What HR Should Do When the Company is Facing Closure

​Unfortunately, as our economy has been hit devastatingly hard by this pandemic, some businesses are not going to rebound and are being faced with difficult decisions that have long term impacts to their employees.  Some have been able to temporarily furlough employees and call them back as business rebounds.  However, others may find themselves in a situation where they need to close the business altogether.  In those situations, if the company is large enough to have an HR person on staff, you will likely play a key role in winding things down and may be one of the last ones employed by the business.  A lot of people will be looking to you for guidance during this critical time.

I found myself in such a position back in 1999 when I was the HR Director for a large medical group that closed.  It was not something that I was expecting.  Unfortunately, there was a nasty and pretty public dispute between the physician owners and their management company that ultimately led to the dissolution of the company.  Less than a year after starting there, much to my surprise I found myself in a key leadership role helping to wind down a medical group that had employed 150 physicians and over 600 staff.  It was quite a learning experience.  Although you’d never wish for it again, I’ve found that often the most stressful times are the ones where you can grow the most.  And now I’m able to share what I learned with you from that experience.

Ten Key Considerations in Preparing for a Dissolution:

• 1. Employee Communication – The most critical thing during periods of organizational instability is communication with employees.  Rumors are going to fly like crazy and employees will be fearful.  During our dissolution, we established a special newsletter early on for the sole purpose of addressing rumors.  It was published weekly via email and employees could count on knowing it would come out and when.  We told them what we knew and were as transparent as we could be.  We also held Town Hall meetings where they could ask questions of senior leadership directly.  We addressed rumors head on and over time, this built trust, which is critically important for employee retention during difficult times.  I’ve used other similar methods during times of great change or uncertainty in other organizations and these have worked well.  Consistency in messaging, frequent communication and transparency from leadership are the keys to getting ahead of the rumors.

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• 2. WARN Act – Know your obligations as an employer in Oregon under the Worker Adjustment & Retraining Notification Act. The WARN Act requires employers to give a 60-day notice to the affected employees and both state and local representatives prior to a plant closing or mass layoff.  In general, employers are covered by the WARN Act if they have 100 or more employees.  You can learn more about the WARN Act here: https://www.oregon.gov/highered/institutions-programs/workforce/Pages/warn.aspx.  If you are an employer outside of Oregon, do your research to see if there are similar requirements in your state. 

 

• 3. Retention Bonus – Consider offering a retention bonus for key employees to ensure you are able to retain them through the period that the organization needs them, which for some may be until the very end.  I’ve used this in two organizations in my career and it was effective both times.  In both cases, we used an outside consultant do the design and make recommendations for eligibility criteria to help ensure objectivity of which positions are considered “essential” and eligible for the program.  If you decided to offer such a program it will be very important to establish clear criteria early on.  For example, consider single incumbent positions that if you lost them it would be difficult to function, such as those needed to keep payroll running or key leadership positions.  In a situation where you are looking to close a business you are not likely going to be able to recruit new or even temporary staff to train them for positions that have complex learning curves. 

 

• 4. Provide Exit Support – Consider offering severance to employees when they are laid off.  In all likelihood, the business is closing due to financial difficulties and you may not be able to afford to do this.  If you are not able to offer severance, at the very least provide clear information to employees in an exit packet on how to apply for unemployment benefits that will help provide them with a financial cushion when they are unemployed.  The exit packet should also include information on COBRA benefits as well as resources that the State will provide when the WARN notice is sent.  If the WARN notice is not required, reach out to your local Workforce Development Office to see what resources they can provide to include.  They can be a wealth of information.  Make this easy for your employees by providing them information early and proactively.  Make yourself readily available for questions.

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• 5. Reference Letter – One day as I was working in my office about 45 days before the medical group was closing, I got a call from an employee who asked me this: “Laurie, who should I have a future employer call to verify my employment when there’s nobody left here?”  I was stumped.  “Uh, I’ll get back to you on that” was all I could think of as a response.  The solution I came up with was to produce a personalized verification of employment letter for all 600+ employees that they could copy and give to their future employers that explained the situation and that the company had closed.  It verified their position, dates of employment and that they were being laid off through no fault of their own.  We were able to produce the letters in mass with a simple mail merge with their individual information from a spreadsheet.  I told employees to be sure not to lose it because it would not be able to be reproduced later on.  I even created one for myself…I think I even still have it somewhere.  Employees were very appreciative to have that and of the effort we made. 

