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Wise Managers Treat Layoffs as Last Resort
by Jim Clemmer
Despite all the trendy rhetoric about the importance of people, leadership,
and values, far too many managers treat people in their organizations with
about as much care and concern as so many numbers on a financial statement.
They are just one more set of assets to be managed. These just happen to
have skin wrapped around them. Phrases like "head count" dehumanize and
objectify people. That's how we talked about cattle on the farm where I
grew up. And that's exactly how too many managers view "their people."
This thinly disguised contempt most clearly shows up when managers jump
into layoffs and downsizing as a first, rather than last step, when facing
the need to cut costs. The airline industry provides a revealing study
in contrasts and leadership. Following the steep drop in air travel after
September 11, more than 100,000 people in the industry were laid off in
North America. But in keeping with their no-layoffs pledge, Dallas-based
Southwest Airlines didn't downsize anyone. To help the company weather
the tough times, employees, on their own, initiated a program they called
"Pledge to LUV" (the company's stock symbol). They voluntarily gave up
hours and days of paid time to help the company reduce costs and avoid
layoffs.
Over the last decade numerous studies have shown that "dumbsizing" sometimes
provides short-term relief – and protects shortsighted manager's bonuses
– while hurting companies in the long-term:
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An American Management Association study in 1996 found that fewer than
half of the firms that downsized subsequently increased their profits,
and only a third reported higher productivity.
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The Wall Street Journal reported that downsizing companies outperform the
Standard & Poor's 500 list only slightly during the six months following
news of a restructuring, then lag badly, with their stock down 24 per cent
by the end of three years.
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Last year, a Mercer Management Consulting study, tracking the performance
of 800 companies between 1987 and 1992, found that of the 120 that cut
costs during the last recession, only one in three achieved profitable
revenue growth during the five years that followed.
As Don Cherry might say, it sure ain't rocket surgery. Downsizing hurts
morale and productivity. Falling sales decline further, customer service
slips, and quality drops. Absenteeism goes up and accidents increase as
stress, insecurity, and resentment grows.
Since tenure rather than performance usually determines who goes and
who stays, the worst supervisors and managers stay behind and add to the
misery index. The high performers who weren't downsized jump ship and further
weaken the organization. This growing leadership vacuum accelerates feeling
of hopelessness.
Mass layoffs are always a very last, desperate step for organizations
with strong leaders who truly care about people. At the center of this
rare leadership are core values around partnership and participation. Organizational
members aren't "heads," "warm bodies," or "human resources" to be acquired
and disposed of like assets on a balance sheet.
High performing organizations manage things and lead people. That means
working together when the financial heat is on to reduce costs through
initiatives such as cross-the-board salary reductions, with the deepest
percentage cuts going to senior management. (They made most of the decisions
that created this problem.)
Other initiatives include reduced workweeks or hours or offering leaves
of absences, either unpaid or at a fraction of salary. Voluntary sabbaticals
can also save a company money, as do the reduction of executive perks.
Other efforts include:
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Redeploying people to revenue building positions
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Offering early retirement or voluntary separation packages
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Identifying and removing underperforming supervisors and managers, especially
those with weak people leadership skills
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Work sharing
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Not replacing people who leave on their own or retire
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Redeploying or lending staff to clients or external partners
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Shared ownership or equity in exchange for salary reductions
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Involving people in identifying unnecessary costs, waste, and errors that
could be reduced or eliminated
All of these approaches require courageous, visible, face-to-face leadership.
Successfully leading in tough times calls for openness, clearly outlining
the difficult situation, expressing your own pain, and providing cost reduction
guidelines. Through surveys, meetings, e-mail polling, "town halls," and
the like, managers facilitate brainstorming, get input, set priorities,
and make joint decisions and action plans. Then communicate - you can't
tell people too much about what's going on and why.
Sam Walton built Bentonville, Ark.-based Wal-Mart into the world's largest
retailer through treating staff as respected partners. One of his legacies
to "treat them as partners and they will treat you as a partner and together
you will all perform beyond your wildest expectations."
Forming respectful partnerships that let staff participate is not the
cowardly acts of managers in closed meetings who hide behind press releases
and get external consultants or the HR department to the dirty work of
firing people. If this sounds like a lot of hard, agonizing work, it is.
Management can be tough, but leadership takes real courage. The research
clearly shows you can pay the price now or pay a much bigger price later.
Originally published in The Globe & Mail. Jim Clemmer is
an international keynote speaker, workshop leader, author, and president
of The CLEMMER Group, a North American network of organization, team, and
personal improvement consultants based in Kitchener, Ontario, Canada. His
recent bestsellers include Pathways to Performance: A Guide to Transforming
Yourself, Your Team, and Your Organization, Firing on All Cylinders:
The Service/Quality System for High-Powered Corporate Performance,
and his most recent book, Growing the Distance: Timeless Principles
for Personal, Career, and Family Success. His web site is http://www.clemmer.net/.
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