Though Now Routine, Bosses Still Stumble During Layoff Process-WSJ

Published in Wall St.Journal: IN THE LEAD JUNE 25, 2007

http://online.wsj.com/article/SB118272587493646469.html?mod=googlewsj

As a new reporter at this paper's Pittsburgh bureau in the early 1980s, I had a front-row seat

when steel companies, battered by lower-cost Japanese rivals, closed plants and laid off

thousands of workers and managers. There was shock, anger and the mistaken belief among

many workers that they'd get their jobs back when the economy improved.

It was the onset of corporate restructuring -- and the beginning of the end of the era when

employees could expect to spend a lifetime at one company. Today, layoffs are a widely

accepted way to cut costs at companies big and small, in every industry. They're also a common

aftermath of mergers and of decisions to outsource jobs, exit a business or change the mix of

talent in the ranks.

Yet, despite the fact that layoffs are commonplace, "there's an enormous gap between what

managers know they should do and how they act on that knowledge," says Robert Sutton,

professor of management science and engineering, Stanford University.

Have you ever been laid off? How did your manager break the news to you? What did he or she

do right or wrong in the process? Perhaps you've been on the other side of the table and been the

one doing the firing. If so, what did you do or say to break the news? Share your thoughts.

Most managers hate giving the bad news, of course. They know what losing a job means to an

employee and his or her family. But layoffs are a quick way to shore up the bottom line and that

becomes a priority.

Because the task is an unpleasant one, the biggest mistake managers make is waiting until the

last possible moment to inform those being cut. Then once in the middle of the process, they

become tongue-tied and fail to express any empathy or articulate what the company will provide

in the way of severance and other benefits.

Many also don't take the high road. They let themselves off the hook by telling themselves and

others that those being laid off weren't good at their jobs -- the corporate version of blaming the

victim.

Timing and straightforward communication are critical not only for those losing their jobs but for

those employees who survive layoffs. When managers don't treat terminated employees decently,

those left behind conclude they aren't valued, either -- making them fearful and sometimes

pushing them out the door, too. "The key to driving out fear during difficult times is to give

people as much prediction, understanding, control and compassion as possible," says Mr. Sutton.

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When Ron Thomas, vice president of organizational development at Martha Stewart Living

Omnimedia, coached managers during two rounds of layoffs, he advised them on what to expect

from themselves and from those getting the bad news. The company cut a total of about 100

employees when it closed the catalogue business in 2002 and then eliminated its television show

in 2004. On both occasions, "I told managers they weren't going to sleep the night before" they

had to announce layoffs, he says.

He urged them to "try to envision that one day you may be on the other side of the table -- so you

should treat people the way you'd like to be treated in this situation," he adds.

Mr. Thomas advised managers not to "sugar coat" the news. He told them to say, "We're closing

something down and restructuring -- and unfortunately your job is being eliminated." They

should then move quickly to discussing how the company plans to help with severance and other

benefits, he says.

He also has arranged outsourcing help for the terminated employees. "We make sure people who

are losing a job know someone will call them to start helping them within a day," he says. He

will often use his own network of contacts to help them land new jobs. When the catalogue

business was closed, he called every catalogue company he could think of to inquire about job

openings.

These efforts fostered loyalty among current and former employees and helped the company

recruit new talent. When Martha Stewart Living launched a new television show, it hired back

some employees who had been laid off in 2004. "If you handle a restructuring well, the word

gets out that you're a good place to work. ... If we post a job opening today, we'll get 1,500

resumes tomorrow," says Mr. Thomas.

An equally big challenge for managers at companies contemplating layoffs is figuring out the

actual benefits. Numerous studies by business professors and management consultants conclude

that layoffs, while perhaps boosting the bottom line momentarily, rarely yield companies

sustainable long-term savings.

Staff reductions cost companies valuable talent that frequently must be replaced at an even

higher cost at a later date. They also hurt morale and productivity among survivors.

This is the case even at some of the most employee-friendly companies. A study of 3,000

Canadian workplaces between 1999 and 2001 that offered employees "high involvement work

practices," such as training, information, motivation and latitude suffered productivity losses

after layoffs. According to Christopher Zatzick and Roderick Iverson of Simon Fraser

University, who conducted the study, survivors at these companies felt their "psychological

contract" with bosses had been violated. The companies that continued people-friendly practices

after layoffs, however, eventually recouped productivity.

Published in Wall St.Journal: IN THE LEAD JUNE 25, 2007

http://online.wsj.com/article/SB118272587493646469.html?mod=googlewsj