Layoffs, Downsizing, and Outsourcing

Communications are important both to maintain the morale of employees retained and to hold the good will of those discharged. They may be back again. The practice of announcing a downsizing late on Friday or the day before Christmas reflects very adversely on the owner's courage and tact, of course. Employees may have to leave, but they appreciate a clear statement of the reason why they're being terminated and like to have as much notice as possible. Some owners feel that they may lose the effective labor of those laid off by announcing early; but in almost all such situations, employees have long anticipated problems; therefore early notice may actually improve productivity during this period by removing uncertainty. If the selection rules are obviously fair and impartial, all employees will react favorably toward the company. And this will be doubly true if the announcement includes information about help the employer intends to provide to those leaving.

Providing outplacement help involves extra work on the owner's part but invariably has a favorable effect. Such help may involve getting assistance from one or more employment agencies, providing information on how to file for unemployment benefits, counseling by the owner or a third party, helping to prepare good resumes, providing leads and contacts, and preparing letters of recommendation.

Many owners, quite naturally, feel the need to downsize as a sign of personal failure—and this despite a good track record of long and successful employment of lots of people. Experience, however, teaches that business does have its downs as well as ups—and also teaches that the owner will benefit from minimizing his or her own frustrations. A good way to do that is trying to help those affected.

ALTERNATIVES TO DOWNSIZING

A few companies have had, and continue to have, "no-layoff" policies or, more realistically, a "no-layoff" philosophy. Julia King, writing in Computerworld, described two such companies, Lincoln Electric Co. and FedEx Corp. "The employment practices go by different names," King wrote, "but the spirit and business strategies behind them are the same. By shunning downsizing as a matter of corporate values, both companies are looking to create a fiercely loyal and productive workforce, which in turn generates high customer satisfaction ratings and bottom-line results. And so far, it's a strategy that seems to work well, in both good economic times and bad."

Elizabeth Smith Barnes, writing in Workforce Management described the no-layoff policy of Hypertherm, Inc. Barnes provided a telling quote from the company's founder, Dick Couch, revealing the mindset behind such policies. "I was at a conference on entrepreneurship at Dartmouth," Barnes quotes Couch saying. "The guy next to me was a young, very bright venture capitalist who believed that the purpose of business is to maximize shareholder equity. I say that the purpose of business is to satisfy the customer and to focus on the development and well-being of your associates, from which good things will happen—including the 'accidental' benefit to shareholders. It seems some corporate folks are never going to understand the value of no layoffs because their fundamental philosophy about what we're in business for is very different."

No-layoff policies are not realistic for many small businesses, but the practices of leaders suggest ways and means both of avoiding layoffs and dealing with cost problems creatively. Techniques mentioned include very careful hiring, cross-training of employees so that many are able to shift from job to job, intense employee involvement in the business through suggesting programs and innovations, and, in the extreme case, pay reductions or reduced work hours so that all employees stay—and share the hardship in common.

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