 

• 6. Shift HR’s focus from Recruitment to Outplacement – Once it becomes public a company is closing, you won’t be recruiting.  Shift your focus on outplacement for your existing staff instead.  We had multiple outpatient clinics and a couple of my staff members and I set up a schedule and went to each of the clinics, telling staff ahead of time that we were coming.  We worked with their managers to make sure people who wanted to spent time with us were relieved from work for a bit.  We had people bring their resumes and we gave them suggestions on how to improve them.  We did brown bag lunch presentations with tips for job searching and interviewing.  Again, employees were incredibly grateful.  Our focus shifted immediately to helping people find jobs.  The company and its leadership that supported these efforts gained loyalty as a result and many employees stayed until the end.  However, we also recognized that some couldn’t and leaders were understanding about that.  Which brings me to my next point.

 

• 7. Encourage flexibility.  Some people aren’t going to stay and when you have vacancies, recruiting under a circumstance of a company closure, even for temporary staff, would be difficult at best.  Ask staff to be flexible and pitch in to help out in a variety of roles.  It is the most likely scenario to fill position gaps during the wind down time.  As we were wrapping up, I had time on my hands.  Normal work just wasn’t there to do anymore and I found myself toward the end filling my days entering medical records into the computer system.  It was not work that I normally would have been doing, but it was work that needed to be done and was fairly quick to learn.  In these circumstances, there’s a sense of team and camaraderie that can develop with those who remain.  It can become kind of an “all for one and one for all” mentality when the right team is in place.

 

• 8. Continue to provide recognition.  Recognition continues to be an important thing to focus on up until the very end.  Reinforcement of team and individual behaviors that you desire to see when everyone is pitching in to get the work done is what is necessary in these difficult times.  I recall one day a few weeks prior to the end of our time when two huge bouquets of flowers arrived at the office.  One for me and one for another key leader during the winddown.  They were from our CEO, Mark.  It’s important to share that Mark was the second interim CEO that we’d had during this transition.  We were all trying to get through this unstable time together.  He had sent these to us just to let us know we and our work and our loyalty was appreciated.  It’s more than twenty years later and I still remember receiving them and I still remember what they looked like.  It made me feel so appreciated and gave me just the boost I needed to see the work through until the end.  Encourage leaders to provide regular recognition and appreciation for the staff who are remaining.  Simple things that don’t cost much money such as thank you or coffee cards are helpful. If you are in the final days of winding things down, consider asking the business owner to allow the staff the option of taking home office equipment that might be useful to them that the business no longer needs, such as computers and printers, as a gesture of thanks for staying through until the end.

 

• 9. 401k plan – Even though a company closes, there are still compliance and records issues that will linger over on things like your retirement plan, tax filings and other related items.  We engaged our retirement plan vendor and attorney to help us with this and I would recommend the same.  Getting this right is very important and there are legacy documents that someone will need to retain long after the organization closes.

 

• 10. Records Retention – We paid a records retention service to retain the personnel files for 7 years post wind down of the company just in case anything needed to be pulled.   We never needed to access anything that I am aware of, but it wasn’t very expensive and I was glad we did it just in case.  You never know when a BOLI claim or lawsuit might still come out of nowhere that needs to be responded to even though the company is wound down and having access to records, at least for a while to help prepare for a defense is something to consider.  At the very least, get some guidance from an attorney on this issue.

Most of all, having a great sense of empathy during the whole process of a dissolution for what your employees are experiencing will be critically important.  In all likelihood you are experiencing similar feelings as your employees since your job is impacted as well.  This is the time to do your best to compartmentalize and try to set your personal situation aside while you support them at work to the extent that you are able.  With that said, make sure you have a support system lined up for yourself also. 

People will look to you to role model how to get through the period of difficulty and this is a time for you to serve as a resource.  A collective sense of shared loss and grief can be felt and recognized together, but a sense of hope and encouragement about their future is also what they need.  There’s something healing when an organization does their best to take care of those who work for them.  Even when the ultimate outcome isn’t what anyone wanted, knowing that you’ve done your best to help those who are left adrift at the end to sail and not sink will leave you feeling good about a job well done under the most difficult of circumstances.
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If you find yourself in this situation and need any assistance or just someone to lend an ear, please reach out to me at laurie@barrhrsolutions.com .  I’d be happy to help.  I know how hard this journey can be.