Although layoff rumors had been circulating for several months, management was silent on layoff prospects. Morale dropped, absenteeism increased, some people left; still management held to the policy of "keep a lid on it."
Finally, many employees were called in, one by one, over a period of three months and told that their jobs had been eliminated.
Thoughtful organizations use many of the following practices during economic layoffs:
* Communicate information. For example, a service organization lost accounts that amounted to 15 percent of its revenue. This information was quickly shared with all employees, and it was apparent that about eight jobs would be lost over the next six months.
Further, employees were informed three months before the loss
of the contracts that it might happen. Thus, employees did not have to debate the necessity of layoffs; they had the same information as management.
* When to reduce. Layoffs should not be a "do or die" situation. Keep close records of revenue and cost trends. Use market and industry data to anticipate future demands. Graph profits per employee. When this number declines over a period of three to nine months, consider reductions.
* How to cut. When both the numbers and your intuition tell you that layoffs are necessary, try to make all of the cuts at one time. Take your hit and be done with it rather than stringing the misery out over several months.
* Who to cut. Ideally, you should cut the individuals who contribute least to the organization. However, in practice that is hard to determine.
Consider cutting the people with less tenure who are not in crucial jobs. But do not make all of the cuts among the "hands-on people" who are serving customers or producing products. In fact, most organizations would benefit from taking disproportionate cuts from management and staff positions.
Some organizations demote key management people to employee positions. Assign many duties of former managers to employees. If trained properly, most employees will appreciate the additional responsibilities.
Remember the remaining employees. During layoffs, we often forget employees who remain with the firm, but research suggests that they also suffer unnecessary, stressful adjustments. Make sure those employees understand their future role in the company.
Gerald Graham is a professor at Wichita State University and a management consultant.
Identify the extent to which you agree with the following by allocating 10 points between each pair of statements.
During layoffs caused by economic conditions, it is effective to:
1. A. Keep layoffs a secret for as long as possible.
B. Share the prospect of layoffs as soon as possible.
2. A. Lay off all of the people at once.
B. Spread the layoffs over a period of time.
3. A. Cut a disproportionate number of lower level positions.
B. Cut a disproportionate number of management and staff.
4. A. Wait until the last minute to cut employees.
B. Cut back when the need first becomes obvious.
5. A. Routinely share revenue and cost data with all employees.
B. Avoid sharing financial data, especially during tough times.
6. A. Share problems and prospects fully with employees who remain.
B. Share only information that is absolutely necessary with remaining employees.
7. A. Ask remaining employees to assume additional responsibilities.
B. Eliminate responsibilities performed by terminated people.
Total the points that you allocated to the following: 1-B, 2-A, 3-B, 4-B, 5-A, 6-A, 7-A. A score of 55 or higher suggests effective layoff practices.