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Laying off employees is never easy. There are ways to do it right, however.
Alix Stuart, CFO Magazine
July 1, 2002
Having survived many layoffs during her years at Wang Laboratories, MetraTech Corp. CFO Christine J. Cox knew plenty about how not to make staff cuts. So she was ready when one became necessary at her current company last June. "I've seen far too many small layoffs done over a period of months," she says. Workflow suffers, "and everybody worries about when the next round will be." Equally debilitating is the stretching out of notifications, and the angst of watching ousted colleagues escorted from buildings by security guards.
Three months after joining the Waltham, Massachusetts-based Web-services billing-systems maker, Cox was asked to organize a 14-person staff reduction. Her approach: make cuts as quickly and neatly as possible, treating the process like any other strategic project. She drew up a three-week schedule leading up to termination day, with sessions for managers that addressed everything from severance-package options to explanations of the need for reductions. Then she prepared a minute-by-minute checklist for managers, covering notification schedules, the cut-off of computer network access, and other items.
She made sure to leave time to assure remaining employees that their jobs were safe, and allow them to air their feelings. "A layoff affects everyone," says Cox, who spoke to the 70 "survivors" in an offsite conference room after terminated employees were notified. "I stressed to employees that these peers had made a very large sacrifice on behalf of the company, and it was up to the rest of us to make sure it was not for naught."
With nearly 140,000 cuts occurring monthly in America, according to outplacement firm Challenger, Gray & Christmas Inc. (CGC), CFOs are learning new layoff lessons all the time. And many find it's not enough to just get costs out of the business; they must also avoid a backlash from remaining employees. "You've got to know how you are going to make money and motivate people coming out of this restructuring," says Robert Morgan, president of the Human Capital Consulting Group at Spherion Corp., which has had more than 1,500 clients in the last year in the areas of layoff and outplacement. He suggests that companies consider a well-planned layoff as a way to "invest in people left behind." Some more-tangible investments benefiting both remaining employees and laid-off personnel: healthy severance packages and outplacement services.
There's no consensus about a "right way" to lay off employees. But there's general agreement that Friday is the wrong time for a big announcement--robbing employees of the opportunity to vent frustrations and ask questions, and giving rise to weekend rumors. Security-guard escorts are generally frowned upon, although tighter security overall is a good idea. One way to soften the blow of terminated network access: offer to copy E-mail directories for departing workers.
Early preparation can pave the way for a better layoff result, especially dropping hints so employees don't feel blindsided by the news. "We find those kept abreast of deteriorating business conditions, though disappointed their jobs were gone, were calmer, less hurt, more professional," said John A. Challenger, CEO of CGC, in a recent speech.
There's a delicate balance in pre-layoff communicating. After the September 11 terrorist attacks devastated revenue growth at $2.1 billion travel company Sabre Inc., CFO Jeffery Jackson and other executives gave their then-6,000 employees monthly updates when layoffs appeared necessary. But "rather than fire a lot of people right away, which would have saved expense, we decided to do it in a way that was consistent with our business plans," says Jackson. Sabre first announced that management was studying conditions, then said it would use the budgeting process to reduce costs. By November, employees weren't surprised with the level of final year-end cuts.
At privately held Metra-Tech, Cox sees evidence that she made the right moves a year ago, and the company has grown enough that it is looking to hire more staff. Still, "in a perfect world," she says, "I'd never do [a layoff] again." -- Alix Nyberg
How To Be The Terminator
Source: Spherion Corp.