Over recent months in Ghana, organisations, institutions and companies have resorted to a massive reduction of their head-count. This move is considered by many as a strategy to reduce the overall size and diversity of the company’s operations. Mostly, the strategy is used to cut expenses with the aim of becoming a more financially stable business if the exercise is carried out tactically. Moreover, the strategy involves withdrawing from certain markets, or the discontinuation of selling particular products or services in order to make a beneficial turnaround.

Whereas retrenchment usually involves a reduction of the workforce due to an economic downturn, redundancy involves a reduction of positions as the result of a number of factors, including restructuring due to an economic downtrend or due to technological reasons. The biggest difference between the two is that retrenchment targets people, while redundancy targets positions. A person cannot be declared redundant, but a position that a person is holding can be declared vacant.

Taking it literally, the Merriam-Webster online dictionary states that “to retrench means to cut down, reduce, or cut out”; stretching it further “to make retrenchments” specifically means “to economise”. And what does it mean to economise? Dictionary.com says that “to economise is to practice economy by avoiding waste or extravagance, or reducing expenditures”.

Defining the term seems easy on paper. In our current business environment, however, retrenchment means putting more and more of even our good workers out of their jobs – for the sake of supposedly saving the business they helped build and strengthen in the first place.

Retrenchment: Good or Bad

Business leaders and Chief Executives in Ghana today are implementing a strategy that shrinks business instead of strategies that will expand & grow the business. For most of them, their expectation of the strategy is to be more profitable with limited manpower. Unfortunately, there is no empirical evidence to show whether the strategy meets its expectations. It is true that the core objective of any business is to maximise shareholders’ investment, but it is not the only responsibility of businesses -- there are the economic, social and environmental aspects.

The stress brought about by one’s loss of job can cause high-risk diseases like high blood pressure, diabetes, or heart disease. Retrenchment builds uncertainty in our career and finances. When one reaches rock-bottom due to poor business decisions or prolonged unemployment, it can result in depression and damage to one’s valued relationships. In short, retrenchment not only affects lives; it changes lives. However, not only the retrenched employees feel the burden of retrenchment. Even the “survivors” will need support, encouragement and counseling to be able to cope.

Being left to perform the responsibilities left-over by retrenched employees, the ones who remain may still be in shock of possibly increased workload with fewer hands to share the responsibilities. The fear for one’s own job security, complicated by the guilt of still having a job while colleagues have lost theirs, may cause bitterness and anger against the management and business owners. Employee loyalty and teamwork may weaken. This post-retrenchment working atmosphere, weighed down by damaged morale, may put the business in greater risk.

On the other hand, there can be a rise in entrepreneurship where retrenched employees can put resources together and start a business that can give employment to other people. These are people who have the skill and experience they need to make the startup a success. The financial sector in Ghana has seen a number of retrenched employees come together to start a business and make it a success.

For the companies and employers there is some level of improvement in performance, reason being that employees are going to be on their best behaviour once the retrenchment has been placed. Nobody can be too safe from the clutches of retrenchment, regardless of how devoted an employee is.The employees are therefore on their toes at all times lest they should be targetted for their lack of trying.

However, the company loses some of its skilled employees as a result of the exercise, because as the popular American proverb says: “It takes nine months to make a baby, no matter how many people you put on the job”. There are a number of roles where the number of people you put on the job does not matter, but still executives keep adding more. I wish a lot of executives would understand the implication of this proverb on their head-count decisions.

Conclusion

Every business decision or strategy that involves the company’s employees or man-power must be well thought-through, and the pros and cons considered before being implemented. Human lives are more important and must be cherished. Retrenchment must always be done the right way.