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Dear CEO’s, Please Lay Off with the Layoffs

January 20th, 2009


A small business owner told me the other day he recently met with his staff and jointly worked out an arrangement where employees voluntarily reduced their hours to help account for the recent slow down in business.  Rather than layoff a few employees, it was decided that everyone would share in the pain and work together to solve the company’s financial dilemma.  Rather than sending talent to the exits, this company is poised to quickly respond in full force when the recession lifts. Teamwork was their response to bad news rather than cutting coworkers.

Why is this CEO motivated to approach his company’s economic issues in this manner?  I suspect it is because he is closer to his people. He sincerely cares for them as individuals.  This small business owner has to look employees in the eyes most every day so he is motivated to work out a solution rather than simply pull out a quick fix tool and layoff employees.

Employees of large corporations are not so lucky.  Their CEO’s and leadership teams are typically far removed from the workforce.  A Fortune 500 CEO can simply call their human resource division and command, “layoff five percent of the workforce.”  Workforce reduction plans can be developed and implemented without senior management getting their hands dirty.   Employees are given the tragic news and sent home with little or no interaction from leadership.

This impersonal approach is why you will notice the initial response to economic bad news from medium to large companies is to layoff workers.  The same companies who often state, “our employees are our most important asset” are the same companies kicking people to the curb at the first sign of bad economic news.  To appease shareholders and initiate positive action in the eyes of Wall Street, a layoff is considered the expected and financially responsible quick fix.

The really bad news is that employee layoffs rarely result in long-term cost savings. The data does not support this knee-jerk reaction to reducing expenses.

It is not hard to find bad news. Evidently bad news sells advertising and all the network news programs have signed up for a double portion of negative news coverage. This has created a steady diet of fear and frustration for business leaders who typically stay electronically plugged in most of the day.

From a positive people practices perspective can we logically think through this layoff strategy? Are there not other alternatives to handing out pink slips?  The Wharton School of Business has made these following suggested alternatives to layoffs:

  • Voluntary retirement and attrition
  • Company-wide salary reductions
  • Reduced-salary sabbaticals with benefits
  • Reduction of working hours
  • Hiring freezes
  • Cancellation of company business travel
  • Suspension of the 401(k) matching contribution
  • Develop and implement employee performance standards

When faced with challenges, leaders and employees will rise to the occasion and deliver viable solutions if an atmosphere of teamwork is propagated rather than an environment where everyone must fend for themselves. Before handing out pink slips, involve the team to determine preventive and innovative alternatives to the dreaded layoff.




3 Comments so far:
  1. SM says:

    I really like these alternatives. I strongly feel it is best to keep everyone as much as possible. Now, isn’t it the right thing to get rid of employees who bully or are toxic and just dislike other employees for no reason? I always hear a positive attitude and likeability is the most crucial thing. Plus, how can a company who gets rid of any of these folks notify other companies to beware of them? Bullies or other naturally toxic people must not be allowed to work because they decrease productivity and hurt the bottom line. May the Obama Administration help this dilemma now! Any comments would be appreciated.

  2. Kevin says:

    Companies who are known as great workplaces are not afraid to part ways with under-performers, bullies, toxic managers, etc. Great workplaces have a responsibility to employees to maintain a workplace free from the hazards of these negative influences. Mislabeling a termination as a downsizing or lay-off is not a good idea. It is best to deal with performance issues as they surface. Great leaders will try to salvage most every employment relationship, however, there are going to be situations when the company and employee must part ways.

  3. Excellent piece, Kevin! I believe that it is a great idea to keep alternatives in mind. So often, we become short-sighted and trapped into believing that there is only one way out. It’s important to look for demoonstrations of alternatives that will inspire us to do better – even if it means going against the tide.

    One positive example I have seen is with Kimray, Inc. in OKC. This manufacturing company has established a higher purpose for its existence. Rather than a myopic focus on the bottom line, their reason for being is to support families. They anticipate slow times and make provisions to care for their employees. For example, during the recession of the Eighties, they kept people on their payroll and loaned them out to charities needing help. In other words, they prepared for the inevitable rainy day and made preparations well in advance of the problem. There was no knee-jerk reaction involving “disposal” of employees. Over the past 90 years, they have demonstrated a sincere commitment to their purpose.

    Make no mistake about it, this is a profitable company of about 500 or so employees. Their standards are based on character initiatives and maintained at a very high level. It is a culture of integrity over rules. As a result, their profitibiliy has steadily increased, worker’s comp claims are minimized and employee loyalty is extremely high. A good example for all.


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