Philadelphia Business Journal - by Victoria Green & Mitch Wienick
Friday, September 18, 2009

In today’s tough economy, companies are obviously struggling and are laying off employees at levels not seen since the early 1980’s when the U.S. was coping with the Savings & Loan Crisis and record high interest rates. Employers are seeking ways to reduce costs and downsizing continues to be on the rise. However, employee layoffs have significant overt, as well as hidden, costs and all costs should be considered when making a reduction in work force decision.

Some organizations are using the economic turmoil as an opportunity to release underperforming employees. At the same time, other companies are facing a severe business crisis and are being forced to lay off some of their best employees in order to remain viable. Unfortunately, and because time is of the essence, some organizations are going straight to work force reductions in order to lower costs without examining all available alternatives to execute cost reductions or generate additional revenue.

Senior leadership is encouraged to be thoughtful and not overly aggressive or act hastily when examining potential options to stay competitive. A reduction in force may not the best route due to the negative impact on productivity and decreased ability to recover once the recession begins to lift. Alternative means for increasing profitability such as process efficiencies, cash conversion cycle reductions, and companywide reductions in compensation may be more desirable and have a very positive long term effect on morale and productivity.

However, after careful evaluations, if layoffs are clearly the right solution, direct and timely communications to the organization will reduce uncertainties and anxiety. Employers should develop a clear and candid communication plan and carefully monitor its implementation. Include post-layoff communications as well. Being inclusive and as transparent as possible, while acting quickly, reduces the chances of employees filling in the communication gaps and making up assumptions that create the conditions for unproductive water cooler gossip. Employees’ assumptions tend to be more negative when focusing on a reduction in force rather than the reality of its implementation. Employees need to understand that downsizing is necessary in order for the organization to remain viable.

When choosing who will be laid-off, consider balancing the work to be accomplished, skill sets needed, and available employee skill sets. Be sure to consider the current work, as well as the work that will help the organization at least maintain market position and eventually flourish when the economy turns up. You may not get some of your dismissed talent back. Once the decision to downsize has been made, management should act quickly and conduct the layoffs in a humane manner. We are aware of employees who have been laid off via email, by inadvertent disclosures from fellow employees, or by finding a notice on their desk. This is really inexcusable and avoidable with the appropriate planning and orchestration. Experienced and professional outside resources can be very helpful in the planning and execution stages.

The “survivors” of a reduction in force need attention as well. Following-up with remaining employees post-layoff to allay concerns and identify issues that need to be resolved is a critical step in the process and should not be skipped or barely acknowledged. Providing a means for employees to express concerns, perhaps through a hotline or Web site, has real benefits emotionally and operationally.

The survivors are not only dealing with the loss of colleagues, but also with a significantly increased workload, possibly a loss of internal expertise needed to get the work done, and fear of being next on the list. Many struggle with how to interact with those packing up their belongings and exiting the building for the last time. Rather than avoiding the discomfort of speaking with the laid off, encourage the survivors to acknowledge the loss and hardship and empathize with their situation. Survivors need to acknowledge their own emotional reaction to the loss and should be encouraged to seek help if needed. They should also be permitted to help the employees who were laid off in appropriate ways and be supported by the company in doing so.

The leadership team needs to step up and provide support to the survivors by helping them cope with the loss and focus on the business at hand. It is important to allocate time to process reactions, to strategize about dealing with the reduction in the work force, and to get the work done. Be compassionate during the layoff, encourage staff to generate ideas for improving profitability and reducing cost, and mobilize your team to act on these ideas and execute the strategy for moving forward.

Layoffs are never easy and can lead to a disengaged work force. Planning carefully and acting humanely and decisively, and showing empathetic leadership during a difficult time can offer real benefits to the organization and ongoing business effectiveness.

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