On Tuesday, Toronto announced the most sweeping staff-reduction plan in the city since amalgamation.
An astonishing 50,000 employees will be offered a buyout package to leave the municipality's civil service. The early information doesn't contain a firm target by which to reduce the work force.
It is also unclear if there will be any attempt to retain the most valuable staff in the organization, particularly those with unique or high-demand skills, senior staff with management expertise, and the most dynamic and self-starting middle-managers who will form the spine of the future leadership.
The retention is a key issue, and critical if this effort is to succeed. Past rounds of civil service reductions follow an unfortunate script.
Offered a buyout package, those public servants with the most entrepreneurial ability take the package, and start their own businesses, join private sector organizations or sell their talents back to government. These are self-starters with an appetite for risk, just the people a dynamic organization needs to stay relevant.
With these heads-up bureaucrats heading for the door, the people who choose to stay tend toward the staid and risk-avoiding. There is a higher proportion of the folks who count the days until retirement and the steady defined benefit pension that awaits.
This is not to say that lazy folks won't take the package, and hard-driving people don't stay. But the trend is toward dynamism leaving an organization in this type of scenario.
The worst losses are among the people any organization cannot afford to lose: second-tier managers who should be preparing to take over the reins of the organization in a few years. This person has the skills to start a second career in the private sector and the drive to take a risk.
An excellent study by RAND shows that the use of retention allowances can keep needed public servants in the trenches longer.
As the population ages, so does the workforce at City Hall. That means staff with critical skills - the only guy who knows how to get an environmental approval of a subway, for instance - will start walking out the door shortly with early retirement, especially if egged on with buyout packages.
Better to use buyouts and retention allowances to shape the workforce. Why would Toronto want to do that, some might ask. The city has a deficit and needs to cut.
To torture a metaphor, pruning a tree won't work if you cut off the trunk. Here is a simple scenario:
Imagine if the vast majority of the dynamic IT staff at the city decided to take packages and move to offers in the financial services industry. In a couple months, the city would see increased problems with websites, system reliability and telephony. More expensive consultants could fill the gap until permanent staff were lured to join with incentivized pay packages and bonusing. Not only are the original cuts growing back, but they are higher-cost people in the same job.
Quickly, the cure becomes more expensive than the disease. Haphazard cutting never lasts.
Better that the city identify what skills it needs to keep in what areas, and then offer buyout packages to those who lack those skills, and incentives to stay for those who have the most valuable talents. (At the same time, the city should be looking for increased productivity through technology, training and financial incentives, but that is for another day.)
As the baby-boomers retire - with voluntary buyouts or simply when they hit their magic number - all large organizations will see a massive challenge in retaining the most qualified staff. Successful organizations will be those who retain the best staff, not those who voluntarily buyout the most.
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