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Job cuts and how to survive them.
Economist Staff, The Economist
November 5, 2008
IN C-SUITES around the world, horribly tough decisions are being made about next year's budget — and, in most cases, given the dire economic outlook, about whom to "let go." This is perhaps the toughest challenge facing a boss, but there is no greater test of leadership. As Margaret Thatcher once put it, in the context of reshuffling her cabinet, "I'm not a good butcher, but I've had to learn to carve the joint."
The challenge lies not just in what jobs to cut, but how to reconcile the cutting with the statements that every company makes nowadays about how "our people are our most valuable assets". What kind of valuable asset gets dumped at the first sign of trouble?
Moreover, as any number of experts has argued in recent years, the key to success nowadays in the high-value-added parts of business is "winning the war for talent." Any employer who acquires a reputation for being a little too quick or enthusiastic an axe-wielder is likely to find it harder to recruit the best when the economy recovers. Even the most sensitive talent understands that firms need to downsize when the economy turns down, and that reasonable efforts must be made to achieve budgets set in sunnier times, but no one wants to work for a boss who gives the impression that his favourite movie is "The Texas Chainsaw Massacre."
Still, current wisdom among axe wielders is that in the last downturn, joints were allowed to sit idly for far too long before they were carved. This time, they intend to cut early, expecting it will buy them the freedom and legitimacy with their board to expand quickly once recovery begins — when unemployment will be high enough to prevent prospective employees from being too squeamish about their new boss's past enthusiasm for axe wielding. This augurs a fairly rapid rise in unemployment.
On the other hand, many firms are already stretched thin, with vastly more efficient human-resource management than in the past, so big reductions will not just remove fat, they also risk damaging muscle, unless accompanied by some significant and well-designed organisational restructuring — which is never easy to do right at a time of intense budget pressure.
One popular option, your columnist predicts, will be a sharp increase in outsourcing, especially to developing countries, which the resurgent dollar has suddenly made more competitive than ever for American firms. Slowing economies in those countries also show that they are not as decoupled from rich countries as many believed.
However well handled, a round of firings is always bad for the morale for those left behind. Getting as much done in one go, and giving those who stay reasonable grounds to feel optimistic about their future is advisable, though not always possible. Pushing ahead with pre-planned events such as holiday parties also makes sense, if only to give survivors a chance to bond around getting gloom off their chests.
And then there is the question of what to do with all those empty desks — which, especially in open-plan offices, can quickly become a morale-sapping monument to the lost. At a conference last week, Alan Patricof, a veteran venture capitalist, advised, "If you are making job cuts, make the environment look tight. Don't leave a lot of empty space around the office." He suggested putting in screens and taking other steps to hide once-occupied desks, so that those still working feel they fill the space, which helps to quickly rebuild an energised team atmosphere.
As for workers, the big question is how to avoid the axe (unless, of course, you want to get the substantial redundancy package you are due, to pay for that long-awaited round-the-world trip while the economy goes through its down cycle). Happily, help is at hand. In a timely article in its September issue, the Harvard Business Review offered an article entitled "How to Protect Your Job in a Recession." These include acting like a survivor; lightening up ("Don't be the guy who's always in a bad mood, reminding colleagues how vulnerable everyone is. Who wants to be in the trenches with him?"); and proving your value to the firm ("Your job is less likely to be eliminated if customers find that your contribution is indispensable.")
The article also recommends that each worker "become a corporate citizen...Start going to all those voluntary and informal meetings you used to skip. Be visible. Get out of your office and walk the floor to see how folks are doing." The hardest recommendation, though, is to "give your leaders hope". For instance, "if the boss is working on a restructuring plan and asks for ideas, offer some realistic solutions. Don't fight change; energise your colleagues around it." It turns out, "the better your relationship with your manager, the less likely you are to be cut, all things being equal." In other words, suck up now before it is too late.