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Layoffs are Hardly the Easy Way Out
By Bill Catlette and Richard Hadden
Layoff. The word lands with a sickening thud. And calling it being "rightsized," "downsized" or in British terms, "made redundant," makes it no more palatable, whether you're giving or receiving the bad news.
I've had to lay off good, hardworking employees. I've also had oral surgery. If you're ever given the choice, take my advice. Go for the surgery.
To be fair, sometimes a layoff is the only path available to ensure the continued survival of an organization. Without lightening the payload, the whole vessel would sink. More often, though, American companies are stricken with "corporate bulimia," bingeing and purging on the workforce, to stay in daily tune with current demand.
Rubbermaid's Chief Executive Officer Wolfgang Schmitt has avoided the temptation to whack heads as his company's growth rate has slowed.
"For one reason," he said, "we'd demotivate the people who remained. Two, they surely wouldn't have the loyalty they now have. And three, if there were any good people left, they wouldn't be here long. They'd be looking around."
It's pretty clear that employees who are concerned about losing their jobs are less likely to be concerned with doing them.
Here are some tips for avoiding this unpleasantness altogether:
- Worry 10 times as much about the quality of the employees you hire as you do their number. Be as judicious about adding headcount at work as you are at home.
Anheuser-Busch, anticipating a need for fewer workers in the years to come, instituted a hiring freeze in 1997, rather than plan massive layoffs.
- Adopt and maintain outrageously high performance standards. Be humane about it, but rid your workforce, one by one, of those who don't measure up, rather than laying off in masses some who do.
- Enlist your employees' help ahead of time. In 1993, tiny $6 million Rhino Foods, a Vermont maker of frozen specialty desserts, had an unexpected drop in sales and a simultaneous increase in efficiency, a combination which threatened the job security of its 60 employees. Rather than taking what seemed the inevitable route, Rhino President Richard Foos asked his employees to come up with a solution. They responded with a novel and downright business-like solution. Through the "Employee Exchange Program," Rhino workers were farmed out to neighboring companies experiencing temporary employment demand.
Working only with like-minded companies, Rhino provided its people with benefit and seniority continuity, and made up any loss in wages. Employees whose interim jobs paid more than their regular ones were allowed to keep the difference. Since successfully navigating through these troubled times, Rhino's sales and earnings have grown more than 600 percent.
If you do find yourself in the unenviable position of having to send people home, here are some things you can do to make it easier on all concerned, including yourself:
- Make sure you've first exhausted all alternative remedies, like shortened workweeks, voluntary pay reductions, or job reassignments. In Canada, where unemployment is roughly double the U.S. rate, it's not uncommon to ask employees to work 80 percent of the time, for 80 percent of their pay. It beats the alternative of laying off 20 percent of the workforce.
- Inflict the pain on top management first. Get rid of the corporate toys, squeeze the corporate headquarters, shrink obscene management salaries and bonuses. Deal with the unions last, so they know you went after real waste first. Get it over with at once. Sudden death is bad enough, but a lingering threat is unconscionable.
Even "Chainsaw Al" Dunlap, the erstwhile chairman of Sunbeam Corp., said in his book Mean Business, "if I don't release them today, I'm going to have to cut more of them in six months or a year anyway. Doing it piecemeal is a fraud upon everybody--the employees, management, and the shareholders." Don't hide anything from anybody. You'll already be low on the trust index. So go out of your way to be visible, and to tell the truth, no matter how ugly it is. When it's over, say so, and mean it. Turn your attention immediately to enacting serious measures that will help you make sure you don't have to go down this road again.
Please print the following attribution for this article: Bill Catlette and Richard Hadden, co-authors of Contented Cows Give Better Milk, help clients clobber the competition by having a focused, fired up, and capably led workforce. They deliver powerful conference keynotes and leadership training. They can be reached at 800-940-7006 (+1-904-720-0870 from outside North America) or www.ContentedCows.com.