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The Seven Dumbest Layoff Alternatives

From Forbes.com

Dr. John Sullivan is a workforce planner. That’s a nice way of saying layoff specialist. Sullivan says almost all layoffs and layoff alternatives are done wrong.

That’s a big issue, since so many layoffs are happening. The Labor Department reported almost 600,000 job losses in January alone. But businesses that try to avoid layoffs by instituting pay cuts, hiring freezes or furloughs usually screw up too.

The main reasons layoffs and their alternatives are done poorly, according to Sullivan: They’re left in the hands of employees and human resources professionals. If you go for voluntary early retirements or buyouts, you’re letting your workers decide who stays and who leaves. Top performers will always feel confident they can find a job elsewhere, while poor employees won’t. So the good employees will be the ones to exit. You’re paying them to walk out the door.

High-paid employees may also feel that if they leave, they’ll save the jobs of three others. That’s misguided, though, because a company needs the best staff it can get. If it lets its most valuable employees walk, the three others may find themselves without jobs when the company or department folds.

Human resources professionals cause problems because they concern themselves too much with trying to be “fair,” partly to avoid lawsuits. That makes them go for across-the-board actions–layoffs, pay cuts or hiring and overtime freezes–that tell employees that performance doesn’t matter, that the best and worst staffers will be treated exactly the same. That, too, can drive top performers to begin looking for companies willing to treat them better.

And don’t forget how layoffs can feed talent to the competition, especially if the competition is creative and aggressive about it. When Yahoo! cut a chunk of staff at its headquarters in December, a small start-up company called Tokbox, which provides a free video chat service, set up a taco truck across the street from Yahoo!’s corporate headquarters. It gave any Yahoo! employee who stopped by–laid off or not–not only free tacos but a promise of five jobs to be considered for. Tokbox’s vice-president of marketing, Micky O’Brien, says it was a sudden idea conceived the day before.

Once you’ve rejected across-the-board cuts, you may be tempted to make HR hack off the 10% of the staff with the least seniority. That won’t do much good for the company either, Sullivan says. It will cost you a lot of new, fresh ideas.

Furloughs (unpaid, forced vacation time) pretty much never make sense. They’re terrible for morale, and they don’t save much money. Roughly 40% to 60% of what a company spends on its employees isn’t salary or wages but rather benefits, workspace and other things that don’t stop costing during a furlough. Furthermore, many furloughed employees take their time away as an opportunity to look for a new job–increasing the chances that the best talent will depart. And morale and stress problems afflict the employees left behind, as they feel that they have to make up for the absent staffers. In some jobs, such as sales representative, the amount a worker brings into the business is more than the company can save with a furlough anyway.

The corporate culture should be a major consideration in workforce planning, according to Steve Miranda. He’s the strategic planning officer for the Society for Human Resource Management. Companies that have a history of weathering tough times should stick to their own track records. Consistency matters. Southwest Airlines has kept to a no-layoff policy for decades. If that changed that now, the company would lose a terrific advantage over its competitors.

Whatever you choose to do, layoffs or their alternatives, you need to do it more carefully than is common. Across-the-board anything is a bad idea. It shuts down innovative and reliable producers, indiscriminately punishes top performers and cuts back in areas that could help keep the company profitable. “You wouldn’t tell a Michael Jordan not to play for one week just to keep things even with the other players,” says Sullivan, who loves to relate layoff strategies to sports, the one industry that he says does workforce management right.

Companies, particularly large public ones, ultimately need to bear in mind that their greatest concern is their remaining employees. In December, Bank of America announced it would lay off 35,000 over three years. “That message was not for the employees,” says Mitchell Marks, an organizational psychologist at San Francisco State University. Companies sometimes announce layoffs just to look decisive, he says. That’s never worth it.

Marks wrote the book on dealing with workforce trauma, Charging Back Up the Hill: Workplace Recovery After Mergers, Acquisitions and Downsizings. Step one: Get the process done as fast as possible. Then let your remaining workers mourn their losses (of co-workers, job security confidence and even a sense of fair play among staff). While companies always see monetary advantage in layoffs, buyout offers, furloughs and freezes, they too often overlook something at least as important: an undistracted employee.

Don’t drive out your best employees with your worst.

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02/20/2009 - Posted by | layoffs | , , ,

4 Comments »

  1. Bank Of America Is Doing Layoffs All Wrong

    The three-year plan could be a very a bad one. Here’s why.
    http://www.forbes.com/2008/12/16/bank-america-layoffs-leadership-governance-cx_tw_1215bofa.html?partner=relatedstoriesbox

    Comment by Bear | 02/20/2009 | Reply

  2. From the New York Times:

    Career Options for Ex-Wall Street Workers

    This week’s news that the city plans to spend $45 million to retrain jobless Wall Street executives may, understandably, have been met with less than sobs of gratitude in that demographic. After all, as the happily divorced like to say, stick a fork in a toaster once, it’s an accident. But a second time?

