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Three-year Plan Eases the Pain of Plant Closings

April 1, 1993
Related Topics: Downsizing, Strategic Planning, Featured Article
Within weeks of joining Leaf North America in 1990, management presented me with one of the biggest challenges of my career. As corporate director of human resources, it was my job to direct the human resources activities involved in closing the company's two Chicago manufacturing plants.

This wasn't my first experience with plant closings. Earlier in my career I had worked for a packaging manufacturer and a computer company, both of which shut down facilities during my tenure. What made my experience at Leaf different was that I was leading the human resources effort as project director.

Leaf is a confectionery company that's based in Bannockburn, Illinois, a suburb of Chicago. The decision to close the two Chicago facilities was part of a long-range business strategy to simplify, modernize and consolidate the company's operations. Leaf closed its Ontario Street plant, which produced Milk Duds™, in March 1992.

The Cicero Avenue plant will cease production of Whoppers™, Sixlets™, Rain-Blo™ and Pal™ in June. The Ontario plant employed 125 workers; the Cicero plant 450 workers.

From the boardroom to the assembly line, closing a manufacturing plant is a challenging, time-consuming and detail-oriented process. A plant closing is more than the actual process of shutting down operations. It's a little like a death in the family. From the corporate perspective, it's the end of a part of the business that was once healthy and viable. For the employees facing early retirement or layoffs, it's the loss of friends, stature and economic security.

Despite these potentially negative outcomes, closing a plant doesn't have to be all doom and gloom. The process can be a positive learning experience for everyone. This includes an organization that's restructuring for future growth and the employees who are facing the challenges of finding new jobs or taking new career paths.

Through my experiences at Leaf, I found that there are procedures that can diminish the negative aspects of a plant closing. These steps also can turn a closing into a new opportunity for everyone involved. Perhaps my insights will help you if your company assigns you to lead a plant closing.

Preparing employees for change takes time and commitment.
There are several steps a company must take to close a facility successfully (see "Six Steps Leaf Used To Close Two Plants Successfully"). For Leaf, the three most significant steps included:

  1. An early announcement.
    Top management decided that Leaf would give employees two-and three-years' notice of the closings instead of the legally required 60 days.

  2. A commitment to helping employees through the difficult transition.
    Leaf provided substantial outplacement assistance, training and educational assistance to its employees during the closing period. Leaf management also was sensitive to the personal and emotional stress that employees experienced during the process.

  3. Ongoing communication with employees.
    Leaf understood that ongoing, open communication with plant workers would be a key to maintaining morale and productivity during the transition.

Two or three years may seem like a long time to prepare for a plant closing. For the employee who has worked in the same building for 15 to 20 years, it's a short time. Because Leaf had made the commitment to train and help workers through this major transition, we needed as much time as possible to help employees prepare for the rest of their lives.

The inner-city location and work-force composition of both plants provided additional challenges. A large percentage of the workers were immigrants for whom English was a second language. Others faced literacy problems. We had to address these special needs if we were to do our jobs effectively.

Looking back, hiring an outplacement firm—The Derson Group Ltd.—proved to be one of Leaf's best decisions. The Chicago-based firm not only provided us with valuable information regarding plant closings, but it also helped us obtain public funding for employee programs.

"A plant closing is more than the actual process of shutting down operation. It's a little like having a death in the family."

With Derson's guidance and assistance, we established a public and private partnership between Leaf and the city of Chicago, the state of Illinois and the federal government. As a result, we were able to take advantage of the available sources of funding and assistance, and bring these resources directly to Leaf's employees.

With Derson's help, Leaf was able to secure funding for on-site training programs. These programs included:

  • General equivalency diploma (GED)
  • English as a second language (ESL)
  • Skills training in high-growth fields
  • Support services (such as subsistence allowances, transportation, day care and others).

Leaf obtained one such grant from the Illinois Department of Commerce and Community Affairs from the Chicago Mayor's Office of Employment and Training. This grant helped cover the cost of our on-site outplacement center, which provided employees with skills assessment, retraining and job placement.

Leaf's employees benefited most from Derson's help through the Trade Adjustment Assistance (TAA) grant from the U.S. Department of Labor. Only a few companies receive such grants according to specific guidelines. Under TAA guidelines, those individuals who enroll and remain in skills training programs can remain eligible for unemployment (for as long as 78 weeks); retraining programs (for as long as two years); and other benefits.

