Time to get smarter about layoffs
PNA co-founder Adrian Savage writes that all too often, tech layoffs begin and end with a number, not a strategy--and that's ultimately a recipe for more trouble down the road.
It's essential to protect the talent vital to future growth by understanding potential at the individual, team and organizational levels. The remaining staff will be all you have available to ensure corporate survival, so they need to include all the available talent for the task. Technology companies already have eliminated thousands of jobs this year, with more to come. Too many of these layoffs begin and end with a number, not a strategy.
Department heads must reduce their head count by a fixed percentage, without time to consider what is best for the long-term future of the business. Managers are almost forced to resort to "neutral" criteria or arbitrary systems like the bell-shaped curve. As a result, some of the most talented people are laid off, while more lose their trust in the company and go elsewhere.
Making layoffs match a pattern derived from abstract assumptions or measurements is arbitrary and unthinking habit. According to the widely used bell-shaped curve measurement system, every CEO heads a company with 50 percent of its people labeled as below average performers.
The "untalented tenth"
Suppose you lay off the "bottom 10 percent" performers, using the bell-shaped curve to find who they are. You have immediately created a fresh "bottom 10 percent" amongst those remaining. Yet if the original group were mostly able people, both "bottom 10 percents" include people vital to future growth. It is the fixed nature of the bell-shaped curve that gives them an unfair label.
All arbitrary and mechanical means of deciding who to keep and who to let go put assumptions in place of reality. You're making decisions based on theory instead of taking time to check out what's called for. It feels "fair" precisely because it is so arbitrary and no one is chosen on a personal basis. That might be equitable, but it isn't sensible.
Potential and performance in a company is not tied to any theoretical pattern. Responsible management always looks to see what is really there, without preconceptions. Ratings that affect the lives of people and companies should be based on reality, not academic distribution patterns.
There are the questions that every technology company considering layoffs needs to ask itself before taking action:
Are layoffs the only option? Have we looked at all the possibilities before deciding to let go of people we've already paid to hire, train and retain? Losing one talented person without reason is a tough mistake to put right. What's our contingency if we can't hire similar people back when we need them?
What is our total strategy to cope with the downturn? Which parts depend on people--like working to stabilize sales, develop or find new products or markets, build greater productivity? What will be the impact on the strategy of letting these people go now? Shooting yourself in the foot is never very impressive.
What importance do these people have for the business in the normal course of events? How can we preserve this, so we're not harming our long-term prospects to meet short-term pressures?
What is our recovery plan? What kind of people will it need? Are we making sure we're retaining them? If they are lost, the impact of the downturn will be magnified by problems with starting the recovery.
One of the clearest learning points from Sept. 11 was how companies hard hit by damage relied on the unexpected initiative and innovation of their people to get them working again in double-quick time. The same thing happens in economic downturns, only more slowly and less dramatically. If companies don't have a clear picture of the talent they have now, plus a solid strategy for retaining what they'll need to stage a recovery, they'll come out of the downturn weaker and less competitive than they went in. That's a double-whammy for the bottom line. It's tough to avoid an industry or economywide recession, but top management is still accountable for being ready for the inevitable upturn.
This economy requires every bit of talent, effort and initiative to ride out the storm. Companies with sound systems for finding and using every instance of internal talent survive economic downturns better.
People want to feel appreciated and valued for their futures, not just their pasts. No one likes to know they've been sacrificed to prop up the short-term balance sheet. Among technical and professional communities, there are long memories for companies who let their employees bear the bulk of any pain. So ask yourself what you should do for your people, not just what they must do for you.