situation as an opportunity for growth, rather than the end of everything.
Those less successful in coping with the forced career transitions reported high levels of despair, feelings of devastation and acute depression. Faced with economic uncertainty and high-end financial commitments, many who’ve been made redundant rush into the job market with a stopgap mentality, often winding up in a job they don’t like.
When emotional trauma is mixed with financial pressures, it can be hard to take the glass half full approach, which is why getting professional advice and staying ahead of the game is so crucial.
When your work environment is in a state of flux, there can be a slowing down and re-thinking of your financial goals. Reassessing what you really need, deeply considering your value, reconnecting with your passion, and redefining your career plans.
It is a time to re-evaluate, rethink, revisit, review, reassess, reconsider, re-connect, refresh and reignite.
It is a time to be ready.
So that when that next perfect opportunity comes your way, you will be ready to say, “Yes, this is the obvious choice for me.”
Be the obvious choice.
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[1] Y. Gabriel, D. Gray, H.Goregaokar, Organization Studies December 2010 vol. 31 no. 12 1687-1712
*Names and some personal details have been changed for privacy reasons.