Derson's help was significant in establishing an on-site career center for employees. We recognized the importance of having a center on-site that was easily accessible for workers. It was Derson who made this possible. The firm went to bat for us with the city and obtained instructors from the city colleges to teach on-site. Derson staffed and managed the center, which offered career counseling, training and educational classes.

The center helped maintain morale throughout the two years leading up to the closing. Even the workers who didn't use the center could see Leaf's commitment to helping them.

Demonstrating support increases worker involvement and commitment.
During the preparations for the plant closing, I never lost sight of the fact that this was an emotional time for employees. Because the programs Leaf was providing had the potential to improve employees' lives in the long run, I knew that employees had to trust the HR team members and me. My objective was to get them excited about their new opportunities and to help them see that this was a way to create better lives for themselves.

The human resources staff did everything it could to encourage and motivate employees to take advantage of the opportunities that could help prepare them for life after Leaf. For example, we:

  • Offered workers incentive bonuses for participating in the training programs
  • Celebrated their accomplishments by having graduation parties
  • Presented graduates with GED and ESL certificates and took photos to capture these special moments.

The human resources staff tried to create an atmosphere at the plants in which people could be optimistic about their future potential. At one of the ESL graduation parties, Hispanic employees made short speeches about what the programs meant to them—in front of their supervisors and co-workers, and in English.

In addition, I was available to employees to help with any problems that they might have. On one occasion, for example, it took the creative efforts of the entire human resources team to find a satisfactory conclusion to a disturbing problem.

Shortly before the final shutdown took place, it came to my attention that one of our long-time employees, who had a developmental disability, was likely to become homeless because of the closing. For many years, co-workers had looked out for this man.

It wasn't until the final months, however, that we discovered that the family members with whom he lived took his paychecks, beat him and sometimes even locked him out of the house. We contacted a social worker, who visited his home and evaluated the situation. She told us that this was one of the worst cases of abuse that she had ever seen. With Derson's help, we were able to place the man into a home that would provide the support and protection he needed.

Another way in which we showed employees our commitment to helping them through this difficult transition was by listening to their requests and being flexible whenever it was appropriate. When an employee presented a special need or problem, the human resources staff tried to be flexible and do what was right for the worker—without allowing co-workers to take advantage of our actions.

One young man found a new job that required him to begin work two weeks before the closing. If he left Leaf before we closed the Ontario plant, he would lose certain components of his compensation and benefits package. The plant manager allowed the man to work a flexible schedule during the final days. He worked two full-time jobs for a short time, but he was able to keep his special Leaf benefits.

In addition, we scheduled education and training sessions immediately before or after work shifts. As an incentive for boosting participation in the programs, we paid our employees for the time they spent in training and educational programs. Leaf also gave $50 bonuses for successfully completing each of the four GED and ESL training modules.

This flexibility demonstrated to workers that we were sensitive to their concerns and helped us maintain consistent levels of productivity. Initially, we were concerned that employees would be more interested in preparing themselves for the future than in doing a good job at Leaf. Ultimately, however, productivity didn't suffer at either plant.

Communication ensures employee participation and understanding.
Offering programs to show your commitment to employees isn't the only way to ensure the success of a plant closing. Backing up your commitment with words—through ongoing communication—also is necessary.

My job as project director involved working with top management in the strategic formulation of human resources programs and then implementing these programs with the help of our corporate HR team and the plant's management. In addition, it was my job to make sure that a spirit of teamwork prevailed from the boardroom to the plant floor. To accomplish this, I assumed the role of liaison, to keep the lines of communication open and flowing between corporate and plant staffs.

I realized early on that gaining the trust of plant management was a priority, because we needed a strong tie to supervisors and hourly workers. Plant manager Sardar Shah-Kahn was a special kind of leader—one whom employees trusted. A strong proponent of the open-door policy, Shah-Khan was at times brother, father and mentor to his employees. He attended their family celebrations, gave moral support when they needed it and counseled them during times of distress.

Because of Shah-Kahn's long history as a caring, supportive and respected manager, he was key to the work of our team. He understood the importance of the programs that Leaf was offering and took the time to encourage people to take advantage of them. We made sure to include him in group meetings and presentations to workers because we knew that they believed him.

In turn, Shah-Kahn was able to help us deliver important messages to the workers. For example, I distributed all employee memos regarding human resources issues under Shah-Khan's signature instead of mine. In addition, he always played the role of key spokesperson at all employee meetings.

