The Layoff

Layoffs punish the innocent and absolve the guilty.  This is my thesis regarding the practice of laying people off.  That may be a little over the top, but it’s close enough in my opinion.  It sounds harsh right?  Well layoffs are harsh, so why shouldn’t those doing the laying off bear accountability?  Managers in most companies have turned the word “team” into a huge cliche’.  They do this as a method of motivating people and creating a feeling of inclusiveness.  If you’re sincere it’s a really great way to work with your people.  But if you really mean it, you’ll treat people like team mates, not commodities.  To take it a step further, if you watch sports, when a team fails who gets fired first?  I’m just saying………

The Harvard Business Review studied a case called “The Layoff”.  This case study made a rather large impression on me, that will remain for the rest of my career.   In a way, a layoff says we as leaders have failed.  We’ve not anticipated the bad times or we’ve been fiscally irresponsible in the good times.  In this case the company was in trouble financially, but they had a huge amount of cash in the bank for the purpose of “critical acquisitions”.  (This tells me they saw an acquisition as an emergency but a lay off as business as usual.)  The management team was tasked with coming up with a layoff strategy.  Apparently they had already cut costs and reduced inventory but there was little detail about what they did to improve their situation.  They decided a layoff was the way to go. 

I am firmly resolved to the idea that layoffs must be the very last resort for a company, but I’m not naive.  Sometimes layoffs just have to be done.  That’s obvious.  However, I find it unconscionable that so many companies lay off their workers as anything other than the very last act of desperation.  Here’s a brilliant news flash:  The economy is cyclical, be prepared because there will be another recession.  If you as an executive have not prepared your company for an economic downturn, you should consider laying yourself off first.  If you have prepared your company for an unfortunate economy but the damage is far worse than anyone could possibly anticipate (like now) you should have follow the guidelines below.

Layoffs have to be the very last resort.  Did I say that already?  You need to understand that you’re not just losing some meaningless inanimate asset.  You are taking food out of the mouths of your “team mates”, their spouses, and their children.  Your people have homes and bills that they cannot pay without a job.  You are taking away their livelihood, their medical insurance, and possibly crushing their self-esteem and self efficacy.   Not to mention the unemployment rate these days and the difficulty in finding new jobs. 

Do NOT leave your people hanging.  I was informed 2 weeks ago that my company will be laying off 20 people.  We probably won’t know until June who those 20 people are.  Laying someone off is horrible, but having to worry about it for weeks or months is the worst part.  A company that creates this type of worry can almost guarantee that some people are working up their resumes and looking for new jobs.  It’s conceivable that a poorly executed lay off could turn into a mass exodus.

Let your people go with dignity.  Give them the best severance you can and offer to give them a reference for their next job.  Remember, you’re laying them off not firing them.  It is YOUR responsibility to make this as amicable a situation as possible.  If you put in the effort to make the situation amicable it can go a long way toward mitigating your reputation hit in the future.  No one wants a job they have to worry about constantly, but if it’s known that you take care of your employees even on those rare occasions that layoffs have to happen, it will help establish your company as a caring employer.  If you lay people off with no severance while having security march them to the door before booting them in the hind quarters, your company’s reputation will suffer. 

If you must lay people off, use a fair and consistent methodology for doing so.  There are a ton of ideas for doing this:  “first in, first out”, “last in, first out” , “higher paid first”, “performance review based”, etc.  All of these are horrible, especially performance based which can create a really political and overly competitive environment.  Soon you have a business filled with people who know how to job the system, not necessarily the best employees.  Also most performance review systems are broken, so laying off people using them as the criteria will be inherently broken as well.  Whatever method you choose, explain that method to the entire company, and proceed with care.

Most of all, have respect for the individual employees.  The reason they’re being laid off probably has little to do with them.  Remember that the ex-employee of today can be the boss of tomorrow.


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