Layoffs: What’s the Right Thing to Do?


A few weeks ago, I was interviewed for an article in the Chicago Tribune titled “Layoffs could spell more trouble for Illinois“, and it put me into a self-reflective mood as to the best way to think about this topic from the perspective of a “values-based leader”.

As with all subjects, I try to approach the topic of layoffs from a “balanced perspective”. By that I mean it is easy to discuss layoffs from either extreme….that is:
(1) it is part of the “free market capital system”, so just accept it, deal with it, and assume the people who lose their jobs will get retrained and find another job;

or

(2) layoffs are unjustified and should not be allowed, or make layoffs difficult to do by requiring organizations to pay several years of compensation to a person who is being laid off (as in many countries in Europe).

Okay, here are a few opinions. First of all, despite all of the issues and challenges with the “free market capital system” (and there are many), I do not believe anyone has come up with a better system throughout the course of history. And, assuming people can be retrained, (which is often a big assumption) the overall economy can continue to grow and flourish. For an example, think of the progression from a predominantly agricultural economy to an industrial economy to a service economy.

Also, it is important to note that making it difficult to lay off people doesn’t solve the underlying problem because employers are less likely to build facilities and hire people in locations where it is difficult to lay off people.

Finally, if my organization has 500 team members and the economic reality is I can only afford 450 to be competitive in the marketplace, if I don’t lay off 50 team members, I am placing the entire 500 team members in jeopardy by being uncompetitive and being at risk of bankruptcy.

Okay, does this lead to the conclusion of “just accept it”, and ignore the issue…..I don’t think so. As I tried to point out in the Chicago Tribune article, when an individual is laid off, it doesn’t just affect that one person, it puts an entire family in jeopardy. And if the person is older, it may be very difficult to find another job. Nothing bothered me more during my career at Baxter than having to lay off team members.

In order to minimize the harm done in layoffs, I have two recommendations for organizations:
(1) I believe that before companies increase their workforce they should take the time to think through whether they really need to hire additional people. It amazes me to see the number of organizations that hire people and several years later lay people off. Why are they surprised? Did they take the time to plan what their real needs would be over the next several years? Are their needs permanent or just temporary?

(2) If you need to lay off team members, I believe you have a moral obligation to help those individuals find another position. This involves coaching, outplacement services, and treating each person the way you would want to be treated if you were being laid off. Not only is it the “right thing to do”, it shows the team members that remain in the organization how you treat people that leave the organization. This has an enormous impact on the people that remain in the organization after a layoff. At Baxter, we provided assistance to team members and we kept track of how long it took them to find another position. We were proud of the fact that 90% of those laid off were able to find another position within three months of leaving Baxter.

So that’s a few “opinions”….let me know what you think!

One comment

  • Harry,
    This is very well thought through, thank you for doing the work (the reflective, more in-depth thinking) on layoffs that is required.

    Too often, like many of the complex issues in politics, complex issues like this get simplified into either or choices. Which are false; black and white options. The “energy” can often get behind the more charismatic (or loudest) voice and the dialogue around the choices never happens.

    You asked for opinions in your blog, and beyond the above, here are two of mine:
    1) Practically every organization I ever worked with has “people” as part of their core value statement. I’ve sensed this is manifested often in action in words only. The “people” value does not exist in the culture for the reasons you give here. As you would frame it in your class: “Do we cut head count and remain fiscally responsible? Or do we think about the people?” The answer is “yes”.
    2) Psychologically any person or group gets into trouble when they split something complex into good and bad. It is actually called “splitting” and it is ominous in psychology. It means the person’s judgment is impaired. Same is true for large groups. That is how we get scapegoats and overly simplified ideas in the political debates. It is a real problem for leadership because factions split around this maladaptive process. And then the leader gets boxed in as the topic gets very emotional quickly and publicly. Good for you for not allowing yourself to be boxed in and for revisiting a delicate and complex dynamic impacting the workplace.

    Another idea to add, to underscore your point about the challenge of finding work, the book “The DIsposable American” was quietly published before the recession, it documented another dynamic about layoffs – the promise of finding “equivalent” work for many blue collar workers never happens in the course of a person’s career. Once laid-off they never recover what they had in terms of benefits and income.

    Eager to hear you write about the similar and intertwined paradox that is “share holder value”.

    Best,
    Daven
    Past President Academy of Organizational and Occupational Psychiatry

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