Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 9, Issue 8;   February 25, 2009: Four Popular Ways to Mismanage Layoffs: Part II

Four Popular Ways to Mismanage Layoffs: Part II

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Staff reduction is needed when expenses overtake revenue. But when layoffs are misused, or used too late, they can harm the organization more than they help. Here's Part II of an exploration of four common patterns of mismanagement, and some suggestions for those managers and other employees who recognize the patterns in their own companies.
A captive white rhino

A captive white rhino. The species is endangered, with fewer than five to ten individuals remaining in the wild. A similar number is captive. Nature's analog of layoffs is population reduction at the level of the species. Natural processes generally do ensure that the individuals that survive population reduction will be able to find the resources they need. But in the domain of the national economy, there is no such assurance. Even if an employee survives layoffs, the company can still go out of business, because the layoffs might come too late to save it. Photo "White Rhinos," by Gary M. Stolz, courtesy U.S. Fish and Wildlife Service National Digital Library.

With so many layoffs occurring in businesses all around the world, some are bound to be executed well, and some not. Knowing the common patterns of bunglers helps decision makers steer a better course, and helps others cope with the mistakes of the bunglers. Last time, we examined how the personal perceptions of decision makers lead to trouble. In this Part II, we look at two common tactical errors.

Death by a thousand cuts
To limit layoffs, and to reduce their visibility, management executes small reductions weekly or monthly, forgoing press releases. They might even deny the actions, saying, "We're operating normally, making continuous adjustments as is our usual policy."
But people recognize that layoffs are happening. Many worry they'll be next. They become increasingly determined to survive, even at the expense of others. Toxic politics emerges, wars and anxiety become common, cooperation ceases, and productivity plummets.
At its best, this method is a form of denial; at its worst, a form of procrastination. A more straightforward approach that deals with the consequences of layoffs openly is more likely to create positive internal politics. If your company uses the thousand-cuts approach, recognize that the relative safety you feel at first is probably an illusion. Prepare yourself.
Minimalism
The relief minimalism provides
usually isn't enough to
turn things around
To avoid laying off too many, management lays off the minimum number believed necessary to survive the current situation. They plan to revisit the decision later, and if corrective action is needed, they'll say, "The situation has worsened."
The relief minimalism provides usually isn't enough to turn things around. A little later, the cycle repeats. People remaining after the first action are shocked, but they're glad they personally survived. They recover after the first hit, only to be hit again. Recovery is slower and less complete the second time. After three or four rounds, morale and productivity are both depressed.
As a decision maker, be certain first that the projected effect of any layoff is substantial financial relief, and second, that the resources freed in this way are committed to expand that relief. As an employee, this pattern is a signal to you that the cycle might repeat enough times to eventually target you. After a couple of cycles, ask yourself, "Do I think our decision makers are capable of getting this right?"

Distinguishing a company caught in unfortunate circumstances from a company in trouble because of mismanaged layoffs can be difficult. But by examining how well its leadership responds to severe challenges to its survival, we can sometimes determine whether organizational survival is possible. When organizational survival is in question, voluntary departure or accepting a buyout can be excellent choices. First in this series  Go to top Top  Next issue: The Fallacy of Composition  Next Issue

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