It’s About Human Beings, Not Just Headcount
By Tim Triplett, Editor-in-Chief
Certainly no one likes layoffs, but for Big Business “reducing headcount” is basically an accounting function, an adjustment of a variable cost. There’s a comfortable separation between the decision makers and the managers who have to look other human beings in the eye and give them the bad news.
With relatively few exceptions, metals distributors are decidedly Small Business. The typical service center is a $20 million operation with one or two locations and perhaps two-dozen employees. Many are much smaller. For the owner of such a close-knit enterprise, layoffs can be a very personal and a very painful duty, one many have never had to face before.
Service center executives don’t like to talk about layoffs. Based on various off-the-record conversations, I get the sense that some view them as a sort of personal failure. The more paternalistic their approach to management, the deeper their sense of guilt toward “family members” they had to let go.
Given the woeful market conditions, virtually all service centers have been forced to cut their labor costs in recent months—the fortunate ones through attrition, wage and hiring freezes, but many through layoffs. How they approached this task can have long-term implications for their companies.
“Downsizing or doing layoffs is a toxic solution,” says management psychologist and author Alan Downs in the article Downsizing with Dignity. “Used sparingly and with planning, downsizing can be an organizational lifesaver. But when layoffs are used repeatedly without a thoughtful strategy, downsizing can destroy an organization’s effectiveness. How you treat people really matters—to the people who leave and the people who remain.”
The sudden and unexpected decline in the economy has not given companies much time to plan their layoffs, which involve difficult decisions about who to dismiss, how much notice to give them, severance pay and other issues. Companies often hand off the responsibility to their lawyers, who tend to favor safe firing formulas such as “last hired first fired” or “10 percent of all departments” so no one can allege discrimination, Downs says.
But laying people off based on seniority or some arbitrary percentage puts the company at risk, he maintains. Decisions about who to let go should be based on a careful analysis of the company’s needs as work is redistributed, and individual workers’ skills and abilities.
Downs recommends that companies be open about an impending layoff, and give employees advance notice, so they can plan for the changes to come in their lives. To surprise them with an unannounced layoff will only foster suspicion and mistrust among the retained workers. Show empathy for both the workers who are dismissed and those who remain, and give them the opportunity to talk about their feelings, he says.
Before any layoff, ask yourself if the problem is too many employees or too little profit. “Using a layoff solely as a cost-cutting measure is utterly foolish: throwing away valuable talent and organizational learning by dumping employees only makes a bad situation worse,” Downs adds.
The economy will recover. Demand for metals will rebound. Eventually. Be sure you have the manpower and the talent in place to take advantage of it when it does.
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