How to help redundant employees become entrepreneurs

Many firms offer advice on CV writing and interview technique, but they should also support laid-off staff to found start-ups, says Chris Locke

The CIPD describes redundancy as a ‘last resort’. This is because “it can be one of the most distressing events an employee can experience”. However, despite the fact that redundancy is both traumatising for the individual and negative for the company involved (on average, businesses experience a 20 per cent reduction in productivity following redundancies), the process has remained largely unchanged since the Redundancy Payments Act 1965.

The UK is currently in the grip of a global jobs crisis. The coronavirus pandemic has decimated many sectors. According to the Office for National Statistics, the number of redundancies in the UK has accelerated at the fastest pace since the financial crisis, with 156,000 people made redundant in the three months to July. This figure is expected to increase dramatically once the furlough scheme ends in October and the data catches up.

The stark reality facing those workers who are being made redundant is they are entering a jobless market. It is one that is likely to remain stagnant for many years to come, as companies seek to conserve cash and find a path back to growth.

In an attempt to soften the blow, many companies try to do the right thing by offering outplacement services that can help with CV writing and interview techniques. This barely moved the needle in times of economic prosperity, however, let alone in the deepest economic crisis in living memory. So there is an onus on HR to think differently and take a proactive role.

The key is HR identifying and providing opportunities that can help the individual transition to a new role, while driving economic growth and new job creation. A critical driver is creating the next generation of entrepreneurs. A recent survey by Direct Line showed 36 per cent of those made redundant wanted to use this as an opportunity to start their own business, whether that was as a freelancer, opening a small business or launching the next big tech start-up. 

One of the biggest factors in a start-up’s success is timing. And while it might seem counterintuitive, during times of rapid disruption new opportunities are opened up. In fact some of the largest companies were started during an economic downturn, including Uber and Airbnb as well as industry giants Microsoft, Disney and IBM.

Now more than ever, HR has an opportunity to evolve its career transition offer and move away from outplacement to outskilling, including start-up outskilling. This is not just about feeling good – it’s good business. First, it gives the company a tangible way to live their people-first values. It will have a positive effect on the brand and can play a key role in negating the typical drop in productivity, employee engagement and organisation commitment following a downsizing. Second, by helping departing talent develop these critical skills, the company is making a positive impact on local communities, helping drive new growth and local job creation. Finally, many of those wanting to build a start-up will be looking to solve a critical issue for their industry or the company. So this offers an opportunity to keep connected and potentially help drive faster innovation for the organisation.

This is not a new concept. Ten years ago Nokia cut more than 45 per cent of jobs. Realising the impact this would have on individuals, the wider community and those employees who survived, they created the Bridge Programme, which included an entrepreneurial stream. This has helped 1,000-plus start-ups and is credited for giving rise to the Finnish tech ecosystem, which includes success stories Supercell and Rovio.

As we enter the next phase of furlough ending, a potential second spike of the virus and an increasingly bleak outlook for recovery, it’s time for HR to move from executioner to hero. Humane and smart responses to unavoidable layoffs isn’t just the right thing to do – it’s also good business. 

Chris Locke is CEO of Rainmaking and ASPIRE