People are not disposable assets

Posted on November 18, 2009

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Overview

Business schools reported record application numbers last year, whilst companies downsized to survive the economic downturn.

As Jerry York, former CFO of IBM and Chrysler and current member of Apple’s board of directors, stated in his recent lunchtime lecture at MIT Sloan, we should expect to see booms and busts more frequently in the future. We must therefore learn to deal with them.

For managers and employees alike, one of the most challenging issues in a downturn is handling layoffs. As a manager, you work for months and years to build the right team and are suddenly faced with having to dismantle all or part of it. As an employee, you face loosing your job and good colleagues.

To start a dialogue about the subject, I recently interviewed three people who had worked in organisations that downsized as a result of the financial crisis. Their stories were diverse and interesting and offer insights into current practices.

Alien Abduction

“The entire company was invited to a meeting. 30 of us went into one room for a meeting lasting an hour. 120 of us went into another room for a meeting lasting 2 hours. When the 2 hour meeting was over, the 30 people in the first meeting had already been shown out of the door.”

Rumours had been circulating for some time that the company would have to lay off staff. As a result, staff had not been as effective and focused as usual. A company-wide meeting was finally called. Some were called into the larger conference room, some into one of the smaller rooms. They were given a good update on the state of the business and told that 30 of 120 staff would be laid off that same day. After an hour, mobiles started going off. When the group from the larger conference room finally came out of the meeting, the 30 people had already been asked to pack their things and leave the office. Their meeting had ended an hour earlier.

Picking up the pieces

The teams then had to pick up the pieces. It was not always easy, as no information, passwords etc. had been handed over. Fortunately key members in each team had been kept, so there were no gaping holes in their knowledge. When needed, the teams reached out to employees that had left, but those employees had little incentive or reason to help.

The targets were not changed officially, it was only acknowledged behind the scenes that they could not be met. Management wanted to keep the pressure up for the company to achieve the best possible result.

Dealing with Clients

The state of the world economy helped the teams position the cutbacks with their clients. Everyone was feeling the crisis, and the company therefore chose to be very upfront with clients previously managed by staff that had left. They tried to match the level of interaction clients were used to and on difficult calls, managers would join in to help address concerns they had about the company.

Political Correctness

“We were given no information on why a person was fired. They simply wanted to be seen to cut across the board. Past performance suddenly meant nothing and the performance appraisals became a joke over night”

Everyone in the company could see the writing on the wall. The industry had been hit hard by the recession and it was just a question of time before lay offs had to be made. Then the first person was tapped on the shoulder. While he was in the one-on-one meeting with the manager, HR came to clear his desk. As he stepped out of the meeting he was handed a box and asked to leave.

No reason

This went on and on. Although everyone knew the lay offs had to happen, nobody could make sense of what the criteria was for choosing who got laid off. It became apparent that performance played no role. It was all about political correctness. People were fired across the board and given no reason why they had been chosen.

The fact that high performers were fired and demoralised the rest of the team. If hard work and contribution was not recognised, and you could be fired for no reason, then where was the incentive to work hard? The performance evaluation system became a joke over night.

Uncertainty

Fear and uncertainty became the new performance driver. The amount of work remained the same. Everyone had to work harder, but kept quiet because they were afraid of loosing their job. There was no clarity on the plan moving forwards, the only thing staff knew was that hard work would not protect us.

Friends Don’t Commit Sabotage

“When you build a team and encourage friendships to build, you can’t simply tell people to leave. You need to help them find jobs, offer counselling sessions and so on. In return you retain mutual trust.”

The process was well planned. The teams had been told that in a meeting that the global economic crisis was affecting their business, although no reference to layoffs had been made. It simply set the expectations of a challenging future.

Visible and fair

The company culture had encouraged strong bonds to form between all team members, and this played a key role in the downsizing process. A month after the initial meeting, the company gathered its staff and asked them for possible solutions that could help avoid lay offs. Were possible, it was avoided, and were not, the process was made clear, visible and fair.

Strong friendships within a team played a factor in selecting who to lay off. Everybody was encourage to help their friends and colleagues find alternative employment and counselling was offered when needed. Staff served out their notice unless they chose not to. There was no fear of sabotage – leavers did not wish to harm the friends they left behind.

Business as usual

The team leaders took a ‘business as usual’ attitude and communicated it well to the team. The learning curve was an issue as there had not been much redundancy in the team, but it was manageable and the workload dropped in line with the number of people laid off.

Friendships remained in place and leavers still speak highly of the company.

Thoughts and Conclusions

Jeffrey Hollender of Seventh Generation recently commented that corporations need to stop thinking about people as easily disposable assets.

The first two stories prove that the problem Jeffrey points to exists, the last one that there are better ways. If Jerry York is right, 21st century managers will need to start building skills in this area today.

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Posted in: leadership