    Ross Baltic, a managing partner with Mercury Partners, a headhunter in Midtown, said the simplest transition might be the most straightforward: Analysts for investment banks might leap to the industries they analyzed, traders might move to the companies they bought and sold. “They may know the pharmaceutical industry, they may know aerospace and defense,” he said. “You may have skill sets and be able to transfer those to those sectors.”

    But while Mr. Baltic said laid-off Wall Street workers had been calling “like you couldn’t imagine,” he acknowledged that executive headhunters were often of little help these days.

    “We’re long on candidates and short on jobs,” he said.

    While many of the tens of thousands of masters of the unemployed universe would most likely happily return to doing what they know, others may be looking for a change of pace. Here then, some possibilities for recycling a Wall Street résumé:

    Lead walking tours amid the ruins of your past life. Who better to show people around the financial district than someone who has worked — who has bled — on the very spot?

    Maybe, said Seth Kamil, founder of Big Onion Walking Tours. But Big Onion tour guides must have advanced degrees in history.

    “We’ve actually gotten a couple of résumés from no-longer-employed Wall Streeters,” Mr. Kamil said. “I’ve been kind of graciously trying to say, ‘Working on the street just doesn’t do it.’ ”

    Become a butler. “Somebody coming from the Wall Street arena typically would have management background,” said Keith Greenhouse, president of the Pavillion Agency, which trains and places household employees, including chefs, personal assistants, nannies and butlers. “It could tie in, indeed, to personal service.”

    It can be a handsome living. “Butlers are starting at around $70,000 on the low end, to upwards of $150,000 a year,” Mr. Greenhouse said. “I’ve got to tell you, the salaries are terrific. A really good nanny could make $100,000-plus a year, plus benefits. That’s a top nanny.”

    Of course, there is the possible awkwardness of a man used to having someone light his cigar for him suddenly finding himself on the other end of the match. But Mr. Greenhouse said he was used to riches-to-rags sorts crossing his threshold: “Divorcees coming in who were married to multimillionaires. All of a sudden they need to go to work and they come to us looking for a personal assistant job: ‘Oh, I know about this because I’ve had the rich lifestyle myself. I know how to take care of rich people’s affairs.’

    “I’ve had people that come from all sorts of career paths and all of a sudden they want to be a butler,” he added. Speaking of cigars:

    Sell cigars. Great idea, said Anthony Cee, manager at Florio’s in Little Italy, which contains the Three Little Indians Cigar Shop. The image of the Wall Street big shot, the Gordon Gekko type, is exactly what his store likes to project.

    “Most of them are cigar smokers, so the education is there,” he said. “If you smoke cigars, I would say frequently you know a little bit about cigars. Professionalism is everything. ‘Dress to impress,’ that’s my motto.” One little problem: no one is buying cigars.

    “We have no openings at all,” Mr. Cee said. “Different times, we help everybody. We had a lot of regulars who are out of work right now.”

    Shred documents. No one knows sensitive paperwork like a Wall Street veteran. Just ask Al Vari, a salesman with Code Shred, whose service area includes Lower Manhattan.

    “I spent 25 years on Wall Street, and now I’m in the shredding industry with two friends of mine,” he said. “It’s not an easy business. It’s a service industry. It’s a trucking company. You send out trucks to shred documents for people who have to shred them by law, or are, in a sense, paranoid.” Mr. Vari warned, however, that this is not a career for a person who has pushed a pencil all his life. “It’s done by a truck driver,” he said. “It’s a labor job.” He considered a possible Wall Street applicant. “These guys, the worst thing that’s happened to them is lead poisoning or deteriorated livers.”

    Someone, however, does have to sell the service. “To be an outside salesman, to have contacts in the industries, they could probably make a living,” Mr. Vari said. “Not what they were making on Wall Street though, I’ll tell you that.”

    Entertain small children. Because even sad clowns are a hoot at a birthday party, said Gary Pincus, owner of the Send In the Clowns Entertainment Corporation, which plans parties in the metropolitan region.

    “We get a lot of calls from Wall Street guys who are looking to work with us,” he said. “They want to change their careers. I told them to call me when our season gets going in March.”

    The party racket is more than just balloon animals and squirting flowers. “Selling parties, running parties, everything that goes with the party,” he said. “A Wall Street guy could come over and do magic shows for the kids, play musical games with the kids, do face painting with the kids.” There are positions for disc jockeys, stilt-walkers and mechanical bull servicemen. And, of course, the marquee job.

    “We’ll hire clowns from Wall Street,” he said. “No problem.”

    Comment by Bear | 02/21/2009 | Reply

  3. My company calls them “RIFs”..reduction in force. their going with the drip-drip layoffs. 10 here, 20 there. like the article says, every one waits for the next shoe to drop, and we’re all looking for new jobs anyway.

    Comment by Pogue | 02/21/2009 | Reply

  4. […] of you reading this are still employed but sense your time is coming, as well. For you, your company’s actions will dictate your next move: will you remain […]

    Pingback by Your Inner Entrepreneur « The Job Exchange | 03/17/2009 | Reply


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