I think that many leaders today are too quick to run to the layoff solution rather than systematically looking at the business and search for a holistic solution to their financial problems.
The Layoff HBS story is interesting in that at least the CEO of the company was informed enough to involve his whole senior staff in the decision on how to handle the layoffs at his company. Under normal circumstances, I would agree that the company does need to downsize to help right the ship. But in this case, there seem to be other options that the CEO hadn’t even considered. The CEO could use some of the cash he has squirreled away for his rainy day fund (aka, the company acquisition fund)—because clearly this is a rainy day. He could also enact an across the board 5% pay cut for regular employees and a higher percentage for those making more than $100,000 per year.
Even if he isn’t a servant leader, it only makes sense for him to work out a solution that impacts him more than it does his employees. Why would you want to work for a company, if the person who makes the decisions isn’t financially impacted by the decisions he makes? I wouldn’t.
And, the potential of using performance appraisals to do the laying off…what a crock! The HR person even said that their appraisals had some bias. Rank and yank? What an awful way to go. And, last in first out as a means for layoffs? What are their employees, widgets coming off the production line? I would argue that the most recent hires are probably the ones that are going to have the new skill set necessary to get the company through the hard times it now faces.
So, what would I do if I was in charge? I would take the following combined approach:
1) review the business, is the strategy still on track? Can I squeeze some dollars out of strategy changes
2) lose some of the cash—I see no better investment you can make than to invest in your employees. This company is sitting on a boat load of cash, why not offset some of the salary expense by reducing the company’s cash position just a bit.
3) make it hurt the little guys the least—allow those in charge (senior management) to take a bigger hit than the rank and file employees
4) encourage early retirement and lose some of the dead weight, not necessarily in that order
As a final component of this process, I would communicate the choices available and the reasons why the method to increasing the financial position of the company was made to employees. They should know that the company has invested in them. This should improve morale immeasurably.