"Education and training sessions before or after workshifts demonstrated flexibility and sensitivity to worker's concerns."

This open line of communication to workers was invaluable to the special human resources team formed to carry out the programs established specifically for the plant closing. This team, which included corporate and plant staff as well as outplacement consultants, worked closely with the management of the plant.

The job of the team was to prepare the 125 employees at the Ontario plant for the challenges they would face after the closing. Our goal was threefold:

  1. To identify and implement training programs designed to prepare workers for new employment opportunities.
  2. To help workers understand and evaluate the available options regarding pensions, benefits, education, training and severance.
  3. To provide ongoing communication about all aspects of the closing.

Recognizing the importance of communicating with employees throughout the transition period, we distributed a short questionnaire to workers early in the program. The results were disturbing but not entirely surprising. We learned that most employees didn't understand their health and pension benefits. We immediately scheduled meetings with our corporate benefits specialists to explain the various options.

We offered take-home materials and answered workers' questions. Throughout the transition period, we monitored our employees' understanding of what was happening and actively sought feedback by using surveys on the programs we were offering. We recognized that if the employees didn't understand what we were doing, we couldn't possibly help them.

Communication is vital during the final weeks of the closing.
The final weeks before the closing were challenging. There was a lot of activity during this time, and we had to be ready because the employees had to complete most projects by the date production stopped. Communication, along with good timing and organization, helped us provide our employees with the assistance they needed before they left the company.

For example, we scheduled individual meetings with each one of the 125 employees at the plant. This was done because many employees still faced language barriers and needed the attention and help of individual meetings. To overcome the language barrier, we suggested that each worker invite a family member or friend to come to their final interviews, in some cases serving as the employee's interpreter.

During these meetings, each employee received a personalized letter that detailed the benefits they would receive. When necessary, we wrote these letters in Spanish. It was imperative to help everyone understand exactly what was happening.

In addition to the employee meetings, there were other matters to handle during these final weeks. For example, we worked with Derson to enable employees to sign up for unemployment benefits right at the plant. This made it easier for employees to take full advantage of this benefit.

The final payroll distribution also demanded a lot of attention during this time. Some workers were to receive several separate checks on the last day, including regular payroll checks, severance, vacation time and bonuses. Before running the final payroll, we worked with Leaf's operations department to decide who would stay on after production stopped, to shut the plant and take apart the equipment.

The night before the final day, I remember feeling tired and a little sad because I knew that I never would see some of these people again. I made some last-minute notes on unresolved questions and reminded myself to get doughnuts for Friday, the last day.

Because we had communicated well with employees, the human resources staff had no reason to believe that there would be problems with angry or disgruntled employees when the day arrived. As expected, the day passed without incident.

Ultimately, I think that it goes back to the beginning when senior management decided to announce our closing plans far in advance. Making a commitment to ease the transition period for Leaf employees and assist them in finding new jobs also helped the process go smoothly.

On the final day there was no production. I brought 25 dozen doughnuts to the plant. People visited in the lunch room, exchanged addresses and phone numbers, picked up their checks, made last-minute arrangements for training and asked questions about things they had forgotten.

Some of the people brought autograph books. Many people cried. We all felt the sadness that comes when it's finally over, but there was no apparent hostility or open anger against Leaf demonstrated by any of the employees.

Although plant production ceased before the last day, the human resources team still had work to do. My wrap-up duties lasted approximately two months, because there was still the on-site career center to oversee. The organization paid a handful of employees through June to take apart the equipment and clean the facility. The on-site outplacement center closed then, too.

Today, Leaf continues to help employees from the Ontario Street plant who still need assistance. They can go to the outplacement center at the Cicero Avenue plant, Leaf's nearby facility that will close down in June. In addition, with Derson's assistance, we have contacted more than 200 companies, resulting in 48 job placements.

Closing a plant is difficult from a human resources perspective, yet it can be a successful and even positive experience. For the company, closing Ontario was part of our ongoing efforts to consolidate our operations, maintaining the more efficient facilities. For the workers, we were able to provide training and education that prepared them for new, even better jobs.

My advice for conducting a successful plant closing is to plan early, obtain outside consultation and communicate with the workers. Make a commitment to help employees move on to new jobs and work to build trust through open communication with plant management and employees. These tactics worked for Leaf and they'll work for your company, too.

Personnel Journal, April 1993, Vol. 72, No. 4, pp. 66-75.

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